News Stop: On Business Angels & SMEs that pay well in Singapore

Lately, there seem to be a lot more news reports on venture capital and small medium enterprises. Today has two reports today about business angels from the BANSEA network and another (funded by SPRING) about SMEs who give good benefits for the employees. We dedicate two pages for both excerpts to these news and also our thoughts about them.

The first article is “Angels With An Appetite For Risk”, by Lee Ching Wern (Today, 2 August 2006). Basically, the purpose of the article is to inform the public about business angels and what kind of investments they are looking for. It is important to let you know that if you plan to set up an internet cafe, a restaurant, a consultancy or a traditional business (that have no innovation), you better not seek any business angel funding because they are not interested. The three keywords to make a business angel tick is scalability, sustainability, team and innovation. Of course, if you have a new business model to make a traditional industry look different, they might consider investing in you. There is also underlying note if you seek business angel to help you, they tend to operate like mentors and will intervene if the entrepreneur starts making a series of blunders. If you know these key rules, seeking angel funding would be easy. For example, I did my startup in the UK using business angel funding. We actually successfully made a proof of concept and now we are seeking another round of funding. As a matter of fact, our mentor who is a venture capitalist, also operates as a business angel. They can be helpful when it comes to dealing with legal issues and business contracts because of their experience.

So, we quote bits and pieces of the article to let you know more about how business angels in Singapore operate. Of course, I know two out of three mentioned in the news (and one of them happens to be my boss).

Some call them angels. Others call them fools. One thing for sure, they have huge appetites – for risks, that is.

And if you are a resource-strapped start-up armed with a brilliant business idea or a breakthrough technology, they are the people you should be looking for.

Business angels are risk-taking individuals who invest in start-ups, often putting in both their business skills as well as their capital into new and developing enterprises.

“In the financing food chain, business angels plug the gap between funding from family and friends and venture capitalists,” said Assoc Prof Dr Wong Poh Kam, chairman, Business Angel Network Southeast Asia, or (Bansea), a non-profit organisation promoting the development of the angel investment community.

According to a Global Entrepreneurship Monitor (GEM) report last year, the informal investment rate in Singapore as a percentage of the adult population has improved from just 1.3 per cent in 2000 to 3.5 per cent last year.

Under the Seeds (Startup Enterprise Development Scheme), there are more than 200 business angels who have collectively invested $44.2 million to-date in start-ups, said Mr Wong Peng Wai, director, Enterprise Ecosystem Development, at the Economic Development Board (EDB).

According to the GEM, between 2000 and 2004, business angels here invested an average of $16,700, and about 9.8 per cent of them invested more than $100,000.

On the difference between business angels and venture capitalists (VC), business angel Francis Chua said: “If you want to approach a VC, you must already be running revenue and having customers. If you are still in the stage of ideas or prototype, find the business angels.” …..

Mr Chua is the lead angel in BAF Spectrum, a newly formed angel fund under the Business Angel scheme administered by the EDB. Together with two other angels, Mr Chua will put $10 million into the fund over five years. The fund, which is targeting to back at least two or three companies a year, will invest a minimum of $75,000 in each start-up. The amount will be
matched dollar for dollar by EDB, up to a cap of $1 million.

Angels look for three things in an investment: Technology, competitive advantage and people.

“We want scalable projects with strong intellectual property protection, with a big market and regional and international potential,” said Mr Chua.

“And because we are investing at such an early stage, we are essentially investing in the people,” said business angel Chow Yen-Lu, and managing director of WholeTree Technologies, who has invested in about five information technology start-ups since 2001……..

Start-ups interested in meeting business angels for funding can contact the Business Angels Network Southeast Asia (Bansea) via www.bansea.org or the Economic Development Board at 6832 6832.

Related Articles which might be of interest to you:
[1] BL, How much do you really need? A primer on financial sources, SG Entrepreneurs. This article will tell you who you should seek funding depending on which stage you are with your business.
[2] BL, Business Angels and Venture Capitalists in Singapore, SG Entrepreneurs. This provide a comprehensive guide for the beginner to know how to find the business angels and venture capitalists in Singapore.

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