British financial services group HSBC has set aside $1.15 billion across two new debt funds focused on “digitising” companies in Southeast Asia, it announced on Wednesday.
The $1 billion ASEAN Growth Fund will focus on cashflow-generating startups looking to tap debt to expedite their economies of scale, advance product lifecycles, and grow their asset portfolios.
The $150 million Venture Debt Fund will focus on Singaporean venture-backed tech startups that need non-dilutive, bridge financing to help tide their operations between longer fundraising cycles and exit horizons.
“We know that profitability may not always reflect a company’s potential in its early stages. That is why we take a long-term view of potential growth by evaluating companies based on historical portfolio performance, key operating metrics, growth plans and customer acquisition strategies,” said Priya Kini, Head of Commercial Banking, HSBC Singapore.
HSBC declined to provide specifics on loan ticket sizes and interest rates. However, it shared that its loans can be structured to provide more flexibility to its clients depending on their financing needs. Its loan tenures can range between under one year to three years.
Some of HSBC’s existing “new economy” portfolio companies include Southeast Asian names like Funding Societies, Carro, Atome Financial, and NextGen Foods.
The two new funds are an extension of HSBC’s existing strategy to expand its loanbook into Asia’s private capital and tech startup ecosystem, which until recently was still considered to be beyond the risk thresholds for traditional lenders.
Asia’s maturing venture capital and startup ecosystem has led to rising demands for debt among startups, especially as these startups continue to scale and the cost of equity continues to grow.
At the same time, most of the region’s existing venture debt players are mostly localised and few. Some examples include InnoVen Capital and Genesis Alternative Ventures in Southeast Asia, as well as Edelweiss Wealth Management and Alteria Capital in India.
In recent times, HSBC has launched a series of debt vehicles for the region including a $200 million Southeast Asia fund in November 2021, a $250 million India fund in June 2022, and a $3 billion fund for Hong Kong and mainland China in May 2023.
In late 2023, HSBC launched two more single market venture debt vehicles—a 500 million ringgit ($106.8 million) fund for Malaysia, and a $150 million (AUD 227 million) fund for Australia.
The London bank’s aggressive push into Asia also took place shortly after its one-pound acquisition of Silicon Valley Bank’s UK arm in March 2023, signalling the lender’s keenness to expand its foothold into tech. HSBC’s innovation banking unit now consists of the UK division of Silicon Valley Bank, as well as newly-formed teams in the US, Israel and Hong Kong.
HSBC’s head of commercial banking for South and Southeast Asia, Amanda Murphy, told journalists at a press conference on Wednesday that the bank has plans to launch a dedicated green loans fund for Southeast Asia under this same strategy.
In the longer term, Murphy added that HSBC will eventually open access to these funds to its high net worth and family office clientele—similar to what it has done for its longer-running venture debt funds in the UK.
