New $100m fund allows institutional investors to invest in VC-backed startups

Photo credit: Pixabay.

A trust fund that provides growth-stage startups a new way of raising money has launched in Singapore.

CapBridge Investment Trust (CIT), unveiled today, will manage sub-trust funds, the first of which is the Pre-IPO Fund targeting US$100 million. It’ll allow institutional investors such as banks, insurance companies, and mutual funds to invest in venture capital-backed startups.

It’s set up by CapBridge, a platform for companies to raise capital globally, and Gordian Capital, an Asian investment management firm handling assets in excess of US$1 billion.

On the road to IPO

“Venture capital has historically been one of the highest-returning asset classes, consistently outperforming equities globally,” said Steven Fang, co-founder and CEO of CapBridge. Yet it has widely been sidestepped “due to the lack of transparency and availability,” added deputy CEO Scott Duncan.

A rules-based structure – typically applied in trading of publicly listed firms – will be applied to the Pre-IPO Fund, making it the first of its kind, Fang claims.

The fund will invest only in startups that meet stipulated criteria such as a revenue track record and minimum financing previously raised, and have committed lead investors – or anchor institutional investors that already have an agreement to take up a stake in a startup.

It will invest “selectively and exclusively” in convertible instruments issued by startups curated on the CapBridge platform. Convertibles are securities, usually bonds, that can be converted into common stock. Institutional investors are given downside capital protection – which usually means a guarantee that some or all of the money they put in will be returned if the value of the investment falls. However, CapBridge told Tech in Asia that “our unique diversification risk management strategy approach just mitigates risks but there are no assurances or guarantees.”

The fund also fast-tracks the closing of funding rounds for companies with a mandated pathway to listing.

“Given the efficiency of a rules-based trust structure, we believe that the Pre-IPO Fund has the potential to expedite pre-IPO capital raising, making Singapore an attractive fundraising destination for growth companies,” concluded Fang.

(Update: Added CapBridge’s response to our queries.)