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Getting Capital from Business Angels and VCs

posted Oct 28, 2012, 6:45 AM by Fide Consultant Group
When companies are working to get additional capital for their business growth, business angels and venture capitalist may be one of the available options. 

Further, we need to understand how the angel investors and venture capitalist industry in Singapore. 


ANGEL INVESTMENT SCENE IN SINGAPORE


Generally, angel investors are investing in high risk, early stage business ventures in exchange for a share of the business.  Business angels are looking to invest in high growth potential start-ups and business sectors that they are familiar with. Some business angels play an active role in the business in offering guidance, and mentor-ship to start-ups while some act as sleeping partners. Business angels are considered as the best source of private equity capital for start-ups. 
  • Usually, business angels offer early-stage investment to start-ups.
  • Angel investors tend to invest in start-ups that have a certain competitive advantage in the market. This could include innovative technology, exclusive marketing and distribution relationships or a strong brand or access to scarce raw material, etc. The business idea should demonstrate that it will generate returns for the investors.
  • Start-ups that have a high growth potential win the favor of most business angels.
  • Angel investors not only provide funding but also offer mentorship and strategic guidance to the companies they invest in.
  • According to research conducted by the National University of Singapore, business angels in Singapore tend to invest in the retail, hospitality and business services sectors.
  • Typically, individual business angels invest anywhere between S$25,000-S$100,000, while angel groups invest much larger sums in the range of S$250,000-S$750,000.
  • Angel investors often form angel networks or groups in order to pool their resources and capital. Angel networks are often a good source of capital for those seeking early-stage or seed funding. The networks help match entrepreneurs with appropriate business angels.


VENTURE CAPITAL INDUSTRY IN SINGAPORE


Venture capitalists are professional investors who play a very active role in your business. Like most business angels, venture capitalists not only offer funding, but also advise you on how you can enhance the profitability of your business. Venture capitalists look for a higher rate of return from the company they invest in, usually 25% and above. Most venture capitalists prefer to invest in start-ups that are at advanced stage and are in high growth sectors such as biotechnology, nanotechnology, or IT.

  • The Singapore government plays an active role in attracting foreign venture capital firms to set up their regional base in the country. Today, there are more than 100 venture capital firms in Singapore.
  • Venture capitalists in Singapore not only provide financing but also offer mentoring to start-up companies. Most entrepreneurs turn to venture capitalists for both financing as well as to gain access to professional management skills and expertise.
  • It must be noted that most venture capital firms in Singapore tend to focus on “late-stage expansion financing” and investment in late-stage startups or mature companies, rather than early-stage financing in new start-ups. Certain venture capitalists prefer to invest in companies that are already making profits rather than investing in a potentially profitable start-up. However, some firms do offer financing for start-ups in their early stages.
  • There are different types of venture capital firms in Singapore ranging from independent limited partnership venture capital firms to corporate backed venture capital firms. Due to attractive tax incentives and other beneficial government policies a number or cash-rich large corporations, government boards and high net worth individuals have setup venture capital funds in Singapore.
  • Venture capitalists in Singapore pay a great deal of attention to the services industry, manufacturing industry, and the high-tech industry. In recent years a significant portion of venture capital investments were directed towards high-return sectors such as biotechnology, medicine, genetic engineering, etc.
  • On an average, venture capitalists invest up to four to five times the net earnings of a company.
  • Generally, venture capital investments last between 2-5 years.
  • Businesses that are likely to turn into multi-million dollar companies in due course are most favored by venture capitalists.
  • Venture capitalists expect an ROI of at least 25%-30% for each year of investment.
  • Venture capitalists look for the following factors while investing in seed stage start-ups: A brilliant business idea that will have a competitive edge in the market such as a scientific breakthrough or IP; a top-notch team; business model innovations; and the economic and market benefits of the business plan/idea.
  • The business team plays a key role in securing the favor of venture capitalists. More specifically, venture capitalists will look at how qualified the team is, what is the role of each team member, what are the technical skills they possess, etc.
  • Venture capitalists assess the milestones that have been set for the business and how much capital will be required to achieve them.
  • Venture capitalists assess the team’s understanding of the current market and competition.
  • Venture capitalists are not interested in knowing long-term financial projections, unrealistic claims about how the company will grow and acquire a large customer-base in the short or long term, businesses that are solely seeking for funds without any guidance from venture capitalists.

Below are lists of the business angels and venture capitalist in Singapore:
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