In an ever-volatile world, you would look at any index. These can range from human development, standard of living, per capita income, quality of life, ease of doing business, corporate taxation or company incorporation. Whichever way you look, the small city-state of Singapore stands tall. The nation’s thriving start-up ecosystem includes robust incubating infrastructure, tax incentives, cash grants, and financing schemes. This has led to a significant increase in the number of startups in the country over the last decade or so, with the number reaching 48,000 in 2015, as compared to 22,000 in 2003.
A major contributing factor in the startup success of Singapore is the growing pool of high net worth individuals, corporations and institutional investors. Also, apart from private sources of funding, the Singapore government actively encourages the set-up of incubators and investments into startups through a variety of programmes. Initiatives led by governmental bodies such as SPRING Singapore (now Enterprise Singapore1) and the National Research Foundation (NRF) seek to support local startups by leveraging on the expertise of third-party investors and encouraging investments through co-investment schemes. Furthermore, the government allocates resources for venture investing through the Economic Development Board’s investment arm and Singapore’s two sovereign wealth funds, the Government Investment Corporation of Singapore and Temasek Holdings.
Equity fundraising in Singapore
Then, there is the option of equity fundraising. Notably, the landscape of private equity funding in Singapore is getting more robust these days, as the government actively encourages private investors to invest in the country’s startups with numerous tax incentives.
If you opt to finance your business by selling equity in your startup, you sell partial ownership of your company (in the form of shares) for a cash investment. However, it is crucial for you to understand that in order to have a good chance of securing equity capital in Singapore, you need to show your potential investors that you have a watertight and comprehensive business plan, clear exit strategies, reasonable and prudent financial projections, an experienced and go-getting management team, as well as strong growth potential.
Alternatively, you can seek other sources of funding from venture capitalists, business angel investors, banks, investment companies/funds or financial institutions.
Angel investors in Singapore
Angel investors are private investors who typically not only invest capital but also contribute their business expertise/skills in early-stage businesses in exchange for a significant share in the company. They can be individuals, or be part of an angel network that engage in investing in businesses with high growth potential and in the industries that they are familiar with. That said, there are some business angels playing active roles in the business while others act as sleeping partners. Angel investors are typically wealthy High Net Worth Individuals or successful businessmen with an appetite for startup companies with higher risk (but that are promising enough to yield higher returns). Therefore your startup should have a high growth potential, in order to win the favour of business angels.
Venture capitalists in Singapore
Moving on to the venture capitalists, these are typically professional investors who have a more hands-on role in your business if they were to invest in your company, and they typically do so with the vested interests of their own clients’ profitability.
Venture capitalists offer not only funding but also advice on increasing your business profitability, and possibly in operational matters as well, especially if your business requires input from different areas of expertise in the team.
Popular startups for venture capital funds are those in high growth potential sectors such as IT, biotechnology and nanotechnology with a competitive edge in the market and longevity of profiteering. Startups whose business involve scientific breakthroughs, Intellectual Property creation and other similar large-scale impact businesses are often favoured by these venture capitalists.
The venture capital industry in Singapore is relatively new and small compared to the US and Europe. Nevertheless, there are actually more than 100 venture capital firms in Singapore ranging from independent limited partnership venture capital firms to corporate-backed venture capital firms.
1SPRING Singapore merged with IE Singapore to form Enterprise Singapore on 1 April 2018.