Genesis Alternative Ventures Fund I, Southeast Asia’s first private venture debt fund, raises investment from a strategic investor – Capria, a Seattle- based global investment fund that invests in venture equity.
Genesis will bank on leveraging Capria’s expertise in impact investing to identify and provide venture financing to companies with meaningful impact objectives such as financial inclusion, sustainable food production, small business digitization, gender diversity, etc., as they scale across Southeast Asia.
Genesis is Capria’s first investment in Southeast Asia and its first investment in a venture debt fund.
Dr. Jeremy Loh, Co-Founder and Managing Partner at Genesis Alternative Ventures, said: “We are delighted to welcome Capria as a strategic investor at a time where a liquidity gap exists for venture-backed companies looking to raise funds. In recent months, Genesis has seen a 30% increase in deal flows from high quality companies and founders. We are poised to make another five to six investments in the coming months which will double our portfolio size.”
“Venture debt was a very new asset class [in Southeast Asia] back in 2015. However, if one looks at Silicon Valley, Europe, and India, it is a very mature asset class. Venture debt allows startups to raise additional capital at a lower dilution than pure equity. As startups grow from Series A onward, having a fundraising strategy that includes venture debt will allow founders to retain a higher stake in their company. I believe that venture debt creates a capital efficiency that is win-win for both the VC investor and startup. Equity should never be used to fund working capital or pay for inventory.
Venture debt can be an alternative solution for a company to purchase inventory for manufacturing products or trading purposes”, says Martin Tang of Singapore’s Genesis Alternative Ventures. He further goes on to provide how venture debt works:
“Here’s a use case: An IoT company needs to pay a contract manufacturer upfront to produce units of its IoT device, which will then be sold or rented to customers. However, the repayment cycle is long and as the IoT company grows, a working capital gap is created. It would be extremely dilutive to continue to fund the working capital through equity so venture debt can be used here to fund an inventory purchase.”
What is Impact Investing?
Impact investing refers to an investment strategy that not only generates financial returns but also creates constructive outcomes. The strategy actively seeks to make a positive impact by investing, for example, in nonprofits that benefit the community or in clean-technology enterprises that benefit the environment. Impact investing attracts individuals as well as institutional investors including hedge funds, private foundations, banks, pension funds, and other fund managers.
Impacting investing aims to generate specific beneficial social or environmental effects in addition to financial gains. Impact investments may take the form of numerous asset classes and may result in many specific outcomes. The point of impact investing is to use money and investment capital for positive social results
Capria Ventures is a global investment firm leading, partnering with and funding the largest network of emerging market fund managers collaborating to deliver superior returns and scaled impact. Capria brings venture capital innovation and global best practices to local venture capital, private equity and innovative debt funds, managed by local investment experts. Capria’s network of investing partners collectively manage more than USD $400 million in assets deployed in early stage and early growth companies in Latin America, Africa, and Asia. Capria has over $100M in AUM which it invests directly in India via Unitus Ventures, and in other markets via partners of the Capria Fund which takes anchor GP and LP positions. Capria has offices in Seattle, Bangalore and Nairobi.
Capria counts International Finance Corporation (IFC), Ford Foundation, Vulcan Capital, Omidyar Network, Sorenson Impact Foundation, among others as its investors. Capria also joins a growing list of blue-chip investors in Singapore-based Genesis, which includes Sassoon Investment Corporation (SassCorp), family office of entrepreneur Victor Sassoon, and other notable corporates, family offices and high net worth individuals across Asia, Europe and the US. CIMB Niaga, a leading bank in Indonesia, became a strategic partner in Indonesia last year with a US$10 million commitment to Genesis to fund fast-growth tech companies in that country.
Delivering Superior Returns and Scaled Impact
Capria specialises in investing in private funds and companies in underinvested emerging markets. These companies deliver essential goods and services to local consumers and small businesses leveraging technology and business model innovation in sectors such as financial services, healthcare, ag/food, logistics, and education.
Dave Richards, Co-Founder and Managing Partner at Capria, said: “The idea of investing for superior financial returns coupled with sustainable impact is catching on in Southeast Asia and Capria is proud to partner with Genesis to further this wave”.
“Until recently, ‘impact investing’ was very nascent and mostly associated with concessionary financial returns in Southeast Asia. This has started to change with more leading funds implementing impact strategies to tap into underinvested sectors and companies.”
As part of Capria’s investment, Genesis will also join Capria Network, the largest network of emerging market fund managers collaborating to deliver superior returns and scaled impact.
About Genesis Alternative Ventures
Genesis Alternative Ventures is Southeast Asia’s leading private lender to venture and growth stage companies funded by tier-one VCs. Genesis was founded by a team of venture lending pioneers who have backed some of Southeast Asia’s best loved companies. Armed with a strong reputation among entrepreneurs and investors, Genesis is a trusted partner in empowering company’s growth while minimising shareholders’ equity dilution.
Genesis was founded by Ben J Benjamin, Dr. Jeremy Loh and Martin Tang in 2019 to help tech enabled companies accelerate their growth while minimising equity dilution. Dr Loh and Mr Tang have extensive experience in venture lending and equity investing, having spearheaded DBS Venture Growth Partners which specializes in venture lending, from 2015 to 2018. Dr. Loh also helmed the EDB Investment office in Silicon Valley from 2009 to 2014. Mr Benjamin is also non-executive director of OurCrowd Singapore, the Israel-based online venture capital platform.
Since inception, Genesis has built a high-quality portfolio of diversified and resilient investments including Horangi, GoWork, Hmlet, Matterport and Lynk Global, co- investing alongside leading global and regional venture capital firms.
Venture debt opportunities across Southeast Asia.
Venture debt has accelerated across Southeast Asia in recent years given the maturing of the tech and financing ecosystem. Global data suggests there is significant headroom for growth in the region. A recent study by Kruze Consulting shows that US venture debt grew 30% in 2019, accounting for 10% of total venture capital investments. By comparison, venture debt makes up between 1% and 3% of overall venture funding in Southeast Asia last year.
With its young, mobile-first population, Southeast Asia is poised to be one of the biggest beneficiaries of high growth companies delivering access to digital products and services following in the footsteps of breakout companies such as Gojek, Grab, Lazada, Property Guru, Razer, SEA, etc.
Investing in times of Crisis
The data shows that financial crises have historically proven to be a time of innovation and entrepreneurship. Over half of Fortune 500 companies were created during a recession or bear market, and over 50 of today’s tech unicorns, collectively valued at $145.2 billion, were founded during the 2007-2009 recession years, including WhatsApp, Uber, Slack, Square, Alibaba & JD.Com. In Southeast Asia, many tech enabled companies such as Kopi Kenangan, NinjaVan, Nium, Tanihub, have continued to raise funds successfully in the first half of 2020, Covid-19 notwithstanding.
Ben J Benjamin, Co-Founder and Partner of Genesis Alternative Ventures, said: “Major crises lead to a whole range of challenges but they also create investment opportunities. Fleet-footed entrepreneurs are able to tap these opportunities to create meaningful products and services to be accessible during turbulent times.
“These entrepreneurs have found their Zoom moments and we want to be there to take them to the next stage of growth.”
This research article has been produced by Investocracy, a company focused on connecting startups from emerging markets with Japanese investors.
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