MDI Ventures' Shannon Lee on why Start-ups Should be Cautious Before Pitching for Venture Debt Capital
Shannon Lee Chaluangco, who will now lead Indonesia-based MDI Ventures’ investments in Singapore, believes that venture debt capital is a “good alternative source of financing with less dilution.” She, however, cautions startups not to “over leverage” it.
She is not wrong. Start-ups avail venture debt capital when they don’t want to dilute the equity of the company. However, they will have to repay the borrowed sum along with interest within a given period of time. And, failure to repay can even lead the company to be sold or to liquidate.
“It (venture debt capital) is great if your numbers are improving and have the ability to secure additional financing, but obviously it can create pressure otherwise. So work with a credible provider that will be a little more patient if things get tough,” Chaluangco said.
In pic: Shannon Lee Chaluangco, a newly appointed Investments Director, MDI Ventures, Singapore
A 29-year-old Chaluangco joined MDI Ventures, which focusses its investments on tech-driven high growth businesses, as investments director for the company’s Singapore operations. She earlier worked with CapitaLand’s corporate venture capital (CVC) initiative C31 Ventures as an investment manager.Meanwhile, MDI Ventures today (8 August) announced Chaluangco’s appointment only a week after the venture capital’s former CEO, Nicko Widjaja, joined PT Bank Rakyat Indonesia to lead the latter’s new corporate venture arm, BRI Ventures. Widjaja backed 32 startups during his tenure at MDI Ventures.
The Telkom Indonesia-backed MDI Ventures is a US$140 million corporate venture capital firm, with headquarters in Jakarta and operations in Singapore and Silicon Valley. It has so far invested in 33 startups. The company earlier announced that MDI Ventures returned 40 per cent this year after a 28 per cent gain in 2018. Further, the VC firm is spearheading talks with limited partners in Asia to raise additional funds as it plans to go full-throttle in its expansion plans.“MDI Singapore is a new outfit, but MDI is a known name especially in Indonesia where most of our investments have been made so far. However, that will change with the establishment of our Singapore office, which is part of our move towards being a global VC,” Chaluangco said.
And her success strategy for startups? “Founders and early employees in startups wear many hats, and it can be tempting to do many things at once,” Chalaungo says. “However, it’s important to be focussed, especially in the early days and to understand who your customers are, what they want, and what they will pay for.”
“Ideas are cheap, so execute quickly yet thoughtfully. Be mentally prepared for it to be several gruelling years ahead. Oh, and don’t be an asshole.” - Shannon Lee Chaluangco
Asia attracted 38 per cent of all CVC deals in 2018, up from 31 per cent in 2017, according to CB Insights. The same report suggests that CVCs accounted for 38 per cent of all disclosed funding for tech startups in Asia.