If you are looking to launch a new business in Singapore, then one of the first things you are going to need to address is how to fund your business. Much like a planted seed is what turns a field of potential into acres of cash-yielding crops, seed capital is the funding that brings a business from the idea stage to its launch.
What is Seed Capital Used For?
In the initial stage of development, companies need seed capital - money that is often used to conduct market research, build a product prototype, and pay company expenses - while their business gains momentum.
Since the cost of living is high in Singapore it can be difficult to fund a new business on your own because the expenses generated from starting the business can add up to quite a lot. Some entrepreneurs based in Singapore do fund their business themselves with their own seed capital.
In some cases, seed capital is provided by the entrepreneur’s friends and family (hence the reference to seed capital in some places as the “friends and family round”). Other entrepreneurs do not have access to this source of funding so need to involve third parties to gain enough money to launch their business idea.
Involving a third-party is not always a bad idea since they will evaluate your business objectively and will only invest in it if they think that long term it will be successful. Although not every business is a success, having someone carry out due diligence prior to investing in it will at least give you as an entrepreneur some reassurance that your idea has some prospects.
Seed Capital from Private Investors
Private investors, often called business angels or angel investors, provide this first round of funding since securing a loan and gaining capital is hard for new and first-time business owners. Private investors often consist of individual business angels or groups. In fact, in Singapore investment groups and quite common so if you are launching a business in this area you may well come across this type of private investor.
When it comes to the level of investment you can expect to get for seed capital, the overall amount is usually quite small (generally under S$75000) and this funding usually only covers the business’ initial objectives.
Business angels are more likely to invest seed capital than banks or venture capitalists in exchange for some control in the company’s operations and financial decisions.
Once seed capital is in place, however, and the business begins to grow, business owners have an easier time seeking venture capital, funding that ranges upward of S$150,000, where the business investors at that point will usually own shares and have a stake in running the company.
Angel Investment Network in Singapore
By getting in touch with Singapore-based business angels on the Angel Investment Network, entrepreneurs can seize these initial funding opportunities, such as seed capital, and get their business ideas on the right track.