What it takes for new economy businesses to thrive

It was also the time when major tech startups-turned-conglomerates we know of today were founded. Success stories include Google, Amazon, Nvidia, among others. These companies later went on to transform the way we would live, and at the same time, created a booming job market that continues to thrive even today.

“The new economy is fuelling our global economic growth, we’re seeing a lot of the growth in ASEAN and here in Singapore,” says Amanda Murphy, head of commercial banking, South and Southeast Asia, HSBC.

“It’s important because it’s impacting not just the overall productivity and the number of centres, but it’s also increasing and improving the standard of living in many countries, in Asia in particular,” she adds.

But all these companies would not have been successful if not for one thing - funding.

Pitchbook data in July showed that venture capital funding globally had almost halved in the first six months of 2023. Investors backed about 3,000 deals over that period — down about a third from a year earlier.

Industry experts noted this could have been due to the rising interest rates and global instability, which made deal-making a lot more expensive.

While investors shied away, one bank has remained committed to supporting new economy companies, with a goal to help promising businesses find their footing wherever it is needed.

That bank is HSBC.

In June this year, the London-based lender launched HSBC Innovation Banking, which includes the former Silicon Valley Bank UK - acquired in March by HSBC UK for £1.

The new and larger entity also formed innovation teams in the US, Israel and Hong Kong, to deliver a “globally-connected, specialised banking proposition to support a broad range of innovation businesses and their investors”, it said.

The new entity currently employs more than 650 employees in the UK and the Nordics. It has also assembled an innovation team of more than 40 across the Bay Area, Boston and New York City, and recruited more than 20 new bankers based in Tel Aviv.

In Hong Kong, close to a dozen bankers were also onboarded to complement the group’s existing new economy expertise serving Hong Kong and the Asia-Pacific.

The bank does all this because it recognises the value which new economy business brings to the larger economy.

The industry has changed, reshaped, and now plays a more prominent place in terms of employment and wealth creation, says Murphy.

“Our hope is that we can partner with companies when they’re young, when they’re starting to get established,” she adds, and to continue providing that support till the company is ready to take on bigger things, like being listed, or being acquired.

What makes HSBC different?

For Murphy, the banking business is all about taking the time to understand its clients, their business needs and giving them access to whatever they need.

“Companies operating here face many challenges in their ambition to scale up and grow their operations,” she says.

“Some of these challenges can include not just getting access to knowledge, skills, and funding but also how to build strategic partnerships and collaborations within the ecosystem and expand their global networks not just here but also across the rest of the world.”

Profitability may not always accurately reflect a company’s potential, especially in its early stages. HSBC therefore takes a comprehensive approach to evaluating companies, including analysing their historical portfolio performance, key operating metrics, growth plans, and customer acquisition strategies.

It also considers their unique business model, competitive advantages, cost structure and their path to profitability. “We aim to understand their needs, establish partnerships, and provide customised solutions for their growth journey,” says Murphy.

With over two decades of experience in banking, Murphy understands the importance of helping young businesses find the right partners that can support them through the early years.

It is also the reason why she continues to focus the bank’s efforts on reaching out to these companies and helping them get access to the right connections and resources that are needed to grow.

For one, HSBC’s clients enjoy access to the bank’s global network across 60 markets and a vast client network where it can link clients with like-minded potential partners. It has recently partnered with Antler, a global early-stage venture capital firm to support early stage companies. It regularly hosts events to facilitate knowledge exchange and networking. For example, it hosted the demo day of global venture capital fund, Orbit Startups, in Singapore this year to connect startups and potential investors. As an international banking group, clients can also tap on private banking services to support founders’ private wealth aspirations, and investment banking services to take the business to the next level of growth.

Clients also benefit from streamlining their cash operations through the HSBCnet platform – which allows one to see all bank accounts globally in one view – useful for companies who operate in multiple markets.

“It enables you to manage your cash on a consolidated basis, whether you’re selling in the Philippines or buying in Indonesia, but selling in Singapore,” says Murphy.

The platform also provides real-time updates, allowing ease of moving money from one place to another.

Meanwhile, the bank’s suite of digital solutions also allows businesses to manage its cash efficiently and put excess cash to good use.

Notable clients who have benefited from the bank’s offerings include Carro – an online used-car marketplace. While the company’s relationship with HSBC started in 2021, it was also one of the first to tap on HSBC’s US$200 million lending fund to support high-growth technology companies in Singapore, seeking expansion across Southeast Asia and further afield.

The loan gave Carro access to S$25 million in trade finance to expand their inventory.

Founded in 2015 in Singapore, Carro has since raised over US$600 million in equity from a suite of strategic investors to become one of the region’s fastest growing tech companies.

In 2022, HSBC also offered a US$4.6 million credit facility to Growthwell, a rising star in the food-tech space, which received US$22 million in Series A investments from Temasek Holdings, DSG Consumer Partners, Insignia Ventures Partners, and Genesis Ventures.

The startup said it plans to channel the funds towards R&D and increase capacity for automating production, freezing, and packaging of alt-protein products to shape a more sustainable and nutritious food system for more consumers. HSBC’s global network and local expertise has helped drive the company’s overseas expansion plans. From Singapore, Growthwell has rapidly expanded into Malaysia and has plans to expand into Thailand, Indonesia, and Taiwan.

In a space where not all financial institutions would be keen to support early-stage businesses, HSBC stands out as a bank that takes a long-term view of potential growth.

Why?

“Because we believe we understand the risks. We have experts, the scale… We believe we understand the companies - in terms of their ability to deliver, the quality of their products and we nurture them,” says Murphy.

Pushing for more

While 2023 has so far been a largely dampened year for many, with dealmaking and IPOs falling by more than half, the lender continues to double down on helping businesses grow, despite bearish sentiment overhanging markets.

In May this year, the lender doubled down on its support to innovation economies in Hong Kong and China by upsizing its specialist lending scheme to start-ups and tech-led businesses to US$3 billion.

At the same time, it also added its first venture debt capability in Asia, while reiterating its promise to continue offering “working capital, capital expenditure facilities, treasury management, and corporate finance solutions to meet the needs of innovation economy companies at different stages of their lifecycle.”

More recently in September, the bank also announced plans to make US$1 billion of financing to early-stage climate tech companies around the world.

The financing is expected to support start-ups to create a range of new solutions, including EV charging, battery storage, sustainable food and agriculture, and carbon removal technologies.

Closer to home, it also recently launched a 500million ringgit new economy fund dedicated to providing high-growth, new economy businesses across Malaysia access to funding solutions to enable them to innovate and scale.

Still, it continues to augment its efforts within the region as it sees Southeast Asia as a bright spot within the region.

It’s a whole confluence of factors, with everything from high levels of digitalisation, rising purchasing power, a young demographic, that makes the region attractive for businesses to build and grow, Murphy says.

The ASEAN region alone is projected to grow 4.8 per cent in GDP in 2024, based on Organisation for Economic Co-operation and Development’s data.

The lender also forecasts that the six largest economies in Southeast Asia -- Indonesia, Thailand, Malaysia, the Philippines, Singapore, and Vietnam -- will grow 4.2 per cent this year and 4.8 per cent next year.

“You compare that with somewhere between zero and one for Europe… This makes it much more attractive and dynamic,” says Murphy. “You sit in Singapore like I do, you can feel the level of excitement, you can see the companies that are out there and creating new engines of growth for the region and the world.”