DBS, Temasek rolls out $500 mil. debt financing for Asia’s tech startups

03, Aug. 2021

DBS and Temasek jointly launched a debt financing platform, called EvolutionX Debt Capital to support startups across sectors such as financial services, consumer, healthcare, education and industrial development. (Photo: Temasek)
DBS and Temasek jointly launched a debt financing platform, called EvolutionX Debt Capital to support startups across sectors such as financial services, consumer, healthcare, education and industrial development. (Photo: Temasek)

By Celine Chen

SINGAPORE, NNA – Singapore's state-owned investment company Temasek and global bank DBS have entered into an agreement to jointly launch a $500 million debt financing platform to support growth-stage technology companies across Asia, particularly China, India, and Southeast Asia.

Headquartered in Singapore, EvolutionX Debt Capital (EvolutionX) will provide non-dilutive financing to help them to accelerate growth and build the next generation of tech leaders in the fast-growing technology ecosystem in Asia.

"The growth debt capital space presents a significant opportunity, and EvolutionX will inves

t in opportunities arising from an increasingly digital economy – across sectors such as financial services, consumer, healthcare, education and industrial development," said Temasek and DBS in a joint statement on July 30.

The collaboration also extends their existing early-stage debt initiatives and investment activities by leveraging Temasek’s investment expertise and DBS’ global banking networks.

Tan Su Shan, group head of institutional banking at DBS, said, “The investment in EvolutionX provides an opportunity for us to play an integral role in nurturing and financing the growth of Asia’s future unicorns, while forging partnerships and ecosystem opportunities with these high-growth technology-enabled companies."

Tan added, "As a purpose-driven bank, we believe in investing in solutions that democratise financing access to companies of all sizes and stages of development to give them the best opportunity to achieve their endeavours.”

Tan noted that growth debt is fast emerging as an alternative source of financing for high-growth tech companies that traditionally only relied on equity as a source of capital.

Tan said, "Apart from helping founder entrepreneurs avoid dilution of share equity in the company’s initial stages of development, growth debt also serves as a complementary tool to tide these companies, which are often cash strapped, through unexpected market and economic headwinds by extending their cash runway.”

Agreeing, Rohit Sipahimalani, chief investment strategist at Temasek said such purposeful use of capital will "create and catalyse solutions for gaps we see today", particularly debt funding needs between the venture and late-stage debt financing phases.

It will also stimulate innovation and growth for long-term, sustainable value as technology and digitization will create a pervasive impact across many sectors and transform economies and communities, he said.

The platform will be helmed by joint interim CEOs Amit Sinha, group head of telecoms, media and technology, institutional banking group at DBS, and Aftab Mathur, director of investment (innovation) at Temasek, before a full-time CEO is appointed in the next few months.

Meanwhile, the digital economy across Asia has jumped by leaps and bounds in recent years.

China's digital economy managed to maintain a high growth rate of 9.7 percent in 2020 amid the pandemic and global economic downturn, according to a white paper released in April. It reached about $6 trillion, accounting for a sizable 38.6 percent of the GDP.

The growth rate of the digital economy was also more than three times that of the GDP, demonstrating its pivotal role in driving economic development, according to the paper issued by the China Academy of Information and Communication Technology.

India’s consumer digital economy, valued at $85-90 billion in 2020, is poised to reach $800 billion by 2030, said consulting firm RedSeer. Making up a big component, online retail will hit $350 billion by then.

RedSeer noted that fintech e-commerce and logistics providers have heavily invested in the last five years to cater to the growing needs of Indian consumers and bring their services to the remotest parts of the country.

"Although the initial journey started with simple online services like buying books, mobile recharges, today the market is flooded with every possible service which will come to rescue at the time of need. Starting from booking tickets for travel or movies, to ordering food online, taking online dance or Maths classes, these services today are available anytime through your smartphones," said RedSeer in its insight article published in July.

The firm believes digital adoption is "bound to increase by at least two to three times across sectors" over the next decade.

According to a Statista Research Department report issued in March, Southeast Asia's rapidly growing internet economy in 2020 was valued at approximately $105 billion. Accelerated by the pandemic which is still affecting the region, it is expected to hit $309 billion by 2025.

Singapore's Economic Development Board noted that there are 13,500 tech startups across Southeast Asia, with the 50 largest ones attracting a total of $13.8 billion in 2018, up from $1 billion in 2015.

Attracting the attention of global investors and blank check companies, more start-ups in Southeast Asia are expected to go public each year.