Singapore takes lion's share of venture dollars in South-east Asia

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SINGAPORE is staking a claim as the leader for venture capital dollars in South-east Asia, as tech startups in the city-state drew in S$5.5 billion of capital over the past year, Second Minister for Trade and Industry Tan See Leng said on Tuesday.

The S$5.5 billion is a dip from the S$8.5 billion raised in 2019, according to figures from Enterprise Singapore. Still, Dr Tan noted that amount of capital raised by Singapore startups last year was still almost three times what was received five years ago.

"The recovery in the global economic activities is expected to be long drawn, highly uncertain and uneven across the different sectors and geographies," he said in his speech at the Action Community for Entrepreneurship's (ACE) Community Day.

"We continue to be the leading investment destination in South-east Asia," he said, referencing a new study by the World Bank Group on the Republic's startup ecosystem.

According to the report by the World Bank, Singapore has drawn an increasingly large proportion of venture capital and private equity dollars in South-east Asia. Since 2014, the city-state has accounted for well over half the total aggregate value of deals in the Asean region, the study said, citing a previous report from data platform Preqin.

Singapore was responsible for the lion's share of investments in South-east Asia. Firms in the city-state accounted for approximately three-quarters of the region's capital in 2019, it added.

The World Bank Group also highlighted the government's contribution to the startup ecosystem, but said that too much government funding may also be artificially propping up some of the Republic's younger startups.

The array of schemes and grants in the startup ecosystem could foster dependency on the public sector, and reduce effective engagement with private investors, the study said.

Startups in Singapore have shown to be increasingly reliant on government support in the last decade: 69 per cent of them were participating in government schemes in 2017, up from the 19 per cent in 2010.

Startups in Singapore are also facing other challenges, such as in acquiring and retaining talent, increased competition from regional rivals and apparent funding gaps for later-stage companies.

The report said that the university system in Singapore is strong, but the city-state would still be limited by its small talent pool. "While Singaporean startups could find talent from abroad, restrictions on the number of international workers and quotas surrounding local hires may further hinder efforts to find and retain talent," it added.

At the same time, regional competition has increased as neighbouring countries - such as Indonesia and Vietnam - have created their own startup ecosystems.

Lastly, funding for later-stage companies may also be harder to come by in the country, said the report. The country's small market size also means that many investors need to operate with a regional scope to ensure a sufficient pipeline, it added.

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