Venture debt firm InnoVen Capital holds first close of debut China fund at $50m

Asian venture debt firm InnoVen Capital announced on Monday that it has secured the first close of its debut China fund at $50 million, after the launch of two prior vehicles to offer venture lending to technology companies in India and Southeast Asia.

InnoVen Capital, a joint venture between Temasek’s wholly-owned subsidiary Seviora and Singapore’s United Overseas Bank, launched the dedicated InnoVen China Fund after around four years of investing in the Chinese market.

InnoVen China has completed approximately 100 transactions into more than 70 startups since 2017, with cumulative disbursements of over $300 million.

Among its portfolio companies are the Temasek- and Toyota-backed autonomous driving startup Momenta; artificial intelligence (AI) firm MiningLamp Technology; ATRenew, a US-listed second-hand consumer electronics trading platform also known as “AiHuiShou“; office IT infrastructure service provider Edianyun; lingerie brand NEIWAI; Nasdaq-listed power bank rental firm Energy Monster; and robotic process automation (RPA) software developer Cyclone Robotics.

Six of InnoVen Capital’s portfolio companies have reached a unicorn valuation of over $1 billion and four have gone public in the US so far.

The establishment of InnoVen China Fund comes as venture debt, or venture lending, is fast emerging as an alternative and complementary source of financing for high-growth technology firms in China and the overall Asia-Pacific region that traditionally relied heavily on equity financing.

As a financing tool that helps cash-hungry startups avoid over-diluting shareholder equity and weather unexpected market turbulence, venture debt grew to roughly $25 billion globally in 2019 from $5 billion in 2010, shows Pitchbook data. In Greater China, the nascent strategy has been on the rise, according to Preqin, driven by fund managers’ growing demand for diversification and better-than-average investment returns.

“I am glad to witness how venture debt has developed in China, from being relatively unknown four years ago to becoming an integral part of financing for startups today,” said Cao Yingxue, managing partner of InnoVen China Fund, in a statement.

“With the new China fund, we can offer flexible and efficient financing solutions to more companies across the consumer, enterprise service and technology sectors, and provide follow-on financings to them as they scale their business,” she said.

With over $15 billion of equity raised from investors, InnoVen Capital primarily provides debt capital to high-growth companies backed by venture capital firms across India, China, and SE Asia. In September, the firm reached the first close of its maiden Indian venture debt fund at 740 crore rupees ($100 million), targeting 1,000 crore rupees (about $134 million) in the final close.

In October, InnoVen Capital hit the first close of its SE Asia-focused venture debt fund at $50 million.