Despite Singapore’s liberal investment rules, tax-friendly environment and highly-educated workforce, start-up companies in the city state are increasingly struggling to obtain venture capital or private equity to get their businesses moving.
According to a study by Beijing-based Asian Venture Capital Journal Research, international 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, the report says.
Only 2 per cent (about $15 million) of the total venture capital investment in Asia was aimed at Singapore, according to the firm’s data for 2012. Japan, China and India topped the list of big venture capital investments in Asia in 2012. Of the 374 venture capital investments in Asia in 2012, Singapore accounted for just 24.
Of the 70 high tech start-ups the Singapore 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 gap in the growth stage,” Wong Poh Kam, a professor at National University of Singapore’s business school, was quoted as saying by Reuters.
As for the reasons, some think government initiatives allow undeserving start-ups to get easy money, while others say the lack of private funds just proves that the government has to be active in providing a catalyst to start-ups and entrepreneurs.