InnoVen Capital Group, a leading Southeast Asian venture debt provider, has bulked up its cash hoard to finance China’s early-stage companies, as challenges ranging from China’s slow economic recovery to regulatory uncertainties are limiting start-ups’ access to funding.
The Singapore-headquartered venture debt company, announced on Friday that it had completed a US$130 million first close for its second China fund, which is a dollar-yuan dual currency fund with a total target size of US$250 million.
The anchor investors for InnoVen Capital China Fund II are InnoVen Capital Group, a joint venture between asset manager Seviora Holdings and United Overseas Bank (UOB), and “two local Chinese government entities” the venture debt firm said in a statement, without providing further details. Seviora is a wholly owned subsidiary of Temasek, Singapore’s sovereign wealth fund and UOB is one of Singapore’s three “big local banks”.
Venture debt is a loan to an early-stage company to help the business boost liquidity in between equity financing rounds. InnoVen Capital structures its deals using a combination of debt and equity financing, and a single ticket size is usually under US$20 million, the company wrote in a note.
Data provider Preqin said venture capital investment in China contracted over 7 per cent in 2023 to below US$70 billion, hitting a four-year low as investors, spooked by regulatory uncertainties and lacklustre economic recovery, steered away from the country’s start-ups.
InnoVen’s second China fund was launched in 2023, and is expected to fully close in early 2025. The first China fund closed in March 2023, with a total size of close to US$100 million.
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“In an environment where the global economy is facing multiple challenges and uncertainties, we continue to see many lending opportunities to high growth technology companies in China,” said Beng Teck Ong, Innoven’s CEO.
“The group has decided to increase our anchor commitment to the new China fund. With a larger fund size and expanded geographical coverage, the new China fund will be well positioned to support outstanding founders throughout the country in their next phase of growth,” he added.
“While we acknowledge the prevailing challenges and uncertainties in the China market, we remain optimistic about opportunities [brought about by] industrial restructuring and the development in new science and technology,” said Cao Yingxue, managing partner at InnoVen Capital China.
This means that sector-wise, the second China fund will zero-in on industries such as deep tech, enterprise services, consumer, and healthcare, while adhering to “ESG investment principles”, she added.
The entrepreneurial spirit and dynamism observed among Chinese start-ups are another key reason that inspired confidence in the country. “Seizing opportunities for the expansion of Chinese enterprises into Asia, the belt and road region, and even globally is a focus for us, and we are dedicated to partnering with companies as they navigate and capitalise on these expansion opportunities,” she said.
InnoVen Capital Group, consisting of branches in Singapore, China, and India, has invested over US$1.3 billion across 350 early and growth-stage companies, among which 50 turned into unicorns, start-ups valued at US$1 billion or more.
The venture debt firm’s most recent China exits include Eyidianyun, an office information technology provider, and Cheche Technology, an auto insurance search engine. The two companies both went public in 2023, in Hong Kong and the US, respectively.
