Earlier this afternoon, I came across SGentrepreneur.com’s post on Wong Meng Weng‘s map of Venture Capital in Singapore (good job Meng Weng!) and couldn’t help but notice Bernard’s comment on how it’s highly unlikely for entrepreneurs to find funding via the traditional venture capital route amidst the turbulent and challenging climate.
(off-topic) Bernard, I really have to disagree – start-ups are still being funded (even in Singapore) despite the downturn. Brandtology and DMS are but two of the more recent and publicly announced examples. These aside, I personally know of at least three other Singapore-based start-ups that have received term sheets or are being seriously looked at for investment by VCs in Singapore in the past 6 months. Of these three – I’m personally closing an early-stage investment at Infocomm Investments (my final hurrah), while another start-up (founded by friends of mine) had received a term sheet at a really good valuation some months back. Many of our local entrepreneurs still have some ways to go before they become truly fundable. More on this in another post perhaps.
Fund-ability aside, if you take a closer look at Meng Weng’s map, you’d notice our government’s fingerprints everywhere in terms of seed, early, and even growth stage financing options. If you’re sufficiently up to speed with our government’s initiatives in the venture capital and entrepreneurial space, the following list (with my personal opinions/interpretations in blue) should ring quite a few bells.
Media Development Authority (MDA)
- iJAM Incubators – makes available chunks of S$55,000 to 9 pre-approved ‘incubators’; These incubators probably act as market filters and disbursement ‘agents’, for first-timer entrepreneurs (who aren’t able to secure any other source of funding) to ‘have a shot’ at POC-ing their ideas. Imho, this programme would not yield successful start-ups – self selection will ensure that the majority (if not all) of start-ups who begin with this route are unfundable by any measure.
- PILOT Scheme (previously known as DCDS) – funds up to 50% of digital media and game content development or S$150,000, whichever is lower; I don’t have any experience with this, but I believe this works pretty much the same way as grants by other government agencies such as EDB/IDA.
Standards Productivity and Innovation for Growth (SPRING)
- YES! – matches $4 for every $1 raised by students under the age of 26; I’ve got no experience with this scheme, so I shan’t comment.
- TECS Proof-of-Concept (POC) and Proof-of-Value (POV) Schemes – funds commercialization process by Singapore-based (at least 30% local equity) SMEs, with S$250k (covering 100% of project qualifying cost) for the POC phase and up to S$500k (covering 85% of project qualifying cost) for the POV phase. This is a competitive-bid grant, where applicants put forth their proposals and get shortlisted and judged by a panel; I’d be very interested in how the individuals that make up the TECS panel were selected, and how consistent they were in reviewing cases. The real test of the effectiveness of the use of a panel as a filtering mechanism would be the proportion of approved projects that eventually reaches the hands of at least 5 paying customers (1 would be too low a metric imho – repeatability of successful sales is better).
- SEEDS – equity matching scheme at $2 for every $1 of money raised, and up to S$1 million from SEEDS (i.e. matches up to S$500k of private sector money raised for total of S$1.5 million); While SEEDS was under the auspice of EDB, over 150 companies got funded in 5 years. Ever since the programme owner changed from EDB to SPRING, the number of funded start-ups have fallen drastically. Word has it that (like any early-stage investments) many investments from the old portfolio bombed, and feet are turning cold. I wish they’d continue investing more – momentum and numbers are crucial in the early-stage game.
- Business Angels Scheme (BAS) – equity matching scheme at $2 for every $1 invested by pre-approved angel groups up to S$1.5 million. Apart from Sirius and BAF Spectrum, there used to be another group named Mustard Seed. With BAF Spectrum’s most recent IT investment being in Jul ’08 and no IT investments from Sirius since raising its new S$30 million fund in May ’08, things have been relatively quiet for Singapore’s angel-seeking IT entrepreneurs.
- Local Enterprise Financing Scheme (LEFS) – matches bank loans 8:2; Again, the start-up needs to have at least 30% local equity. Few Singapore banks would be willing to extend a credit line to IT start-ups with no tangible assets and intangible intellectual property that requires expertise beyond that of any banks to value fairly. A profitable Singapore-based software services company with multi-million revenues, 7 years of operating history and top-tier VCs as shareholders was only able to secure a S$187k credit line from 1 bank. It would seem IT companies with no fixed assets/collateral have been forgotten.
National Research Foundation (NRF)
- Proof of Concept Grant for iHL researchers – no experience with this.
- NRF Incubation Scheme – no experience with this.
- Early Stage Venture Fund – seeded S$10 million each to 6 early-stage VC funds; Last I heard, some of the participating VC firms were having trouble raising the minimum of S$10 million to close. *winces*
Infocomm Development Authority (IDA)
- Infocomm Investments (IIPL) – equity investment arm of IDA, to co-invest with VCs in Singapore-based growth-stage IT companies; IIPL operates like a typical VC firm, except that it does not set the valuation. Instead, it invests on the same terms as the lead investor(s), who have to be sufficiently qualified, i.e. has track record of investing in IT deals. The company also has to have substantial operations in Singapore.
Economic Development Board (EDB)
- Complete listing over here.
- S13H – allows approved VC funds tax exemptions on qualifying incomeManages the S13H incentive for venture capital funds
If you have more grey hair that I do, you might remember some of the following (in no particular order):
- Kent Ridge Digital Labs (KRDL) – an incubator that worked so well, it lost more people than it could replenish; eventually subsumed under NRF. For more background, check out my posts here and here.
- National Computer Board (NCB) – I’ve spoken to several ex-NCB folks who attested to the good Industry Development work under the stewardship of Lim Swee Say et. al., and the can-do spirit and derring-do spirit that once permeated the organization.
- TIF Ventures – a whopping US$1+ billion placed under its management, in a massive attempt by the government to stimulate our VC and entrepreneurial landscape; it resulted in plenty of VCs and funds managed out of Singapore, but did not necessarily translate into investments into Singapore-based companies.
- Phillips Over-the-Counter (OTC) – a project hatched by EDB and handed over to SPRING when EDB divested itself of all its VC/Entrepreneurship work last year. Today, OTC struggles to remain relevant – a case of too few companies listed and lost momentum.
- Research, Innovation and Enterprise Council (RIEC) – NRF is the secretariat to this high-powered council chaired by PM Lee Hsien Loong and a group of ministers, and also involving private sector folks such as Koh Boon Hwee (DBS), Wong Ngit Liong (Venture Corp), George W. Buckley (3M) and Professor Clayton M. Christensen (HBS). This is the closest Singapore has to a central body coordinating R&D efforts.
If you’re still with me at this stage, give yourself a pat on the back! As confusing as some of these schemes and roles of these entities may be, one thing is clear – there are too many cooks that are spoiling the broth! It takes more than a PhD degree to wade through the swaths of government incentives and schemes, each with its unique objectives that were probably designed to fulfil the nation’s overall KPIs (for growing our R&D). Along the way, KPIs get innocently or intentionally misinterpreted, new schemes get designed and created by a whole host of civil sector officers of varying seniority, passion and zest who come and go. as often as Cassanova and his women. The end result is a Singapore that has spent S$7.3 billion on R&D in 2006, and another S$9.14 billion in 2007, owns the bragging rights to a gross domestic expenditure on R&D (GERD) of 2.61% (vs USA’s GERD of 2.68%), but yet has absolutely NOTHING to show for its past 10 years of work, except for a confusing potpourri of government incentives and schemes.
I know entrepreneurship takes time. That is exactly why our government and bureacracy still have time to make it better, by identifying and empowering an entity to hire the right team to lead and coordinate our government’s to-date diffused efforts in the Venture Capital and Entrepreneurial space. I do hope we can put an end to the short-term mentality and risk aversion that has left much of our bureacracy unable to execute the good wishes of our leaders.
In the meanwhile, I will continue to worry for Singapore’s future.