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Failure to launch: Singapore start-ups struggle to woo investors - Yahoo! Singapore Finance
By A. Ananthalakshmi
SINGAPORE, Dec 21 (Reuters) - Singapore's decade-long push to become a hotbed for entrepreneurs is stuck at stage one.
The city-state of 5.3 million people ranks No. 1 in the world in ease of doing business and fourth in starting one, according
to a World Bank study. It offers low taxes, easy-to-obtain seed money to start a business, and a well-educated, Englishspeaking workforce in the gateway to Asia.
It just takes one day and S$315 ($260) to register a business in Singapore. Yet, the country has struggled to attract
international investment money for its own start-ups.
Venture capital firms are put off by the small size of the market, lack of big ideas that can be a global success and an
uncertain exit strategy. Only 50 out of 301 venture capital firms based in Singapore are interested in local investment,
according to the Asian Venture Capital Journal Research.
Of the 70 high tech start-ups the government has invested in over the past two years, just 10 received follow-on private
funding from investors locally and abroad, according to the National Research Foundation, the government arm
responsible for research and development.
"There is a real shortage of venture capital firms investing in Series A in Singapore," said Leslie Loh, an entrepreneurturned-investor, referring to the first round of funds raised by start-ups after seed capital.
"VCs are looking at countries like India and China where there is a larger domestic market."
Only 2 percent (about $15 million) of the total venture capital investment in Asia is aimed at Singapore, according to Asian
Venture Capital Journal Research's data for 2012. Japan, China and India topped the list of big VC investments in Asia.
"In the early stage there is a big push (by the government). But if you look at the whole ecosystem for helping companies
grow, there is a gap in the growth stage," said Wong Poh Kam, a professor at National University of Singapore's business
school.
"For a Singapore company to be able to achieve global success, it needs to have sufficient follow-on venture capital
funding."
CHICKEN-AND-EGG PROBLEM
Pampered by government funds at the early stage, when start-ups can tap up to S$500,000 in grants, companies are
finding it hard when they go looking for millions of dollars from venture capital firms for Series A funds.
Of the 374 venture capital investments in Asia in 2012, Singapore accounted for just 24, according to AVCJ Research.
"If there are no success stories, VCs do not think there is a compelling reason to be here," said Wong.
But that success depends on big money from venture capital firms, leaving start-ups stuck in a vicious cycle.
Andrew Roth, co-founder of Perx, which makes a digital loyalty card application, said one of the first questions he heard
from investors when he went looking for funding was, "What is your net operating income?"
Roth says he would not have been asked that question if he was in Silicon Valley, where investors care more about the
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Failure to launch: Singapore start-ups struggle to woo investors - Yahoo! Singapore Finance
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