A Wish for Smarter Money in Singapore

Bernard pointed out the following in his comment to my previous post.

The funding gap from S$0.5 to S$4M is very real, and requires smart money to elevate a lot of start-ups to the next level.

I had also commented in the same post that many of our local entrepreneurs still have some ways to go before they become truly fundable.

Instead of writing a long diatribe with no personal experience as an entrepreneur, on areas that I think they can do better, I think I’ll take that comment back, and concur with Bernard that smarter money is what our entrepreneurs need.  I mean, there must be smart money in Singapore already!  Anything less would  be blasphemous.  Look at Meng Weng’s chart below – we must all be smart money, no? 🙂 we just need to all become smarter.

Wong Meng Weng's map of Venture Capital in Singapore

Wong Meng Weng's map of the Capital Markets in Singapore

Been there, done that

To start with, it helps for the smarter money to have a credible track record.  Entrepreneurs would probably be more willing to listen and respect the investors’ views when you’ve been a serial entrepreneur yourself, or have had a string of home runs tucked under your belt.  Few entrepreneurs are going to care about what a young ‘un like me would say, as compared to someone like Leslie Loh and Eddie Chau, or even Mitch Kapor (who recently funded my friend’s start-up, Discoveri.o), Toivo Annus (of Ambient Sound Investments, who btw is an investor in Garena) and Joichi Ito.  After all, experience does matter in early-stage investments.  While VCs rely on an intuitive pattern recognition process (on top of any formal investment due diligence), angels have even fewer data points to cross-reference, and probably have to invest in more deals, and/or consider whether the amount of value they can add to any potential investment would be sufficient for the venture to reach its near-term milestones, i.e. secure their first customer and successfully raise the next round from VCs – which leads me to the next point…

Rolling up your sleeves and getting your hands dirty

The value of active engagement and participation by smart-money investors – even down to the day-to-day operations of the start-up – cannot be understated.  That’s the whole basis behind the financing in the first place – otherwise, debt could be a much better instrument for the entrepreneur to pursue.  The last thing an entrepreneur needs in the early days of his venture is to be faced with a termsheet from financial investors who ask for redemption rights and a whole host of other protective provisions that puts him squarely on the short end of the stick – which leads me to my final point…

Just Believe

R Kelly thinks he can fly.  Rod Stewart has plenty of reasons to believe.  Mariah Carey and Whitney Houston tells us that miracles can happen when we simply believe.  Smart investors stand and fight alongside the team once the money’s in.  Others who choose to be penny-wise pound foolish will find themselves expending all their energies excessively watching out for potholes and ‘mitigating risks’, instead of gunning for that pot of gold at the end of the rainbow together with the team.

Cartoon on Venture Capital

What can we do about it?

One way our government can attract smarter money that’s abroad to spend more time in Singapore, would be to allocate say S$50 million to guarantee between 50 – 75% of investments made by quality angels into Singapore-based start-ups.   Give these investors a 3-year call option to buy back the government’s stake at a nominal interest rate.  This lowers the investment risks substantially for qualified angels – they buy the stake back for cheap when things go well, and take a 15% hit on the investment if things go south.  Do not slap too many requirements on the scheme – if you put too many locks in place, these smart individuals are likely to either do all they can to pick it, or simply take a look, feel offended to be perceived as prospective thieves and walk away.  There should be active engagement at a personal level (a-la Contact Singapore-style) and more efficient execution on the part of our bureaucracy, to make these investors feel welcomed in Singapore.

It’s time we rolled out the red carpets – after all, we need them more than they need us.

About James Chan

James Chan is an entrepreneur, investor, geek, photographer and husband/father based out of Singapore. Apart from frequent travels to Vietnam, Myanmar and Indonesia for work, James can also be found online via his trusty 15" Retina MacBook Pro or iPhone 6+.