As startups in the region increasingly feel the squeeze of a downturn brought about by the COVID-19 outbreak, Singapore-based venture capital firm TNB Aura has launched a new special situations fund to back tech companies impacted by the pandemic.
The fund will provide selected startups with a cheque of around $2 million each, helping extend their runway by 12-18 months, TNB Aura said in a statement.
Given the urgent need for financial assistance for many startups at this moment, the VC firm says it aims to provide funding within 1-2 months and is open to a range of funding structures including convertible notes and direct equity.
“We are investing for the long term, and seek to provide an encouraging narrative to the ecosystem at this critical time. Ultimately, we believe in strong fundamentals, and in the ability of selected companies to both weather the current storm and come out stronger on the other side,” said TNB Aura co-founder and managing partner Charles Wong.
The launch of the special situations fund comes at a time when TNB Aura is seeking to raise its second fund, which we understand to be targeting a corpus of over $100 million.
Co-founder and managing partner Vicknesh R Pillay told DealStreetAsia that the special situations fund is positioned as a sub-fund of the VC firm’s second venture fund. However, the special situations strategy may well be extended, depending on market conditions.
“If the current market sentiments continue, which we expect to happen for at least another six months to a year, and we see a continued flow of startups facing cash flow issues, the special situations thesis will continue to extend into the rest of our fund 2,” he said.
Pillay acknowledged that the current investor sentiment makes it a tough time for general partners (GPs) to raise a fresh fund. However, he is confident that given the current value dislocation, potential limited partners (LPs) will be able to see “tremendous upside opportunities after we weather these turbulent times.”
Founded and managed by Pillay and Wong, TNB Aura’s $22.7 million first fund was one of five funds approved under the Singapore government’s AME co-investment scheme in 2016 with SPRING SEEDS Capital providing matching funding for select deals.
The firm, which focuses on Series A and B technology investments in the region, has already allocated more than 70 per cent of its maiden fund.
TNB Aura boasts 16 portfolio companies, including Indonesia’s Ralali, Vietnam’s Teko and Singapore’s TradeGecko.
The launch of the special situations fund is the first of its kind in Southeast Asia and comes at a time when many VCs are said to be adopting a more reserved and selective approach to investing as they look to conserve capital amid the economic downturn caused by the COVID-19 pandemic.
The virus spread has led world leaders to encourage and force people to stay at home, serving a huge blow to economies all around the world with consumption levels, particularly for secondary and tertiary needs, dropping significantly.