Doing Business

How Startup Raise Capital in Singapore?

Nora Setiawan

July 20, 2020

Doing Business

How Startup Raise Capital in Singapore?

Nora Setiawan

July 20, 2020

Singapore is a leading startup hub in Asia and the world, as it’s home to over 40.000 startups. The country houses 6 out of the 12 Southeast Asian unicorns as well, and they are Razer, Sea, Lazada, Grab, Trax, and Bigo Live. Supporting these startups are over 100 incubators, accelerators, venture builders and over 150 Venture Capital funds.

Other than that, Singapore’s research and innovation ecosystem have played a key role in its emergence as a global business hub. However, its ecosystem brings together academia, government, and the private sector to collaborate and innovate on solutions that are still relevant and practical to the needs of the global market.

Many foreign entrepreneurs have set up businesses in the country because it has a stable socio-economic environment. Singapore is well known for its political stability and excellent business environment. Also, Asian gateway of clusters and business opportunities, and the country makes it easy to assess institutional investors.

Overview of Singapore Business and Economy Situation

According to official data from The World Bank and Projections from Trading Economics, The Gross Domestic Product (GDP) in Singapore was worth US$382 billion in 2019. The GDP value of Singapore represents 0.32% of the world economy.

Back in 2017, Singapore was ranked as the world’s second most open economy by the Heritage Foundation’s index of Economic Freedom. That is why it remains one of the most market-oriented and open economies in the world, and also considered the easiest country in terms of doing business.

To add more facts, Singapore is seen as a gateway to the Asian markets, where spending by 3.2 billion middle-class consumers could hit US$55 trillion by 2030. It won’t be a shock as the consumer there enjoys a high standard of living and is a keen buyer of foreign products. Singaporeans are not only brand conscious, but are also very local and cautions towards exploring alternatives. For example, they like new products, but they stay loyal to familiar brand names.

They like to experiment with new products only after feeling assured about their quality and customer care services. They also consider the factors, such as price, quality and service when deciding to purchase things.

After all these years, with more than several thousand startups launched each year, dozens of investment funds and angel investor networks, and an emerging culture of entrepreneurship, Singapore is aiming to make the country the “startup factory” of Asia.

Singapore’s government has created several funds and grants that targeted specific emerging industries, and nearly all large global Venture Capital have a presence there. Additionally, the early-stage investor ecosystem there is stronger than before, as the startups seek funding from venture capital investors who may be based outside Singapore. 

It will be the right decision if you want to set up the startup companies in Singapore, as it has the strong connections to major innovation hubs around the world. Moreover, it established launchpads in key markets, such as Bangkok, Jakarta, and San Francisco.

The next thing that you will know is how to raise capital for your startup firm in Singapore. Let’s continue to follow the information below!

How To Raise Capital For Startup

How to raise capital in Singapore for startup

There are ways to raise funds for startups firms. You can raise the money through Venture Capital, Crowdfunding, and Government Funding. We will give you detailed information regarding the definition and steps for these 3 ways of funding the startup firms!

1. Venture Capital

The Venture Capital industry in Singapore remains robust. In 2018, the number of deals grew to more than 220 deals, with a net worth close to US$4.2 billion. The government is aiming to bring in an additional S$200 million of additional funding in 2019 to add to the S$1.3 billion that has been made to local small and medium enterprises.

Singapore also provides tax exemptions for onshore and offshore funds. The existing legal framework provides tax relief for Venture Capital funds. 

The Steps To Raise Capital Through Venture Capital:

  • Evaluate how much the business is worth, such as do some financial projections to show a realistic return on investment.
  • Figure out how much the business needs to raise, including to determine your total needed amount by considering how much capital you can use immediately and how much control you are willing to give up to new investors.
  • Get in touch with the Venture Capital firm and you should prepare for the pitch to the Venture Capitalist.
  • Decide how much ownership you can give up to a Venture Capitalist. This depends on the ownership structure and the number of rounds that you fund for the business needs.

2. Crowdfunding

It is a method of fundraising that used to raise money for business ventures, personal projects, and nonprofits. It is through the collection of small amounts of funds from a large number of contributions. This way is helpful for entrepreneurs, innovators, and creatives to get their ideas.

There are 4 types of crowdfunding:

  • Donation: The individuals give out the money and they are not expecting anything in return.
  • Reward: The invested money is for non-monetary rewards in exchange. It could be a simple mug or even a t-shirt.
  • Debt: It is a financial-transaction between the investors and the companies. The company usually agrees to pay back the principal plus interest to lenders at a predetermined date.
  • Equity: Investors offer capital in exchange for a stake in the companies. It’s similar to invest in the stock market, except the companies are private rather than listed. Hence, the gains come from dividends and capital when the share value increases.

The access to funding and capital is extremely important for startups in the early stages of the business. The development of a crowdfunding market will not only help bridge this capital gap, but also solve other problems that are caused by the startup industry’s over-reliance on government funding.

3. Government Funding

One of the well-known Government Funding in the country is Startup SG Founder. It is a platform to access local support schemes and suitable for first-timer entrepreneurs. 

The platform provides the entrepreneurs with mentorship and a startup capital grant of up to $30.000 on a co-matching arrangement. It means that the scheme matches $3 to every $1 raised by the entrepreneur for up to $30.000.

The Application Process:

  • You will have to contact one of the Accredited Mentor Partners (AMPs) and submit your application directly to them.
  • Your selected AMP will evaluate your application based on the uniqueness of the business concept, the feasibility of the business model, the strength of the management team, and potential market value.
  • You will be informed of the result within 5 working days.
  • If your application is approved, Enterprise Singapore will issue a Letter of Offer to you, and your AMP will mentor you over a 12-month period. The grant is disbursed after your business has met certain milestones.

READ MORE: Viettonkin Consulting Global Incorporation Service

These are the necessary information regarding raising capital for your upcoming startup company. You will have no doubt in setting up a startup firm in Singapore as it has a stable economy and business environment, but you still need to prepare and decide how you would raise money for your startup company. In conclusion, preparation and some research will be the key to set up a company!

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