Q&A: InnoVen’s Chin Chao on venture debt’s rise in Asia, after closing largest deal

InnoVen CEO Chin Chao. Photo credit: InnoVen Capital.

InnoVen Capital, a joint venture of Singapore’s Temasek and United Overseas Bank (UOB), today announced US$15.4 million funding of travel portal Yatra in India’s largest venture debt deal. It’s also the biggest deal for InnoVen which operates in Singapore, China, and India.

Apart from its size, the deal shows a broadening of appeal for venture debt – it can be a useful option for later-stage companies too, and not just early stage startups, InnoVen CEO Chin Chao explains to Tech in Asia.

For Yatra, which competes with MakeMyTrip and Cleartrip for booking flights and hotels, this is the second time it is opting for venture debt. InnoVen had provided it with a loan of US$4 million in 2013. Now the US$15.4 million loan comes after an IPO. “After having raised US$92 million through our Nasdaq listing in December 2016, the debt funding provides us additional capital for our growth needs,” says Yatra CFO Alok Vaish.

Venture debt is 25 to 30 times cheaper than equity financing.

InnoVen started in India as an entity of Silicon Valley Bank (SVB) in 2008, and got acquired by Singapore’s state-owned Temasek in a joint venture with UOB in 2014. It has given out 165 loans to 120 startups so far, mostly in India. It expanded to Southeast Asia early last year, and to China a couple of months back.

For Chin Chao, it’s a second coming to venture debt as CEO of InnoVen Singapore and interim CEO of Innoven India. Back in 1998, he was a VC becoming increasingly frustrated with banks refusing to extend debt facilities to his portfolio companies.

“Instead of complaining about it, my partner and I decided to do something about it,” Chao tells me. They formed a joint venture between Venture TDF and Keppel Tat Lee Bank in 1999 to provide loans to fast-growing tech companies. But when the Oversea-Chinese Banking Corporation acquired Keppel Tat Lee Bank in 2001, the venture debt business got shut down.

Last year, when InnoVen expanded to Southeast Asia, Temasek and UOB brought in Chao to head the Singapore unit. He’s also interim CEO for InnoVen India until a replacement is found for Ajay Hattangadi, who had been with the firm from its SVB days and quit earlier this year to start a rival venture debt firm Alteria Capital.

In an interview with Tech in Asia, Chao shares insights on the venture debt scene which he has observed from way back in 1999. Here are excerpts from the interview:

What a venture debt firm usually offers is for startups to raise working capital without having to dilute equity. Now, with the Yatra deal, it seems like you want to cater to later stage companies. Is there a shift?

What we’re seeing in India is that companies that raised money from us earlier are coming back to us for additional financing requirements. We took a call not to let these opportunities pass us by, so we’re looking at funding larger companies too.

Also, since we’ve already lent money to these companies once or twice earlier, we’re comfortable with the team and business – such as with Yatra.

We’re still focused on the series A and series B stages; that’s our bread and better. But we’re seeing a lot of opportunities to write larger cheque sizes than the usual US$1 million to US$2 million.