Japan’s largest bank MUFG to launch new US$300 million debt venture fund

TOKYO : Mitsubishi UFJ Financial Group Inc (MUFG) will launch a new US$300 million fund to offer debt financing to late-stage tech startups in the Asia-Pacific region, its chief executive said, as Japan’s largest lender seeks to tap opportunities in growing economies.

The move comes amid a fundraising frenzy in Asia as the number of unicorns, or privately held startups with a valuation of more than US$1 billion, has swelled.

The new debt fund will be created early next year through Mars Growth Capital, a Singapore-based joint venture between MUFG and Israeli financial tech firm Liquidity Capital, Hironori Kamezawa told Reuters in an interview.

MUFG will make a US$300 million capital commitment to Mars, which will provide debt financing to startups in later stages of growth including unicorns.

If the investee firms eventually choose to go public, MUFG plans to support their initial public offerings with its U.S. alliance partner Morgan Stanley, Kamezawa said.

The fund’s financing decisions will be based on Liquidity Capital’s artificial intelligence-driven credit scoring model that forecasts future earnings and cash flow of a startup from real-time financial and accounting data.

“We’ve seen immense needs from startups for debt financing” as a way to raise funds without reducing existing shareholders’ ownership, Kamezawa said.

“It’s usually difficult for us bankers to extend loans to those startups in the red, but the Israeli firm’s credit scoring model has helped us out,” he added.

It will be Mars Growth Capital’s second debt fund. The first fund, set up last year, is focused on early-stage startups and currently has a US$200 million capital commitment. Mars Growth Capital has so far clinched financing deals with 11 companies, according to MUFG.

(Reporting by Makiko Yamazaki and Yuki Nitta; Additional reporting by Scott Murdoch in Hong Kong; Editing by Ana Nicolaci da Costa)