Professor Dr. Wong Poh Kam here provides an overview of role of Venture Capital and Angel Investors in teh-startups scene in Singapore. It has been republished here with permission. A more detailed version of this will be published in the Annual SVCA Directory 2011/12

High-technology entrepreneurship has been identified as an important driver of Singapore’s knowledge-based economy, and increased policy attention has been given to encouraging the formation and nurturing of high-tech start-ups, especially those with significant intellectual property (IP). To this end, in 2010 the National Research Foundation (NRF) engaged me, as director of the NUS Entrepreneurship Centre, to conduct a study of high-tech start-ups in Singapore. While the survey covers many aspects of the high tech start-up dynamics, including characteristics of the founders, their sources of technology and funding, growth strategies, performance and challenges, this blog highlights some salient findings on only one aspect of the survey: the performance of start-ups that have received funding from venture capitalists or angel investors versus those that did not.

The survey focused on young ventures that started-up or began operations no earlier than 2004 (i.e. companies that were at most five years old in 2009), and that fall within sectors classified as high-technology using a definition adopted by the United States Bureau of Labour Statistics (BLS), which includes all sectors with proportion of employment in R&D exceeding the average for all sectors. Based on this definition, nine manufacturing sectors and three service sectors categorized at the 2-digit Singapore Standard Industry Classification (SSIC) level are included as high-tech sectors in Singapore.

Based on over 300 responding firms covered by the survey, we estimated that less than 10% of high-tech start-ups in Singapore have received investment from VCs or business angel investors (VCA). The majority of high tech start-ups that did not receive VCA funding reported that they faced two hurdles when attempting to raise funding from VCA. Firstly, they reported that VCA investors tend to impose harsh terms or offer valuations that are too low. Secondly, they reported difficulties in attracting the interest of such investors.

While firms receiving VC/Angel (VCA) investment represent only a small share of tech start-ups in Singapore, the survey results show that VCA-funded firms outperform other start-ups on a number of key indicators.

a) High-tech start-ups that have received VCA investment tend to be more innovative and IP-intensive

Start-ups that have received VCA investment are more likely to conduct in-house R&D (83.3% vs 51.7% for other firms). Correspondingly, they have a higher propensity to develop their own core technologies (88.9% vs 70.5%). They are also more likely to have introduced significant product or process innovations over the preceding three years[1] (76.5% vs 62.5%) and have a greater tendency to possess Intellectual Property (IP) assets (52.9% own/have applied for IP assets vs 11.5% for other firms).

b) High-tech start-ups that have received VCA investment have higher employment growth…

Start-ups that have received VCA investment experienced much higher employment growth rates since their first year of founding (329.8% p.a.) as compared to other start-ups (175.0% p.a.).

c) High-tech start-ups that have received VCA investment had greater growth ambitions

High-tech start-ups receiving VCA investment have a higher propensity to expand their operations to overseas locations (52.9% have overseas-based operations, as compared to 27% of other firms). They also have more ambitious growth targets for the future. Almost three-quarters of VCA-funded firms project growth rates in excess of 20% per annum over the next three years (versus 61.3% of other start-ups).

In summary, our survey of young high tech firms in Singapore show that while less than one in ten of them received VCA investment, those that did get funded by VCA showed higher average employment growth, greater growth ambitions, and tend to be more innovative and IP-intensive. This difference is likely to be due to a combination of the selectivity of VCA investors who chose to invest in more scalable ventures, as well as possibly the value add provided by the VCA investors to the start-ups, enabling them to invest more in technological innovation and to accelerate their path to growth.

About the Author
Dr. Wong Poh Kam [LinkedIn] is a professor, angel investor and consultant. He holds positions at the NUS Business School, (by courtesy) at the NUS Engineering School and LKY School of Public Policy. He is also the Director of the NUS Entrepreneurship Centre. As an angel investor, Dr. Wong has invested in many high-tech firms and sits on the boards of many. His portfolio companies include Invantest, iWow and GlobalRoam. He has consulted widely for international agencies such as the World Bank and ADB, various government agencies in Singapore such as EDB, IDA and A*STAR, as well as many high tech firms in Asia.

Dr. Wong Poh Kam blogs at Connect The Dots@Singapore.

Image credit: visualpanic

With the theme “Bridging People and Technology with Design”, the Rainmakers put Fox onstage together with four other Silicon Valley-based designers and/or start-up founders; Luke Wroblewski of Bagcheck, Jason Putorti of Votizen, Garry Tan of Posterous and Y Combinator, and Jessica Mah of inDinero.

Three hundred participants made up of design and product enthusiasts, entrepreneurs and students based in Silicon Valley attended the event held at the AOL Auditorium on Jun 20, 2011.

Panellists (from left): Garry Tan, Kevin Fox, Luke Wroblewski, Jason Putorti and Jessica Mah

Audience. Photo Credits: Quek Siu Rui

We bring you the key takeaways of the panel discussion:

Q1. What does design mean to you?

Jessica Mah: Helping solve problems for users. In the case of InDinero, design is about helping business owners track their money online. It does not matter how something looks visually, but more of the user interaction.
Jason Putorti: Design is a process. In design, we work to find the intersection between user needs and business needs.
Luke Wroblewski: It depends on whom you ask the question to. To me, design is all encompassing.
Kevin Fox: Design can be anything. But it has to be functional, appealing and gratifying. It is important to give joy to the users.
Garry Tan: Good design is making something that people want.

Q2: What is your top principle in web design?

Jessica Mah: Test your design out with people. Go through your mock-ups with people.
Jason Putorti: I come from an advertising agency background. To me, user comprehension is very important. What is the most important thing in the page for the user?
Garry Tan: People do not get copy correctly. As a result, users get lost. This is a big problem. Designers should think about how they are communicating to one single person, what is in their mind, and what needs to be done to make the person do what they intend.
Luke Wroblewski: This is a big question. To me, the number one principle is “Do no harm.” Do not communicate the wrong thing and waste the users’ time. Today, time is the most precious thing. Wasted times means doing harm.
Kevin Fox: Design should make something very easy to understand yet seemingly invisible. Design is creating things to make things more productive.

Q3: Is there a shortage of designers in Silicon Valley? If there is, what can be done?

Jason Putorti: The stereotype of a designer in Silicon Valley is someone who has done “XYZ”, has “N” years of experience and maybe lives in San Francisco. The point is, most of them are happy. It is tough to move these guys unless they are inspired. However, most people (founders) do not have things that are really inspiring. Great designers want to work on something inspiring; something that is going to create social impact and change the world.

Founders have to think bigger and have an inspiring vision. This way, he/she can attract people to solve the big problem.

Secondly, consider thinking outside of the box. Look further out. For example, I have worked with designers from Sweden.

Jessica Mah: There is a massive reliance on design help. For example, think of a businessperson trying to recruit an engineer. This is like a start-up founder trying to recruit a designer but do not know how to design.

Kevin Fox: Designing is like cooking. Anyone can cook. There are recipes to follow for baseline design. But they are recipes. Imagine yourself as a chef. You have the recipe, but you start to play with the recipe, create your own techniques, explore what works and does not work. What are the patterns? How do people think? How to make new things that people like? This is the path for people to become designers.

Luke Wroblewski: When start-up founders say they are looking for a designer, they are not looking for a designer. For example, when I hear people saying “I need someone to create killer user experience”, it is too late. You already made the product. You already designed it. You already created the user experience. The sheer fact that you got that far means it is too late.

When people say that they want a designer, the designer has to take the technology and make it meaningful for people. The question in designing is what is the core essence of the product?

Many people have the misconception of the word “design”. People think it is making a product fanciful, when design is the core of the product.

Also, people tend to separate product from user experience. Fundamentally, product is the user experience.

Q4. For a coder who would like to learn design, what skills should I pick up? Which component (e.g. Typography, Copy) is the most important?

Kevin Fox: Get to the core. Components such as typography and copy are the makeup.

Luke Wroblewski: There is no need to take a class. Just put things out there, see how people use it and then iterate and move on.

Also, remember that engineering is crucial. There is no design without building something on the web. It is about collaboration – I learnt most about design from my engineering co-founder. He sees the system. He tells me what can be done and cannot be done.

Jason Putorti: Focus on interaction design and usability – everything comes in later.

Rainmakers LIVE! 2011 was organised by Julian Koo, Amanda Lim, Tay Kah Hong, Lucas Ngoo and Ang Sea Law together with NUS Entrepreneurs’ Association (NUSEA). NUSEA consists of participants of the one-year NOC in Silicon Valley programme, where participants take classes at Stanford University while working full-time in a Silicon Valley start-up.

Rainmakers was the name used by Gwendolyn Regina Tan (editor’s note: yes, the Gwen from SGE) when she produced the first NUSEA newsletter back in 2005. Later on, Rainmakers LIVE! the conference was conceptualised and organised by Gwen and the rest of the NUSEA executive committee then. Her Silicon Valley juniors have since then continued to carry on the legacy of the brand.

During the mixer, attendees got to enjoy the food catered by Coho and were invited to leave their feedback on Surveylicious a mobile survey platform. Surveylicious made giving feedback easy and fun amidst the bustling networking taking place at the lobby of AOL.

The Rainmakers LIVE! event is sponsored by Infocomms Development Authority of Singapore. AOL is the venue sponsor.

This article was contributed by Ridza Salim and the Surveylicious team. Surveylicious is a location-based mobile and web platform that enables businesses to collect constructive feedbacks from their customers in real-time. Surveylicious is also the winner of Stanford’s Entrepreneurship Bootcamp pitching competition 2011 sponsored by Sequoia Capital.

James Chan writes:

Our 3rd speaker for the Startup Roots Speaker Series is Derek Sivers, who is best known for being the founder and former president of CD Baby. RSVP your attendance if you haven’t already.

As usual, the talk will begin this Thursday at 7:00pm at Hackerspace.SG. The Startup Roots Singapore Summer Fellows will be having their own Q&A session with Derek at 6:30pm, but everyone’s welcomed to sit around and listen in. We’ve made the switch from Eventbrite to FlickEvents in support of local startups (thanks @ruiwen for the reminder).

I invited Derek to speak because I believe our Summer Fellows will be equally intrigued as I was about the man – professional musician and clown turned software engineer and philanthropist. Just like Joi Ito and Carl Coryell-Martin, I believe our students will come to learn plenty from Derek’s wisdom and experiences.

And here’s my email conversation with Derek today.

Derek, I first met you when you were contemplating moving to Singapore. How did that come about? What prompted you to decide that Singapore was it?

I’m a Singapore Permanent Resident now. I’m here for good. This is home. So many reasons like location and laws, but really it comes down to the people. I’ve been so impressed with the people here. I love the cultural hybrid. Whenever we’re in a group, you look around the table, and it’s usually 1-2 people each from Singapore, India, Vietnam or Philippines, Malaysia, Europe, and U.S. I love the diversity of perspectives. I love that nobody comes to Singapore to be lazy. Everyone is quite driven and smart. Well, at least in my circles.

If you had to describe Singapore with three words, what would it be?

I don’t really feel qualified to say, yet. I have so much to learn. There’s so much under the surface. But on first impressions: Optimized, Driven, Future-Focused.

What will your talk be about?

The lessons I learned during my 10 years of starting CD Baby, then growing it and selling it. Instead of just telling my tales, I focus on the lessons distilled from this experience. Lessons that anyone can apply to their own business. I learned these the hard way from experience and doing many things wrong. So I share them to help prevent others from making the same mistakes.

Your success with CD Baby is well-known by many. Instead, let me ask you about your trials and tribulations. Can you tell us about the failure that taught you the most?

Well the fact that I had to sell CD Baby is actually a huge failure on my part. I was such a bad manager in the end that I completely destroyed the relationships with my employees. I sold because I had to. So the lesson from my biggest failure is to always guard the culture inside your company. If the culture gets corrupt, it’s almost irreversible.

Last question from a foodie (me), before I let you go. What is your favourite local delicacy?

Salad Stop. Sorry, I know that’s a horrible thing to say. I just prefer fresh sprouts, nuts, fruits, seeds, beans, veggies, etc. A health researcher I really admire has a great rule-of-thumb: ”If man made it, don’t eat it.” Does this mean I lose my Singapore PR status? If so, I’ll just be diplomatic and say Chili Crab, like everyone else.

And there you have it – Derek Sivers himself. Do come up and say hi to him after his talk this Thursday. Be there or be square!

Editor’s Note: This post has been republished with permission.

The co-founder of Surveylicious, Amanda Lim, shared with us her experiences.

The trip is part of the World to NYC mission co-organised by IE Singapore, IDA and NYC Economic Development Corporation.

Kicking off the World to NYC mission, David Lerner, Director of Venture Lab at Columbia University, gave an introduction to the City’s ecosystem for entrepreneurship at NYU-Poly Business Incubator. The incubator provides affordable office space and startup resources, which is very valuable in an expensive place like NYC. We visited the NYU Interactive Telecommunications Program (ITP) and had a chance to speak to faculty members including famous writer, Clay Shirky. ITP is most famous for graduating famous startup alumni such as Dennis Crowley, founder of FourSquare.

Throughout the week, we also visited other NYC incubators like NYU-Poly Game Innovation Lab and General Assembly. At General Assembly, VCs from Rose Tech Ventures and First Round Capital provided a good understanding on raising angel or VC funding in the US. Second Market shared on the secondary market that allows startups to sell shares to accredited private investors without the need to be publicly listed. The delegation also got to visit leading Media and Tech companies such as Edelman, Bloomberg LP, The Ladders, and InterActive Corporation (IAC) to hear from business experts in these industries. Consultants and experts provided advice on the pitfalls of launching an international business venture in NYC and issues in areas such as incorporation, immigration law, taxation, recruitment and real estate.

Throughout the week, IDA and IE Singapore also organised business meetings for Singapore startups to explore business or partnership opportunities. Some of the companies that met the World to NYC mission delegation are big ad agencies like JWT, Saatchi & Saatchi, Digitas etc and MNCs such as Random House, AOL, BBC and Nokia.

The highlights from our trip were learning the secret tricks of the trade on pitching to VCs from FirstMark Capital. Subsequently, Surveylicious’ very own Julian Koo got a chance to pitch at the Sales for Startup competition organised by Ultra Light Startups and pitted his wits against the judges’ questions. Getting the opportunity to observe the ringing of the NASDAQ closing bell by China IPO debutant, Jiayuan.com, was also an unforgettable experience for our team who one day aspires to be listed there as well!

Surveylicious Team at NYC

Image credit: zoonabar

Angel investor and professor Dr. Wong Poh Kam here provides an overview of the angel investing scene in Singapore. An extended version of this article will appear as a chapter in a forthcoming book on Angel Investing in Asia, edited by John Lo.

As in other newly industrialized economies in Asia, business angel investing in early stage start-up companies has been relatively new in Singapore. This is due to the fact that the phenomenon of high tech start-ups is itself relatively new in Singapore, having really taken off only since the late-1990s as the Singapore economy began its shift towards a knowledge-based, innovation-driven economy. While business angel investment deals are known to have existed in the 1980s and early 1990s, they were mainly in the traditional trading and manufacturing sectors, as was found in a study of 29 angel investors.

While there are no reliable statistics on the number of business angel investors and their contribution to venture investing in Singapore, some indicative figures can be culled from the annual Global Entrepreneurship Monitor (GEM) study on Singapore that I conducted for the period 2000-2006.

Informal investments

As can be seen in Table 1, based on the Global Entrepreneurship Monitor (GEM) study, the prevalence of informal investment (Informal investors are defined as those who have in the past three years invested in an entrepreneurial business venture started by someone else, excluding the purchase of publicly traded shares or mutual funds) in Singapore appears to have increased over 2000-06, with the informal investment rate rising from 1.3% of the adult population to a high of 3.5% in 2005, before falling slightly to 3.0% the following year. Nevertheless, this was still below that of advanced economies such as USA and other Asian NIEs such as Taiwan, China and Korea.

Table 1 also shows that the informal investment rate is somewhat correlated with the rate of entrepreneurial activity in Singapore, as measured by the total entrepreneurial activity (TEA) rate (The Total entrepreneurial rate (TEA) rate measures the proportion of a nation’s adult population that is engaging in entrepreneurial activities in one of two ways: in the process of starting up a business or running a newly formed business less than 3.5 years old with significant ownership).

Several studies of advanced economies (see e.g. Wetzel 1983; Bygrave et al 2002) have estimated that the total amount of informal investment is several times the size of the formal venture capital (VC) industry. Based on GEM estimates, Singapore is no exception. The relative size of the informal investment market in Singapore is estimated to be several times larger than the market for formal VC investments. Although informal investment as a proportion of GDP has fallen over time, from 2% of GDP in 2000 to just over 1% in 2006, it nevertheless far outweighs the amount of venture capital (VC) investment, which has generally been less than 0.2% of GDP from 1999 to 2005.

The GEM data suggest that the majority of informal investments in Singapore were based on social ties. About 42% of informal investors in Singapore were related to the investees, with another 52% being social acquaintances (work colleagues, friends or neighbours), leaving only 6% to be socially unrelated (strangers or others). If we regard this last category to be true business angel investors, then the incidence of such business angel investors is probably in the range of 1 in 1000.

Development of the Business Angel Investment Community: From Individuals to Groups and Networks

The Early Growth of Business Angel Investment

While there are no reliable data on the emergence and growth of business angel investors in Singapore, anecdotal evidence suggests that the first major wave of angel investment in technology companies emerged in the mid-1990s, after a number of indigenous technology/manufacturing companies successfully went IPO. Some of these successful entrepreneurs subsequently became business angel investors, funding the next wave of technology-based start-ups that emerged in Singapore as part of the global dot.com boom. For example, the three co-founders of Creative Technology, arguably the first successful home-grown high tech firm in Singapore (having pioneered PC soundcard and became the global market leader), had all engaged in angel investment activities after the company went IPO in 1994, with one of them (Chay Kwong Soon) establishing a formal investment fund (Enspire Capital) to do so. Other examples of successful technology entrepreneurs-turned angel investors in the late 1990s include Gay Chee Cheong and Tommy Goh. After leading a contract manufacturing firm, JIT Electronics, to successful IPO and subsequent acquisition by Flextronics in the late 1990s, they co-founded a venture investment fund, 2G Capital, to invest in technology start-ups and growth companies.

Besides entrepreneurs-turned-angel investors, a number of prominent angel investors in this first wave included senior executives of global MNC subsidiaries in Singapore or government-linked corporations (GLCs). For example, Mr. Koh Boon Hwee, an ex-Hewlett Package senior executive and later chairman of a number of GLCs such as Singapore Telecom and Singapore Airlines, had been known to play the role of “Arch-angel”, syndicating deals that were co-invested by other senior executives who had worked with him. Another example is Ng Hock Ching, a senior vice-president of another GLC, Natsteel Electronics, who became an angel investor in several technology-based companies after Natsteel Electronics went IPO in 1998.

As a result of the dot.com crash in early 2000, the number of high profile angel investment deals appeared to have dwindled. In their place, a number of new business angel investors emerged, doing smaller-sized deals and focusing on early stage high tech start-ups, including spin-offs from local universities and public research institutes. As we will detail below, there was a trend towards the formation of angel groups and networks

Formation of Business Angel Network (Southeast Asia) (BANSEA)

The Business Angel Network (Southeast Asia) (BANSEA) was established in Singapore in 2001 by a group of Singapore-based angel investors, with loose network connections to investor groups in Thailand, Malaysia, Vietnam and Indonesia. Inspired by the professionalism of angel groups like the Band of Angels in Silicon Valley and the Tech Coast Angels in Southern California, BANSEA’s vision is to foster the development of a vibrant, professional angel investment community in Singapore by providing a platform for knowledge-sharing and deal-syndication among investors as well as a platform for matching start-up deals with investors. Recognizing the nascent stage of angel investing in Singapore, the founding group of angel investors decided to organize BANSEA in the form of a Public Company limited by guarantee, with membership open to all bona-fide angel investors upon recommendation by an existing member. A board of directors is elected annually from among the members to govern the operation of the non-profit company.

The core activities of BANSEA consist of monthly/bi-monthly networking lunches, where 3-4 start-ups are pre-selected to pitch to members of BANSEA, who could also invite other investment professionals as guest to join the lunch and networking.BANSEA focuses on early-stage companies seeking investment ranging from $100,000 to $1 million. Interested start-up entrepreneurs can apply to pitch to the network by either submitting their business plan executive summaries to the BANSEA website, or through the introduction of an existing member. Applicants who are not selected to make a business plan pitch may still opt to have their plans circulated to members online.

In the early years, BANSEA took a more inclusive approach, and allowed not just bona-fide angel investors with investment track records to become members, but also rookies interested in learning to do their first deal, as well as some investment professionals such as investment brokers, consultants and deal lawyers. This led to an increase in membership to more than a hundred. In more recent years, BANSEA shifted towards greater professionalism, and instituted a two-tier membership (chartered members and ordinary members), with more stringency in membership qualification criteria and an increase in membership fees. This resulted in a reduction in membership to around 50+ who are more serious investors.

In recognition of its growing professionalism and catalytic role in the venture ecosystem of Singapore, the Singapore government agency in charge of promotion of start-ups (SPRING Singapore) offered public funding support to BANSEA since 2007. Under a scheme called the Incubator Development Program (IDP), SPRING provided funding for up to 70% of the qualifying cost of BANSEA operations. This public funding support enabled the organization to employ a full-time executive director who could organize activities professionally and provide services to members to generate income.

As part of the professional upgrading, BANSEA introduced a Start-up Mentorship Program, whereby a pool of BANSEA chartered members offer to provide face-to-face mentoring service to start-up entrepreneurs in return for an honorarium. In addition, BANSEA also organizes training workshops for entrepreneurs and angel investment forums for members. BANSEA also participates in various activities fostering the development of the entrepreneurial ecosystem in Singapore, with members serving as judges in various business plan competitions and providing inputs to government policy making. BANSEA also successfully organized the inaugural Asian Business Angel Forum (ABAF) in Singapore in March 2010, attracting more than 200 participants.

As part of the move towards professionalization, BANSEA also began compiling investment data among members since 2007. While admittedly incomplete, the data collected by BANSEA shows that a total of 53 investment deals in the period 2007 to first half of 2010, with a total investment of S$14.5 million. The majority of the funded deals appeared to be in internet technologies, interactive digital media, info-communication technologies (ICT) and biomedical devices.

Formation of Other Angel Groups and Networks

Besides BANSEA, a number of loose angel networks has also emerged in Singapore in recent years. This includes an angel investment club established by the Hewlett Packard Alumni Society, and another angel network for Alumni of the Nanyang Technological University (NTU). Unlike BANSEA, however, these loose networks tend to have less regular activities, and no statistics are available on the volume of deal flow generated through them.

More significant is the emergence of a number of angel groups that were facilitated by various government support schemes, including the angel groups funded by BAS and TIS. We will discuss these in the next section.

Government Support Schemes for Angel Investing in Singapore

Recognizing that the venture financing system in Singapore – especially early-stage financing – has been relatively weak compared to more advanced high tech economies like Silicon Valley and Israel, the Singapore government has introduced a number of support programs in recent years to address these weaknesses. With regards to angel investment, these programs can be classified into two groups: those that directly promote angel investment; and those that more indirectly encourage angel investment through the provision of early-stage venture capital.

Government schemes that directly promote angel investment

The most established of these programs directly promotes angel investing through a co-investment scheme to leverage private angel investors who are taking the risk themselves. The Startup Enterprise Development Scheme (SEEDS) was introduced in 2000 by the Economic Development Board (EDB), but the administration of the program was subsequently transferred to SPRING. SPRING co-invests with third-party investors who are not related to the start-ups, with a minimum investment of S$75,000 required of the private investor. Initially providing a 1:1 co-investment between S$75K to S$300K; the co-investment was increased over 2009-10 to 1.5:1 and S$750K (cumulative) in response to the financial crisis. In the initial years, the scheme provided an upside incentive to the third party investors when there was a positive exit: After recovering its initial investment plus accrued interest, the Scheme offered one-third of any remaining surplus gains to be given to the third-party investors. In more recent years, this upside incentive has been withdrawn. As of the end of 2010, over 150 start-ups have been funded under SEEDS (SPRING Singapore, 2010).

A related government scheme seeks to promote the formation of business angel groups. The Business Angel Scheme (BAS), also administered by SPRING, was introduced in 2005 and co-funds investment by pre-approved Business Angel groups. Under BAS, SPRING would co-invest S$10 million with at least three experienced angel investors who collectively commit to invest at least S$10 million over five years. The scheme provides for a 1:1 co-investment of S$1 million per deal, with an option for investors to buy out SPRING’s investment within five years at 1.25 times the original investment value. As with SEEDS, the co-investment terms were improved over 2009-10, to 1.5:1 up to a maximum of S$1.5 million per deal. Three angel groups have been co-funded under the BAS program so far: Sirius Capital; BAF Spectrum; and AccelX. The BAS and SEEDS complement each other, so that start-ups that have already received funding under SEEDS can still apply under BAF for follow-on investment up to a maximum of $1.5 million (SPRING Singapore 2010). As of the end of 2010, close to 20 ventures have been funded by the three angel groups supported by the BAS.

It should be noted that the introduction of the SEEDS and BAS support programs has been the result of consultation between the government and BANSEA leadership.

Government schemes that indirectly support angel investment through the provision of early-stage VC

Angel investment depends on the availability of follow-on VC investment funds to take the start-ups to the next (growth) stage. Although Singapore has attracted a significant amount of venture capital funds to base their operations in Singapore, these funds are predominantly later-stages funds, and invest mostly outside Singapore. Thus a large proportion of the US$1 billion TIF fund-of-fund established in 1999 has gone to US-based VC funds, with extremely limited investment activities in Singapore. Moreover, most members of the Singapore Venture Capital Association (SVCA) do not invest in early-stage start-ups. In order to fill this gap, the Singapore National Research Foundation (NRF) has in recent years established two VC support schemes.

The first of these is the Early-Stage Venture Funding Scheme (ESVF) which was launched in 2008 and seeks to catalyze the formation of early-stage VC funds. Under the scheme, selected VC firms receive co-funding from NRF to invest in locally-based early-stage technology start-ups. Selected VC firms must raise at least $10 million from third-party investors, and NRF matches $1 for every $1 invested. To-date six funds have been selected for such co-funding: BioVeda Capital II; Nanostart Asia; Raffles Venture Partners; Tamarix Capital; Upstream-Expara; and Walden International (NRF 2008).

The second NRF scheme is the Technology Incubation Scheme (TIS). Launched in 2009 and modeled on Israel’s Technological Incubator Programme, TIS aims to encourage local and foreign technology incubators to invest in early-stage high-tech start-ups based in Singapore, nurturing them and preparing them to raise funds from VCs. Under TIS, NRF co-invests in Singapore-based high-tech startups accommodated in the selected technology incubators. As of 2010, seven incubators have been funded under TIS: Clearbridge Accelerator; I2G Tech Accelerator; Neoteny Labs; Plug and Play; Social Slingshot; Small World Group; and Stream Global. It is interesting to note that five out of these seven TIS were helmed by foreign investors, who were enticed to set up their incubation operations in Singapore because of the generous co-funding provided by the government. As of the end of 2010, about 11 ventures have been incubated by the various TIS.

In addition to the above NRF funding schemes, the National University of Singapore (NUS) has also contributed to the availability early-stage venture financing. The NUS Entrepreneurship Centre (NEC) secured commitment from senior management of NUS to provide a S$5 million seed-fund to invest in promising NUS-related spin-offs that it incubates at its incubator (the NUS Enterprise Incubator or NEI), with matching funding from a number of government schemes, including the SEEDS fund and SPRING’s Young Entrepreneurs Scheme for Start-ups (YES! Start-ups) scheme (previously known as ETDF). NEC also helps start-ups to apply for various government support schemes such as the EDB Cleantech incubator grant scheme, the SPRING Technology Enterprise Commercialisation Scheme’s Proof of Concept (POC) and Proof of Value (POV) grants, Media Development Authority’s micro-funding scheme, the NRF POC grants, and the NRF ESVF and TIS funds. NEC also maintains close contacts with BANSEA to introduce promising start-ups to BANSEA, SEEDS and BAS investors. Indeed, a disproportion of the investment deals by the ESVF and TIS so far have been in NUS-related spin-offs. Similarly, a number of notable deals by SEEDS and BAS investors which have attracted significant follow-on VC investment or corporate acquisitions were also NUS-related spin-offs. More details about NUS’ role in facilitating angel investment in Singapore can be found in Wong, Ho and Singh (2011).

Concluding Remarks

In line with Singapore’s increasing shift towards a knowledge-based, innovation-driven economy, the business angel investment community in Singapore has evolved dynamically in recent years, with greater professionalism and sophistication. The development of the business angel investment community has been driven by both government support policies as well as the emergence of a nascent class of tech-savvy investors comprising of successful entrepreneurs, experienced senior executives from high tech MNCs and local firms, and entrepreneurially-minded academia with connections to Silicon Valley. The cosmopolitan nature of Singaporean economy, with the government pursuing an open policy to attract foreign talents, also facilitated an inflow of foreign angel investors, thus adding to the diversity and vibrancy of the angel investment community in Singapore.

Going forward, a key challenge – and opportunity — for the further development of Singapore’s angel investment community is to develop stronger global links with angel investors and VCs in leading high tech hubs in the world. Because of the small domestic market, young start-ups in Singapore need to learn to go global quite early, so the angel investors who back these start-ups need to become more savvy in helping them to globalize as well.

Editor’s Note: This post has been republished with permission. Image credit: Brooke Anderson

Dr. Wong Poh Kam is a professor, angel investor and consultant. He holds positions at the NUS Business School, (by courtesy) at the NUS Engineering School and LKY School of Public Policy. He is also the Director of the NUS Entrepreneurship Centre. As an angel investor, Dr. Wong has invested in many high-tech firms and sits on the boards of many. His portfolio companies include Invantest, iWow, GlobalRoam and tenCube (acquired by McAfee). He has consulted widely for international agencies such as the World Bank and ADB, various government agencies in Singapore such as EDB, IDA and A*STAR, as well as many high tech firms in Asia.

Dr. Wong Poh Kam blogs at Connect The Dots@Singapore and can be found on Twitter and LinkedIn.

When MIT announced last week on April 25 that Joichi (‘Joi’) Ito had been appointed the next Executive Director of the MIT Media Lab, it sent ripples through the technology world.

Seen as a bold and forward-looking step by a university known for its rankings and formal education, MIT has challenged the status quo and embraced the famously-talented media savant, who himself has never finished either degrees in computer science and physics.

Named as one of Business Week’s 2008 “25 Most Influential People on the Web”, Joi (pronounced ‘Joey’), 44, is the founder of Digital Garage, PsiNet Japan, Infoseek Japan, and early investor to more than 40 companies which include Flickr, Twitter, Kickstarter and Technocrati. Joi is the CEO and founder of venture capital firm Neoteny Labs, and sits on the boards of ICANN, Mozilla Foundation, WITNESS, Global Voices and Creative Commons, among others.

In an interview with Asian Scientist Magazine, Joi talks about his vision as Executive Director of the MIT Media Lab, his thoughts on education, and his lifelong bond with Japan and Asia.

Joi, first of all, hearty congratulations on your appointment as Executive Director of the MIT Media Lab. You are a global citizen in an increasingly globalized world – having been born in Japan, and having lived in Canada, USA and Dubai. Has the media helped to break down boundaries between the East and the West?

I believe that the Internet has provided a voice and the ability for people to connect people-to-people, which allows us to have the kind of networked and nuanced relationships across cultures that will help cultures work together.

Right now, mass media and heads of state use traditional international relations channels which are fairly blunt instruments, and they are having trouble keeping up with the speed or dealing with the complexity and nuances of the world today.

I don’t know whether we’re actually “breaking down boundaries” so much as providing the ability for cultures to interact constructively and adapt to the environment. I believe each region, country and person is unique, and each has their boundaries. But the key is how to network people together so that they are productive and not in unnecessary conflict.

One of the differences in your new post compared to venture investment is the strong educational mission of MIT. Do you see a fundamental difference between information exchange (e.g. Twitter ) and education? Are there specific approaches you are looking forward to “reducing to practice”?

Both are trying to create “impact” – the lab through educating students and conducting research, and venture businesses through creating products and services.

I like the word “learning” better than the word education. I realize that the Media Lab is a research lab within an educational institution with an academic degree-granting program, but education sounds a bit one-way and top-down.

I think the Media Lab is about creating a learning and research environment where degrees are an important byproduct. I think that focusing on impact, projects, research and making sure that learning is happening is the key, and it will be our job to make sure that we are fulfilling the educational standards so that our students are earning their degrees.

However, this is my personal opinion and what we end up “reducing to practice” will be based on a lot more learning on my part about how the Lab and MIT work. This will be an iterative process with the faculty and the students. It’s hard for me to be very specific about my plans since I haven’t spent enough time at the Lab yet.

You have spawned a long list of successful initiatives that include Creative Commons, Technocrati, Flickr and Mozilla Foundation. You obviously have an eye for online media. Do you have any words of advice for start-ups such as Asian Scientist Magazine?

I didn’t actually start most of those projects, but I do have advice for start-ups. I think it is very important to understand what sort of differentiators you, your region and your network has, and focus on trying to figure out how to leverage that. Also, most start-ups fail, not because they don’t have an interesting product, but because they don’t get distribution – they can’t attract users.

Make sure you have a distribution plan. Also, launch early and talk about your work. Reid Hoffman often says that if you’re not embarrassed by your first launch, you’ve launched too late. He has a famous line, “Don’t ‘ready, aim, fire’. Instead, ‘almost ready, aim, fire, aim, fire, aim, fire.”

The New York Times called your appointment as director of MIT Media Lab an “unusual choice” because you did not finish your degrees. We cannot help but draw a similarity with Bill Gates of Microsoft and Mark Zuckerberg of Facebook. Does new media redefine the traditional role of education?

I think that many of us dropouts dropped out because traditional colleges didn’t have the right program for us. I believe that the Media Lab is and can become even more the kind of place that would attract people who might otherwise drop out. I do think that the way we “educate” in this new environment needs to evolve. Great professors already do this, but I think it’s a lot more about coaching and mentoring and a lot less about lecturing facts.

You mentioned previously that surrounding yourself with smart people stimulates your thinking. Where do you derive inspiration from, and who are your role models?

I derive my inspiration from my interactions with people and their interactions with other people. These people also make things, do things and impact the world around us. Being a part of a global network of active, learning and inspired people is my goal and my source of inspiration and energy. I find role model behavior everywhere I look – almost every single person that I meet has something that I can learn from or be inspired by. Having said that, there are people who have had more influence on me than others, but I have dozens of extremely important mentors and not a single one.

The Media Lab is an unusual place, in that it is a hybrid of art and science. Does science & technology complement and enhance the arts? If so, what significance does that type of research have for MIT?

I believe that the arts allow us to think about and explore science and technology in extremely creative ways – extending the models, frameworks and tools in ways that researchers and engineers wouldn’t naturally try. I think the arts are an essential component of the creative exploration of any scientific and technical area, and that the relationship with the deep and rigorous academic side can be extremely fruitful.

You have retained strong ties with Japan throughout your childhood and career. How has being Asian influenced the choices you’ve made along the way?

Being Japanese, I believe I can have a particular kind of impact on Japan, as well as bring some of the positive elements of Japan and its culture to the world. I’ll always keep a connection to Japan and Asia in some area of focus because this is part of what I am.

Educational experiences in Asia tend to be more defined, and this has been suggested to curtail innovation and creativity. How we can encourage more polymaths like yourself in Asia?

I think that one way to encourage it is for people like us to continue to work in and with our countries of origin and try to lead through example.

Do you really think moving electrons around in various forms of new media can change the course of our planet?

Yes. Atoms are extremely important, but atoms are also made up of forces and energy. Our bits are forces and energy that interact with and affect the atoms. It’s all part of one complex system that is beginning to move faster and become even more complex. The key for us will be to understand how to survive and thrive in this complexity. Understanding how to do that will require thinking like that which happens at the Media Lab.

Assuming the Media Lab never figures out how to forever perpetuate your soul with cloud computing; what, in the end, do you want to be known for?

I personally think that legacy and hoping to be known for something in particular isn’t really what I focus on. I want to have a positive impact on the world and feel like I’m doing the right thing “now”.

This post was originally published on the Asian Scientist.

Click for enlarged version.

Click for enlarged version.

Image credit: Tecfan

About The Author

An aspiring branding and product strategist, Ridza Salim is a fourth year Communications & New Media and Technology Entrepreneurship student at the National University of Singapore. Ridza dives deep to understand the relationship between global and local trends in the media, web and technology scenes. Ridza can be found on LinkedIn.

The crux of the Quora thread questions the benefits of social shopping for both consumers and merchants. With social shopping sites, consumers are now expecting bargains every day. From an economic perspective, the consumers become extremely price-sensitive, choosing to only purchase at heavily discounted prices.

Consequently, the merchants might lose out. Here’s why. While the “social shopping” model offers a low cost advertising and publicity channel for small-time merchants, there is a lack of brand loyalty among consumers (assuming everything else is constant). Consumers purchase the deal because the price is irresistibly cheap. Over the long run, even if consumers like your product or service, they might not want to pay the full price. Instead, they might demand that you do another run on the social shopping site, or they might purchase a similar deal from another merchant.

Some would then argue that providing discounts is a common business tactic that any retailer or business-owner can offer. But discounts are clearly different. Retailers offer discounts to get rid of existing stock. Think of it as a basic economic principle: you decrease the price of the supply so as to increase demand. However, in social shopping, you create the demand first, without necessarily ensuring that there is enough supply. Retail outlets know their inventory count perfectly well, and can afford to slash prices based on this knowledge.

Singapore, like many other countries, has caught up with the social shopping scene. According to an analysis by AllDealsAsia in October 2010, there are at least 15 “Groupon Clones” in Singapore.

The local media (both Mainstream and Tech Blogs) has positive coverage on “social shopping” in recent times, especially with:

1) Beeconomic’s acquisition by Groupon.
2) Telco Giant SingTel’s launch of a Daily Deals site on its inSing portal.

Doing A Deal Audit

With so many social shopping sites in Singapore, what kind of deals are the sites offering? Who buys them? How much savings do they offer?  

For my mini-analysis, I compiled data based on the “deal of the day” (on 31 Dec 2010) offered by each of the social shopping sites. The sample of social shopping sites is based on SGEntrepeneurs’ article (which in turn, is based on the AllDealsAsia article). Initially, I wanted to analyze the daily deals over a period of one week or one month. However, some of the sites do not have an archive. Hence, I made do with a day’s worth of deals.

Findings

From the sample, 12 out of 17 (70%) sites showed at least one active daily deal. Out of the remaining five, two needed user account log-in (lazy users like me might choose to give it a miss), one did not have any deal of the day, one site only offers deals in Hong Kong and the fifth one is an inactive website.

For the 12 sites, there were a total of 14 active daily deals (note that all the sites offered one active daily coupon on their main page, except for inSing, which offered three).

Overview of deals on 31 Dec 2010:

Click for enlarged version.

Breakdown by Categories (Most Popular to Least Popular):

Deal On?
8 out of 14 deals had enough buyers for the deal to go through. There were no indication of the deal’s status for the three deals on inSing. The remaining three deals needed more buyers (ranging from requiring 1 more buyer to 50 more buyers).

Savings
Beauty coupons offered most savings – range between 50% and 94% savings. The average savings is 82.5%.

Facial, Massage & Body Wrap deals offered above average savings, at 88% to 94%. Brazilian Waxing & Spa were at 50% and 77% savings respectively.

F&B savings ranged between 50% and 63%. Note that the three restaurant deals all offered savings of 50%.

Sales
With such huge savings, beauty-related deals attracted a total of 425 buyers (note that three out of the six beauty-related deals were ending in three hours, while the remaining three will be for sale for at least 50 more hours). The four F&B-related deals only attracted a total of 69 buyers.

Interestingly, the least and most popular (sub-)categories came from the recreational activities-related deals where the “Segway” deal had the most buyers (423 coupons), while the luxury coach ticket did not attract any buyers.

Delving Into Verticals

Beauty: Beauty-related deals are extremely popular

Why?

1) Probably regarded as undifferentiated products.
2) Cheap –> Impulse buys! i.e. Facial & Massage at $10, $20, and $30 vs. $100 or $200

A person who comes across the deal might react this way: “Wow! What a steal! Too cheap – even if it’s not a brand I heard of/I trust, I’m willing to give it a try. And even if I don’t redeem the coupon (maybe because I will forget about it or don’t have the time), this is a deal that cannot be missed.”

Conclusion: Immediate gratification of cheap purchase > Worry about actual experience.

Interesting Point: As beauty-related coupons are really popular, can we conclude that most of the social shoppers are females?

F&B: F&B deals are not as popular as I expected.

Why?

Dining is a social experience. People choose dining options based on prior experience (food they like or brand names they trust), or based on the recommendations of people they know. The three restaurants featured may not be part of popular restaurant chains commonly known among Singaporeans.

Conclusion: Popularity of establishment and proximity are important in Dining Experience.

Recreation: The “Segway” deal at Sentosa is popular.

Why?

A huge proportion of the Segway deal is probably purchased in bulk for corporate events, family or friend outings as you probably will not try the Segway alone. Instead, you will more likely try the Segway as a social activity in a group context. So, you buy more than one coupon. Maybe you buy 2 or 5 or 10.

Also, customers have pre-existing expectations/idea on what is riding on a Segway like – through prior experience, photographs they see, friends who tell them about it. That makes it easier to jump onto a Segway deal.

Note that at least one other site has featured a similar deal by a different merchant before. The all-inclusive trip to Penang and luxury coach ticket are not attracting (more than 1) buyers.

Why?

Singaporeans (okay, everyone) are dead serious when it comes to planning for holidays, and do not make impromptu purchases (unless it’s for a super dirt cheap air ticket, which is extremely time-sensitive).

What’s up ahead?

Is social shopping the future of online shopping in Singapore? Or is it just a fad?

What do the social shopping sites need to do to make sure that they don’t die off? As the first step, I speculate that social shopping sites, in their bid to compete and differentiate from other local competitors, will once again learn and apply successful tactics executed by more established daily deals or e-commerce sites.

Perhaps some of the developments that we will see in the near future might include:

- A site for people to sell, trade or auction unwanted coupons in Singapore. This will add another layer to the social shopping ecosystem, and is already happening in the United States.

- Coupons offering enrichment classes (swimming lessons, holiday art classes etc.) for children, especially those conducted by independent instructors who would like to tap the demand in the local education sector, or coupons promoting local fashion/handicraft designers.

- Reverse auction feature on daily deals sites (eg. Name Your Own Price ala Priceline).

While this mini-analysis is based on a one-day sample, it forms a good starting point in obtaining more insights in the much-talked-about Singapore social shopping scene. When the social shopping scene develops to a critical mass, we can better understand purchasing behavior, consumer demographics and if the daily deals are consumer-driven or merchant-driven.

Image credit: epSos.de

About The Author

An aspiring branding and product strategist, Ridza Salim is a fourth year Communications & New Media and Technology Entrepreneurship student at the National University of Singapore. Ridza dives deep to understand the relationship between global and local trends in the media, web and technology scenes. Ridza can be found on LinkedIn.

To most of us, watching anime or reading manga is just a past time, and beyond dressing up in our favourite character’s costumes, and collecting memorabilia, there really isn’t much else to do. But Sylvia Yao and Wu Di, both manga fanatics and gaming enthusiasts, decided they had to do something manga-related to fill the void that the growing social gaming scene had left behind.

Observing the growing interest in manga here in Singapore, and the many social games that have sprouted over the internet, especially social media platforms, it was only natural the duo felt marrying the two would then give manga fans access to a wide array of manga-styled games to add depth to their hobbies.

Manga Castle was finally born in January 2010, and so well-received by manga fans all over Asia, the US, Canada and the UK, it already has a growing community of more than 17,000 fans on its Facebook page. A feat that was made possible by their participation in various business competitions, most notably, the Ideas.Inc Challenge 2009, where they received $15,000 in prize money, another $100,000 through the competition’s Top Incubation Award, and mentorship and entrepreneurship training on top of that.

The seed money has allowed them to be able to hire a team of graphic designers and programmers, and they now have the capability to constantly improve their gaming engine for a more enriching experience for gamers.

What was originally a consumer-driven, subscription-based gaming portal, has also since evolved to become a platform that also attracts gaming developers to showcase their games. Manga Castle provides these gaming developers with the business intelligence they have gathered, through the gamers’ behaviours online, to ensure gaming developers are able to develop games that are now based on facts and science, instead of intuition that they’re traditionally used to. This then ensures developers build games that are profitable and have business sustainability.

With this business concept, Manga Castle expects to build an all-rounded manga community that is well-connected from gamer to developer, although business ideas continue to evolve with time and the needs of the community.

However, passion is the only constant in this journey. As Sylvia puts it, “Only when you are passionate about what you do, can you persuade others to buy in to your idea. Although we are still in the middle of this journey, our vision remains steadfast and I am still in awe of this journey of self-discovery.”

Take part in Ideas.Inc., an annual business competition organised by the Nanyang Technopreneurship Center for aspiring entrepreneurs aged 26 years of age and below. Ideas.Inc. provides significant funding, mentorship and skills enhancement workshops for its successful participants. Ideas.Inc can also be found on Facebook.

The Einstein that you are has drafted the perfect business plan loaded with forecasts and good vibes. You have a good feeling that this is gonna work because you have spent more than what it is usually required in carefully conceptualizing and researching on your business idea. Yet, there’s one thing left in order to kick the inertia. No prize for guessing the F-word. That’s right – FUNDING.

Funding has always been the business element that everyone is trying to avoid maybe because it sounds complicated, difficult to handle or worse, a problem to solve for the lack of it. But every business needs funding and whether you like it or not, you will have to do a lot of legwork to get this part done.

When there’s scarcity for financial resources, do not let the roadblock sit in front of you and kill that business plan you’ve sweat on. Try to work at it by collating information on potential sources of funding for your business. Being young and new has its good points and its otherwise negative aspects. Your idea might be brilliant but unfortunately in business, you have to prove to your investors that your business is workable and that their investment will return and grow with minimum exposure on the investors’ part. Pitching for a funding approval is like a game field. The goal is to enthusiastically build trust and confidence and eliminate all possible signs of doubt about the business.

For young entrepreneurs, here’s a rundown of funding options that may be used to fuel your business.

Bootstrap Financing

This is, by far, the safest option for starting entrepreneurs.

Bootstrap financing means frugally using your current earnings and assets to fund your business. Less money borrowed means less debt and higher credibility. However, your own savings might not be enough to support your operational costs. (Related article: Bootstrap Finance: The Art of Start-ups)

The 3 Fs

This type of funding option comes in various names such as ‘crowd funding’. Some people call it the 3 F’s (friends, fools and family). Count yourself lucky if any of these 3 Fs could lend you an amount enough to start your business. The downside is, it’s purely based on goodwill and they can take the money back whenever they want to – even when you’re least prepared. This could also affect your relationship with them as you will be forced to pay back favours in the future.

Financial Houses and Bank Loans

Strictly business, borrowing money from financial houses and banks could be very exigent. It demands a good credit history and most often than not, collaterals that the banks can take hold of in the event that you cannot pay back. The chance of getting grants from financial houses and banks for a young entrepreneur is very slim. Should you get approved, believe it or not, you will be more pressured to earn back the money borrowed plus the interest, making you worry more about paying the debt than making the business prosper.

Venture Capitalists & Private Investors

Venture capitalists are business bodies funding startup businesses for interest and ownership. VCs may not ask for collaterals but the process of applying takes a lot of courage and effort. You will have to pitch and convince them that the project does work. According to Mark Sutter of entrepreneur.com, there are four things that VC’s look for in a startup business – management, market, money and above all else, momentum. Sometimes, even if you have all four, if you do not have the power to convince, your application wouldn’t be granted.

Private investors on the other hand are the direct opposite of VCs. They are often called business angels – very wealthy individuals who look more into your capabilities as a person rather than the promise of your business. If your idea is not of their interest, you will have to gain their trust which takes a lot of time.

Business Grants from Government

There are various grants that are being offered by the government but also keep in mind that there are a lot of aspiring young entrepreneurs who are keen to take the plunge into the entrepreneurial world. They are as eager as you are and it will take some time to place your paper on top of the file.

Ideas.inc Business Challenge is one of the funding sources you can find in Singapore. Already in its second year, Ideas.inc aims to provide financial and institutional support to budding entrepreneurs with golden business ideas. Each year, young entrepreneurs are invited to join the competition where 15 teams get up to $15,000 each for prototyping and feasibility study and 6 of them will be chosen to receive up to $50,000 for commercialization. Powered by NTU, ideas.inc Business Challenge provides an experiential learning platform for entrepreneurs, allowing them to win zero-interest funding, professional mentoring from experienced entrepreneurs in the field, and massive exposure. It is part of NTU’s project in turning Singapore youth into proactive entrepreneurs.

In addition, with Ideas.inc Business Challenge, you do not only get the financial support but the pertinent guidance through mentorship that you need in making your business succeed. Here, your idea doesn’t end in making it tangible but aiming to keep it progressive.

Take part in Ideas.Inc., an annual business competition organised by the Nanyang Technopreneurship Center for aspiring entrepreneurs aged 26 years of age and below. Ideas.Inc. provides significant funding, mentorship and skills enhancement workshops for its successful participants. Ideas.Inc can also be found on Facebook.

Image credit: aresauburn™