Growth-stage startup funding slows in Singapore; early-stage deals buoy overall investments

ENTERPRISE Singapore (EnterpriseSG) on Thursday (Oct 27) warned of a weakening environment for startup fundraising, noting that investments in growth-stage startups have become sluggish compared with the year before.

Singapore startups closed 517 deals in the first three quarters of 2022, 6 per cent more compared with the same period last year. Still, the amount raised was S$11.4 billion, falling shy of the previous year’s S$11.6 billion, according to EnterpriseSG.

“The current macroeconomic climate has darkened considerably. Fundraising and listing prospects are less favourable,” said Peter Ong, chairman of EnterpriseSG. Ong was making opening remarks at the finals of startup competition Slingshot, held during the Singapore Week of Innovation and Technology.

Ong noted four unicorns, or companies valued at US$1 billion and above, have been minted in Singapore this year – Biofourmis, Insider, Livspace and Coda Payments. That’s fewer than the 11 minted in 2021.

Ong said the uncertainties this year may have caused later-stage investors to hold back. While growth-stage funding contributed to most of the jump in total investments from 2020 to 2021, 2022 saw a 25 per cent fall in funding value from Series C rounds and above.

Early-stage investments, however, emerged as a bright spot. Investments up to Series B rounds saw an uptick to reach S$5.5 billion for the first nine months of 2022, an increase of 14 per cent by volume and 45 per cent by value.

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Still, startups face a challenging business environment amid high inflation and rising interest rates.

“Tamed investor risk appetite and heightened focus on profitability are realities that all startups have to face,” said Ong. He added that the government and its ecosystem partners will continue to support companies.

Singapore’s tech ecosystem has grown considerably, now housing over 3,900 tech startups and a network of more than 220 incubators and accelerators. The city-state has over 400 venture capital (VC) managers and an estimated 700 family offices.

The government has continued to spur investments in the early stages of startup growth, especially for sectors that VCs have been slow to back.

Government-owned Seeds Capital and SGInnovate co-invested over S$23 million across 26 startups so far this year, which drew in about S$128 million of private capital.

Ong highlighted the need to secure Singapore’s position as a gateway to international markets. The government has been working on an extensive portfolio of bilateral and multilateral trade and economic agreements, while cross-border collaborations such as the Global Innovation Alliance help companies enter new markets.

Young tech talent in Singapore will also have a shot at gaining exposure to overseas markets through government-run programmes, including an exchange programme with Indonesia launched in August.

EnterpriseSG on Thursday said it has expanded the GIA network to include Abu Dhabi, its first node in the Middle East, and Seoul. Expected to commence in 2023, the programmes will each support at least 30 Singapore-based startups and tech-driven small and medium enterprises to enter the market over the next two years.

EnterpriseSG has partnered with corporate innovation and venture development firm Rainmaking Innovation to run the programmes.

“We see strong interest from commercial stakeholders in areas such as smart cities, fintech, energy and cleantech for Abu Dhabi; while in Seoul, demand is high in areas such as supply chain technology/logistics technology, foodtech and smart mobility,” said Brian Lim, head of the Rainmaking Expand Program.