ADDX fractionalises venture debt fund by Innoven Capital – a joint venture between Temasek subsidiary Seviora and UOB
![SINGAPORE, 20 MAY 2021 – Private capital platform iSTOX is rebranding itself as ADDX as it enters a phase of fast-paced growth. The digital securities exchange will facilitate more issuance deals – at least 20 this year, more than double of the deals completed in 2020. Among these issuance, deals are new product lines, including private equity (such as pre-IPO unicorns), structured products, products that provide exposure to cryptocurrencies, as well as commercial papers[1]. The new investment opportunities will accompany product lines rolled out in 2020 – such as hedge funds, private REITs and wholesale bonds – forming a more complete range of private market offerings. With a wider range of products, the ADDX platform can better fulfil the portfolio diversification needs of investors at different points along their investment journeys. The fractional ownership made possible by digital securities allows investors to manage risk and to pick and choose holdings with the goal of reducing correlation to the public markets and to their overall portfolio. Accompanying the fresh brand name is a newly-launched ADDX mobile app, now available on both Apple and Android devices, to enable users to invest in the private markets on the go as well as on the ADDX desktop website[2]. Existing investors can log on to the new ADDX platform with the same username and password to view their current investment holdings or to trade. The company expects to grow to about 100 employees by the end of the year, up from 70 at the end of 2020. The product, tech and growth teams will expand, with plans to recruit product managers, UI/UX designers, developers, blockchain researchers and capital markets associates. Oi Yee Choo, Chief Commercial Officer of ADDX, said, “The rebranding to ADDX marks an important milestone in the company’s journey. iSTOX was launched in 2017 with just four team members, focused on making safe and regulated Security Token Offerings – or STOs – a reality. We achieved that when we were licensed by the Monetary Authority of Singapore (MAS) as a financial institution last year. With ADDX, we are supercharging our growth towards the same mission of democratising the capital markets. The demand for fairer and more equal investing opportunities for accredited investors has never been greater, and we have built the infrastructure to make those opportunities available for the first time. The new mobile app, product lines and issuances planned for 2021 reflect a new ambition and new pace of expansion. We will become the single platform accredited investors go-to for all their private market investing needs. In the longer term, we hope to serve retail investors as well.” Ms Choo added, “The bigger picture we see is technology transforming the private markets in a profound and fundamental way – it is hard to overstate this. Powered by blockchain and smart contract technology, digital securities are significantly more efficient than traditional ones. They allow much broader access to the private markets by both issuers and investors, matching capital with fundraising companies at a faster speed and lower cost. Eventually, the line between the private and public markets will blur, because substantial capital can be raised before an IPO happens – if companies find IPOs to still be relevant. Individual investors benefit from participating in the higher-growth phases of companies, while companies have more space to focus on their long-term plans if they can put off a public listing for a few more years. A revolution of this nature in the capital markets has not happened since the advent of electronic trading. There is no turning back the clock.” Founded in 2017, ADDX is fully regulated by the MAS as a platform for the issuance, custody and secondary trading of digital securities, also known as security tokens. ADDX automates manual processes in the private markets to reduce minimum investment sizes for accredited investors from US$1 million to US$20,000. Investors can also trade their securities on the ADDX exchange, which settles trades instantly, compared with the 2 or more working days needed on other exchanges. Issuers benefit from digital securities through lower fees, a lower minimum fundraising threshold and a faster speed to issuance, which reduces uncertainty in a rapidly-changing business landscape. Accredited investors[3] on the ADDX platform come from 27 countries, spanning Asia, Europe, the Americas (excluding the US), Australia and New Zealand. The fresh look and brand name have come shortly after other significant developments for the company in 2021. In January, the company closed its Series A funding round with US$50 million raised, as new Japan government-backed investors took a stake in the company, including JIC Venture Growth Investments (JIC-VGI) and the Development Bank of Japan (DBJ). Japan’s Juroku Bank and venture capital firm Mobile Internet Capital also joined as new shareholders. Existing shareholders Singapore Exchange (SGX), Japan’s Tokai Tokyo Financial Holdings and Korea’s Hanwha Asset Management added to their holdings in that round. Other ADDX investors include Temasek subsidiary Heliconia Capital and Thailand’s Kiatnakin Phatra Financial Group. A number of blue-chip issuances[4] were digitised and listed on ADDX in the first two quarters of 2021, including the Mapletree Europe Income Trust, the Astrea VI private equity bonds, and a fully digital commercial paper by CGS-CIMB. [1] ADDX commercial papers were launched in May 2021, with the announcement of the S$150-million commercial paper programme by financial services provider CGS-CIMB. [2] The website can now be found at www.ADDX.co. Visitors to the former website, www.iSTOX.com, will be automatically redirected. [3] Under the Securities and Futures Act (Chapter 289) of Singapore, an accredited individual investor is one whose net personal assets exceed in value S$2 million (or its equivalent in a foreign currency), or whose financial assets (net of any related liabilities) exceed in value S$1 million (or its equivalent in a foreign currency), or whose income in the preceding 12 months is at least S$300,000 (or its equivalent in a foreign currency). [4] For details on ADDX issuances, please visit: https://addx.co/en/investments/](https://mediabulletins.com/wp-content/uploads/2021/05/Oi-Yee-Choo-Chief-Commercial-Officer-of-ADDX.jpg)
World, 7 DECEMBER 2022 –Global private market exchange ADDX has fractionalised a venture debt fund by Innoven Capital[i], bringing down the minimum subscription size for individual accredited investors[ii] to US$20,000, from US$5 million. Innoven is a joint venture between Seviora Holdings – a wholly owned subsidiary of Temasek Holdings – and UOB.
The Innoven SEA Fund I provides venture debt funding to high-growth startups and technology companies across Southeast Asia. The fund is anchored by a US$50 million commitment from Seviora and UOB, and it provides investors a combination of fixed income and equity return, with annual cash distributions.
ADDX is using blockchain and smart contract technology to automate manual processes throughout the lifecycle of the investment. This allows ADDX to make the fund available in fractional units at scale and to enable secondary trading by investors on the ADDX exchange.
Venture debt is a form of debt financing for companies that are still dependent on venture capital funding to grow. Loans sizes can go up to 30 percent of an equity round or cash in bank, and loans are made out based on factors such as the strength of the startup’sshareholders, the quality of its management team as well as the firm’s competitive advantage.
For startup founders, venture debt is less dilutive than equity financing, allowing companies to extend their cash runways and secure more time to achieve growth milestones. For investors, venture debt is a fixed-income investment with a lower risk-return profile as compared to venture equity capital. Venture debt is, however, accompanied by regular distributions, which is attractive to many investors in the current risk-off environment. In addition, venture debt deals typically come with equity warrants, which give venture debt funds the option to purchase equity at a future date, should the startup continue to grow. These warrants are a source of upside potential, giving venture debt a higher risk-reward profile than pure fixed-income investments.
Paul Ong, Partner of Innoven Capital SEA, said: “The macroeconomic climate and interest rate hikes that have impacted company valuations have led to cautious deployment of capital 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.”
Oi-Yee Choo, CEO of ADDX, said: “Venture debt is poised to grow. In the US, where the ecosystem is more mature, venture debt deals make up around 25 percent of venture capital funding. In Southeast Asia, that figure is less than 5 percent. 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.[iii] 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.”
She added: “Innoven is a pioneer of Southeast Asia’s venture debt scene. Backed by Temasek subsidiary Seviora and UOB, Innoven’sexcellent parentage 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.”
[i]The investment offering was completed via a special-purpose vehicle, Prometheus-13 Pte. Ltd.
[ii]The Singapore regulatory regime that ADDX operates under defines an accredited individual investor as an individual whose net personal assets exceed in value S$2 million (or its equivalent in another currency), or whose financial assets (net of any related liabilities) exceed in value S$1 million (or its equivalent in another currency), or whose income in the preceding 12 months is at least S$300,000 (or its equivalent in another currency).
[iii] See https://www.preqin.com/insights/global-reports/2022-preqin-global-private-debt-report