(L-R) SEED Ventures Director Ter Weizhi, CEO Ian Gan, and co-founder Nixon Ng
Singapore-based VC fund management company SEED Ventures has announced the launch of a new sector-agnostic venture debt fund.
Christened ‘Venture Debt Fund 1’ (VDF1), it plans to provide an interest-free loan of US$15,000-US$37,500 to 30 seed-stage ASEAN startups each by the end of 2021.
What makes the fund unique is that it is able to dispense funds in just five days of completing due diligence (typically one to two weeks), with a repayment term of two years.
“It is definitely tough to get a bank loan within the first two years of starting up. VDF1 allows the fund to disperse US$15,000 within just five days,” Nison Chan, Business Development Partner at SEED Ventures, told e27.
“At the seed stage, due diligence is pretty straightforward, so cash flow will be easier for our portfolio companies. Our General Partners and Limited Partners do have the network to either provide sales channels or further fund-raise at the next stage,” he added.
Although SEED Ventures won’t be taking interest from startups in exchange for investment, it has clarified that the shareholders of the fund will be incentivised with small amounts of equity.
“We will be taking maximum equity of up to 10 per cent. It can, however, be decreased to a base minimum when companies complete their debt repayment in about six months. At the end, we will still hold a base equity of 2-5 per cent per startup,” Chan explained.
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For instance, if a startup pays back the loan six months earlier, the 10 per cent equity it provided to the shareholders at the beginning will come down to eight per cent.
Besides financial support, SEED Ventures will also assist its portfolio companies with strategic industry help in business, distribution and sales.
Moreover, it will support startups with accounting and data protection services at near cost, so startups can use their funds on revenue-generating operations.
VDF1 is receiving interest mostly from F&B companies.
“What sets us truly apart is our relationship with the founders of the portfolio companies. We focus very much on the morale of our founders and CEOs. They seek business advice at different stages and we do meet up once a week, depending on the situation. We do check in from time to time to ensure that their morale and health of the company are well. In this current era, maintaining great relationships with founders/CEOs means almost everything in business,” Chan concluded.
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Image Credit: SEED Ventures
The post SEED Ventures’s new fund can pay interest-free loan of up to US$38K to startups ‘within 5 days’ appeared first on e27.