ARQCapital Partners (ARQ), a venture capital investment firm, plans to pour in P1.5 billion in investments to high-growth medium enterprises (MEs) over the next two years through its ARQ SME Mezzanine Business Development Co. (ARQ SME BDC).
Noting that most venture capital firms focus in the country are focused on early-stage startups and private equity investors and strategic investors are focused on larger investments and more mature enterprises, ARQ capital chose to become a mezzanine investor enabling SMEs to take their businesses to the next level.
“We believe there are core challenges of (small and medium-sized enterprises) SMEs in the Philippines,” Edmund Solilapsi, founding partner and CEO of ARQ, said in a virtual media briefing. “These are the access to appropriate capital and knowledge sharing. We are not just offering capital. We are not passive investors who give capital to entrepreneurs and let them do what they want. We think that the best way to create an impact and help these SMEs is to invest in them and then nurture them, show them the road, and then help them take that continue on.”
So far, ARQ has invested about P1 billion in 33 firms since 2016 through its ARQ SME Business Development Company (ARQ SME BDC) and through co-investment partners. The investment company also said that is also raising additional capital from development institutions to fund its investments.
With a unique focus on SMEs, ARQ said that in addition to its 22 existing investments, the firm plans to fund 10 more MEs by the end of this year.
“We typically support entrepreneurs requiring more than P25 million during their companies’ high-growth phase, especially those with revenues hitting between P100 million to P500 million,” said Abigail Tan, co-founder and managing partner of ARQ. “As partners, we primarily assist companies in crafting a sound business plan and financial strategy that in the end should unlock further capital raising or a potential exit.”
Tan highlighted the market base for smart capital investors could be worth over P25 billion ($480 million), which is the equivalent of 20% of 4,800 medium enterprises in the Philippines identified by the end of 2020 that may have high-growth potential.
“We typically support entrepreneurs requiring more than P25 million during their companies’ high-growth phase, especially those with revenues hitting between P100 million to P500 million,” Tan said.
“We want to enable Philippines SMEs build value, add long-term partnerships that promote SME financial inclusion, and support the country’s growth,” Solilapsi said. “We want to be that gateway to larger fundraising and new business opportunities for this network.”
With backgrounds in international private equity funds, Solilapsi and Tan established ARQ in 2014.