Raising private equity capital in Singapore is where investors fund privately held businesses with intense market rivalry in exchange for capital gains and dividends.
The applicant will need a thorough company plan, an exit strategy, realistic financial expectations, an experienced management team, and strong growth potential in order to secure private equity.
If you want to know more about establishing a new company here, refer to the Singapore business formation guide.
Angel and venture capitalist investors are Singapore’s two main sources of private equity.
Angel investors
When investors, typically high-net-worth people, fund firms in their early stages in exchange for a stake in the business, this is known as angel investing. They occasionally offer early-stage firms mentorship and advice in addition to financial support. Angel investors can be one person or a group of angel investors working together.
Angel investors typically invest in startups that are anticipated to have a competitive advantage in the market, high growth potential, and generate a return for the investor. This competitive advantage can be in the form of exclusive distribution and marketing relationships, a brand name, breakthrough technology, or access to limited raw materials.
There are now more than 100 angel investors in Singapore that give qualified entrepreneurs cash ranging from S$ 25,000 to S$ 700,000.
Venture capital
Professional fund managers known as venture capitalists invest in late-stage businesses based on the industry that the venture capital firm is targeting. The institutional funding that venture capitalists typically use comes from pension funds, foundations, high-net-worth people, universities, insurance companies, and businesses.
In addition to lending money to businesses, venture capitalists can offer guidance on how to increase the profitability of the company. Venture capitalists typically anticipate returns of 25% or higher.
Nanotechnology, software, biotechnology, financial technology, e-commerce, logistics, advanced manufacturing technology, and agri-food technology are some of the industries that venture capitalists could choose to invest in.
The applicant must first determine the value of the company in order to raise funds through venture capital, for example, by creating financial projections that demonstrate the return on investment. Next, they must decide how much funding their company overall requires and how much ownership they will give the investors.
After the applicants have made that decision, they should create a proposal for the company and contact a venture capital firm.
Tax exemptions are available for venture capital for up to 15 years.
The following conditions must be met by venture capital funds in order to be eligible for the tax exemption:
- Have the Monetary Authority of Singapore (MAS) grant the required licenses and permissions for the proposed activity
- Commit to investing a particular portion of their subscribed capital in Singapore-based seed or early-stage businesses, Singapore-based businesses (other than seed or early-stage businesses), or foreign businesses that have impacts on the economy of Singapore.
A predetermined recovery rate is available for tax remission on expenses for goods and services incurred using funds that have been approved.
PRIVATE FUNDS IN SINGAPORE
- Banks, investment firms, and other financial organisations can establish private funds.
- Private funds typically avoid funding fledgling or early-stage startups.
- Private funds choose established startups that are already up and running and exhibit strong growth potential.
- Private funds just supply funding; they do not provide management or technical skills.
- There are various categories of private funds, including:
Independent funds – These are often established by well-off people, wealthy businesses, or wealthy families.
Institutional funds – Banks and other financial entities set up these funds.
Corporate funds – To invest in smaller businesses, big businesses set up separate funds.
BUSINESS ANGELS, VENTURE CAPITALISTS, AND PRIVATE EQUITY NETWORKS IN SINGAPORE
In Singapore, there are a number of networks that assist in connecting startups with business angels and venture investors. Some of these networks are as follows:
Business Angel Network Southeast Asia (BANSEA)
This organization connects start-ups with business angels during the seed stage of business formation. BANSEA makes investments in businesses that have unique chances for significant returns on capital.
This typically refers to start-up businesses having the potential for rapid growth, a dominant position in the market, and long-term advantages. BANSEA invests in businesses having a five-year revenue growth potential of greater than S$50 million. Either a developing market or an established market with a global reach should be used for this.
Singapore Venture Capital Association (SVCA)
The Singapore Venture Capital and Private Equity Association (SVCA) was established in 1992 under the auspices of the Economic Development Board (EDB) in order to support and develop industry growth.
Singapore Investment Network
This website gives users access to one of the country’s largest databases of angel investors who regularly invest in a variety of Singaporean companies.
Private Financial Institutions in Singapore
Some of the private financial institutions in Singapore include:
- Citibank
- Standard Chartered Bank
- Hong Kong and Shanghai Banking Corporation
- Development Bank of Singapore
- Oversea Chinese Banking Corporation
- United Overseas Bank
- GE Commercial Financing Singapore
- IFS Capital Limited
- Hong Leong Finance Limited
- Sing Investments and Finance Limited
- Singapura Finance Limited
GOVERNMENT EQUITY FUNDING IN SINGAPORE
By establishing government venture capital funds and co-investing in startups, the Singaporean government assists start-ups in raising private equity. These are a few of the government funding programs:
Business Angel Funds
Business Angel Investments Business Angels Funds (BAF) is an equity co-financing assistance program provided by SPRING Singapore to innovative, seed or early-stage start-up companies with Singaporean headquarters that are under five years old, are creating new goods or services for the global market, and have a minimum paid-up capital of S$50,000. Up to a maximum of S$1.5 million, SPRING will match every dollar invested by pre-approved business angel groups.
The pre-approved business angel group must make a minimum investment of $75,000 in each startup. The business angel group and SPRING will take equity. The minimum investment per start-up by the pre-approved business angel group must be at least S$75,000. SPRING and the business angel group will take equity stakes in the company in proportion to their investments.
Start-up Enterprise Development Scheme
The Start-up Enterprise Development Scheme (SEEDS), provided by SPRING Singapore, is an equity-based co-financing option for start-up businesses based in Singapore that are developing novel goods and/or processes, possessing intellectual property, and exhibiting strong growth potential across international markets.
The start-up must be a Singapore-based business with fewer than five years of experience, minimum paid-up capital of $50,000, maximum paid-up capital of $1 million, and primary operations in Singapore.
Up to a maximum of S$1 million, SPRING will match private investor investments dollar for dollar. Private investors must make a minimum S$75,000 investment per startup. In proportion to their investments, SPRINGS and the private investor will receive ownership interests in the business.
EDB Investments
The Economic Development Board of Singapore’s subsidiary EDB Investments (EDBI), which has its headquarters in Singapore, invests in start-ups in the biomedical sciences, clean technology, digital media, and other important Singaporean businesses.
Infocomm Investments Pte Ltd
An entirely owned subsidiary of the Infocomm Development Authority of Singapore (IDA), Infocomm Investments Pte Ltd (IIPL) makes investments in Infocomm businesses that are in the growth stage.
i.MATCH
i.MATCH is a government program that assists Interactive Digital Media (IDM) start-ups in obtaining equity. The businesses are also eligible for R&D grants or co-contributions from SPRING Singapore in addition to private investments.
TIF Ventures Pte Ltd
TIF Ventures Pte Ltd (TIFV) is a wholly-owned subsidiary of the Singapore Economic Development Board and a government-controlled fund-of-funds management business. TIFV primarily invests in venture capital funds across geographical regions, high-tech businesses, and industries with high growth rates.
Reach out to us at Relin Consultants for further assistance in raising private equity capital for your business in Singapore.
FAQs
What is private equity?
Private equity refers to funds raised from high-net-worth individuals, institutional investors, or private equity firms to invest in private companies or public companies that are being taken private.
How can I raise private equity capital in Singapore?
To raise private equity capital in Singapore, you can approach private equity firms, venture capitalists, angel investors, family offices, or wealthy individuals who are interested in investing in your business.
You must prepare a detailed business plan and financial projections to convince potential investors to invest in your business.
What types of businesses are suitable for private equity investment in Singapore?
Private equity investors in Singapore typically invest in businesses with high growth potential, a proven business model, and a strong management team. They also prefer businesses that operate in industries with high barriers to entry, such as healthcare, technology, and finance.
What are the advantages of raising private equity capital in Singapore?
Private equity investment can provide your business with the necessary funding to grow and expand. Private equity investors also bring strategic advice, industry expertise, and valuable networks to help your business succeed.
What are the risks of raising private equity capital in Singapore?
Private equity investment comes with certain risks, such as loss of control, dilution of ownership, and pressure to achieve high growth targets. Private equity investors may also have different objectives and priorities than the founder or management team of the business.
What are the terms and conditions of private equity investment in Singapore?
The terms and conditions of private equity investment in Singapore vary depending on the investor and the business.
Private equity investors typically invest in exchange for equity ownership, preferential dividends, and a seat on the board of directors. They may also have specific conditions and requirements, such as a certain rate of return or a specified exit strategy.
How long does it take to raise private equity capital in Singapore?
The time it takes to raise private equity capital in Singapore varies depending on the complexity of the business and the availability of potential investors. It can take anywhere from a few months to a year or more to secure private equity funding.
How can I increase my chances of raising private equity capital in Singapore?
To increase your chances of raising private equity capital in Singapore, you should have a clear business plan and financial projections, a strong management team, a track record of success, and a compelling value proposition.
You should also understand the private equity market in Singapore and be prepared to negotiate the terms and conditions of the investment.
