If you’re an entrepreneur or business owner in Singapore who has started looking into further funding options then there are a range of different financial terms that you may have come across, but may not necessarily completely understand what they are.
With this in mind here are some of the more common types of equity financing options that are available, and how each of them works. Each entrepreneur has different needs, and so it is up to you to determine what is right for you and your business requirements.
Seed Capital Funding in Singapore
Seed Capital - This is often referred to as the first round of financing. Seed capital funding usually occurs in the first stages of a new business, perhaps where the project has yet to begin. In some cases entrepreneurs will use their own money, or borrow money from the bank via personal loans, or from family members for seed capital, since the initial stake tends to be lower than the investment required to expand upon a business.
In Singapore Angel Investors usually play a key role in this stage, as the higher risk/reward attracts these investors more than Venture Capitalists, where a group decision will usually require an evaluation of activity to date, such as financial data. Another factor relating to the market in Singapore is that it is more common to find investor clubs and groups of investors that work together to pool their money into an investment.
Generally, seed capital is not a large amount of money, usually slightly higher than basic grants and loans: this type of equity financing falls in the S$15-50k range.
Venture Capital Funding
Venture Capital - This type of investment usually follows as the next step. It involves significantly more money and virtually always requires the investors to be involved in part of the overall running of the company and its decision-making process. The average range for this step is often in the 6-figure range and is invested as a type of Private Equity.
Obviously, the overall aim is that the investors will generate a good return via the growth of the company and ideally the eventual Initial Public Offering (IPO) of the company. Venture Capital Investments are usually made in exchange for a percentage of the company's shares, which will provide a strong return on investment if the company is successful.
In most cases a business that attracts venture capital funding is already established. For example, a business in Singapore may be operating profitably and effectively but does not have the means to expand overseas to across the rest of Asia, or globally. In these cases where a proven track record has been established locally in Singapore, VC funding would likely be more readily available.
Other Equity Financing Options in Singapore
Other types of investment funding methods for businesses in their later stages include Hedge Funds and Collective Investments. Generally, this form of investing is only for larger companies and organizations. Start-ups and entrepreneurs would not normally attract this form of investment.
Bank loans are also an option for established businesses, but for start-ups in Singapore, this door is normally closed since most banks require some evidence of a successful trading history.
Angel Investment Network in Singapore
The Angel Investment Network in Singapore connects entrepreneurs with angel investors. If you have a business start-up in Singapore and are looking for an investor to help fund your business, then sign-up to post details of your project and get started. Angel Investors can find projects based in Singapore and all over the globe. Find your next investment opportunity today.