Overview
This is part of our series on one unusual source of venture capital funding which you may not have thought of: the multilateral development banks.
In this installment we outline what financing may be available through the Asian Development Bank (ADB).
Funds and Programs
ADB’s venture capital investments are made through Manila-based, ADB Ventures.
ADB Ventures has one main active equity fund, ADB Ventures Investment Fund 1, one active seed funding program, ADB Ventures SEED, and one planned debt fund.
Total VC funding as of November 2022 (latest available confirmed data) was USD 65 million.
We will concern ourselves with the two active funds:
1) ADB Ventures Investment Fund 1
Fund size:
The fund had $60 million as of December 2022 and has made 8 investments to date (as of June 2022, latest available confirmed data). As such, funds should still be available for making new investments.
ADB Ventures has indicated that 50% of the fund will be for follow-on investments which will at some point limit capacity for new ones unless they raise a new fund.
Fund life:
Closed in October, 2020, ADB Ventures Investment Fund 1 will have a life of 17 years, while investment holding periods are expected to be up to 10 years. The fund life is substantially longer than the typical 7-year VC fund; so, ADB Ventures may be providing you with more long-term, patient capital.
Target number of investments:
The fund wants to make 20 investments, though the final figure could range between 15 to 30 in total.
Company stage:
This is an early-stage fund, so the investment in your company would be pre-Series A to Series A.
As such, to be a potential investee your company should have 1) product-market-fit established and 2) be at or near positive unit economics (around breakeven gross margins). Also, you should be ready to commercialize and start scaling the business.
Target investment type and size:
The fund makes equity investments with a ticket size between $500,000 and $3 million. The stated maximum investment size is $4 million; however, they have gone higher.
Target company characteristics:
The fund is seeking technology companies that have scalable businesses and are commercially feasible. Also, ADB Ventures seeks companies that have “great teams and commercial traction that can generate positive impact on climate change and gender equality”
The ADB is climate and gender-conscious in investing and these criteria will be filters in investment evaluation. The ADB wants investments that will be ESG compliant in the future. Keep this in mind when reviewing how your startup operates.
If they invest in your company, the ADB will also provide free advice and support on ways to track and improve climate and gender equality impact.
Target sectors:
The fund has stated that it’s primarily targeting four sectors: 1) Cleantech, 2) Agritech, 3) Fintech, and 4) Healthtech.
Geographic focus:
ADB Ventures has indicated that they expect the Fund to have 40-50% of its investments focused on Southeast Asia, 20-30% in South Asia, and, thus 20-40% in the rest of Asia.
That said, if your company is from any ADB member country you are eligible for investment. (See Country Eligibility table.)
Additionally, we note that the fund’s portfolio has investments in companies headquartered in South Korea, Singapore, Hong Kong, and the U.S., so it appears that your company could be headquartered outside of the region and be eligible for funding, so long as it focuses upon an ADB member country or countries.
Deal structure:
ADB Ventures prefers to go in as a co-investor; however, if you do not have one, then they may refer you to investors in their network. For ADB Ventures, co-investors can include angel investors, impact investors, and corporate VCs.
Deal speed:
If successful, it should take at least 3 months to close a deal (including time for due diligence, shareholder negotiations, etc.).
Final note:
ADB Ventures Investment Fund 1 expects to source investments through its own pipeline via the ADB Ventures SEED program and the ADB Ventures Lab, which we cover next.
2) ADB Ventures SEED program
Program size:
The seed program had $5 million in funding for 2022 and has made 35 investments to date (as of June 2022, latest available confirmed data).
Program life:
As SEED is a program and not a fund, there is no stated fund life.
Target number of investments:
The target number of investments is unspecified.
Company stage:
This is an early-stage funding program, so the investment would be for seed capital to pre-Series A.
As such, you should be working on prototypes, completed production development, and have some revenues. The company should be ready to search for and establish product-market-fit and validate your concept.
Target investment type and size:
The program provides grants of up to $200,000. In return for the grant, your company will give future investment rights to ADB Ventures.
As such, the SEED program is a potential path to future funding from an ADB Ventures fund.
As an additional note: ADB Ventures Lab is another expected pipeline to ADB Ventures funds.
ADB Ventures Lab, in turn, partners with Plug and Play Asia Pacific to link companies with incubators, accelerators, and corporate customers, so this may be a further source of funding to explore.
Target company characteristics:
The SEED program is seeking early-stage technology companies that have potentially scalable businesses and that can be commercially feasible. Also, like with ADB Ventures Fund I, they are seeking companies that have “great teams and commercial traction that can generate positive impact on climate change and gender equality”
The ADB is climate and gender-conscious in investing and these criteria will be filters in investment evaluation for the funds. The ADB wants investments that will be ESG compliant in the future. Keep this in mind when reviewing how your startup operates.
If they invest in your company, the ADB will also provide free advice and support on ways to track and improve climate and gender equality impact.
Finally, different from ADB Ventures Fund I, if your company is based in a middle-income country, your technology solution should able to scale into less economically developed countries, especially if focused on a) climate change or b) addressing instances of local poverty.
Target sectors:
SEED is primarily targeting four sectors: 1) Cleantech, 2) Agritech, 3) Fintech, and 4) Healthtech.
Geographic focus:
ADB Ventures has indicated that they expect the Fund to have 40-50% of its investments focused on Southeast Asia, 20-30% in South Asia, and, thus 20-40% in the rest of Asia.
That said, if your company is from any ADB member country you are eligible for investment. (See Country Eligibility table.)
Deal structure:
It is OK if you do not yet have any institutional investments (i.e., investments outside of yourself, family, and friends).
Note, however, some preference is given to companies that have been funded by “strong local investors.”
Deal speed:
A deal may be closed in as fast as one month.
How to contact ADB Ventures
To submit company information or a pitch deck:
https://ventures.adb.org/startup-inquiries/
General enquiries:
If you are interested in finding out more, or, would like assistance on evaluating or developing your company’s financing options, please feel free to contact us at info@praxcore.com or