Digital Securities: ADDX Tokenizes Venture Debt, Lists on Exchange

ADDX has announced another digital security available for investors on its digital asset exchange. The most recent security is a venture debt offering by Innoven Capital – a JV between Seviora (a Temasek subsidiary) and UOB. The $50 million fund combines a fixed return as well as the possibility for capital gain. As the security has been tokenized, ADDX notes that minimum investments start at USD $20,000.00 as opposed to the norm of around $5 million. ADDX leverages blockchain technology as well as smart contracts to automate manual processes. This allows ADDX to make the fund available in fractional units at scale and to enable secondary trading by investors on the ADDX exchange.

Oi-Yee Choo, CEO of ADDX, explained that venture debt is poised to grow, adding that in the US, venture debt deals make up around 25% of VC funding:

“In Southeast Asia, that figure is less than 5%. This strongly suggests there is room for expansion, as venture debt funds raise more capital from investors and deploy that capital in a region where the prospects for tech startups remain bullish in the medium- to long-term, despite the uncertainty we’ve seen in the capital markets this year. More broadly, private debt as an asset class is on the rise, with assets under management (AUM) forecast to increase from US$1.2 trillion in 2021 to US$2.7 trillion in 2026. As blockchain technology lowers the barriers to entry for individual investors – by as much as 250 times, as in this case – we take the view that a significant share of the projected growth in private debt will come in the form of new, mass affluent investors getting access for the very first time.”

Venture debt is a form of financing for companies that are still dependent on access to venture capital to grow. Loan sizes can go up to 30% of an equity round or cash in the bank. Venture debt is a financing option that does not dilute equity capital.

The Innoven SEA Fund I provides access to investors for venture debt funding of high-growth startups and technology companies across Southeast Asia. The fund is anchored by a US$50 million commitment from Seviora and UOB.

Paul Ong, Partner of Innoven Capital SEA, said the current economic environment has hit valuations and investors are more cautious in the deployment of capital – especially from equity investors.

“Companies have shifted their focus to decreasing their burn rate and building cash reserves in anticipation of a potential near-term period in which equity capital may be more difficult to obtain. In this current environment, the demand for venture debt has increased significantly.”

Choo added that the venture debt fund backed by Temasek subsidiary Seviora and UOB ensures good deal flow.

“For example, the fund manager is evaluating deals with a cumulative value of close to US$150 million, which gives Innoven the room to be highly selective in deploying capital. This is the secret behind Innoven’s strong track record – it has a loss rate lower than 1 percent, after US$218 million in loans made out. We are excited to work with Innoven to bring this high-quality fund to a wider spectrum of investors.”


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