Singapore has one of the most extensive and innovative startup ecosystems in Asia. There is a community of incubators, accelerators, venture capitals, programmes and grants made available to startups. What can you look out for after setting up your Singapore startups?
Every Startup’s Starter Pack, The Six Pillars of Startup SG
1）Startup SG Founder
Financials Kickstart your business with Startup SG Founder, a scheme where Enterprise Singapore matches $3 for every $1 raised. That accounts for a whopping 75% of your overall capital!
Mentorship/Training Unsure of how to begin or develop your business further? Fret not. Enterprise Singapore presents you with the opportunity to receive COMPANY-SPECIFIC mentorship tailored to your business model with their Accredited Mentor Partners (AMP)
2） Startup SG Tech
If your business falls under these sectors, you can stand to gain access to these two grants:
Biotechnology and biomedical sciences
Robotics, information and communication technologies
Transport engineering and engineering services
This is where your proposed line of trade is still at the conceptualization stage. To qualify for the grant, you as the business owner must present the innovative science and technology concept behind the solution.
This is for businesses that wish to further develop and spearhead the entry of their proprietary technology. To succeed, the proposed proprietary technology is required to fulfil the following conditions:
Be commercially viable
Be leading on or building on proprietary technology
Be in a breakthrough level of technology
3）Startup SG Equity
Together with private sector investors, this scheme ropes in SG Government to co-invest in general tech and deep-tech startups. Investors involved will have to each pledge a minimum of $50,000 in investments and be willing to provide the necessary guidance and management experience to spur company growth.
4）Startup SG Accelerator
This scheme provides grants for startup enablers such as incubators and accelerators. Such companies are specifically aimed at growing a business by providing business advice, resources, contacts and capital.
5）Startup SG Talent
With how globalized and accessible Singapore is, this scheme aims at providing ease of setting up a company and ease of attracting global talent. Some schemes covered are:
A work pass scheme facilitating rising entrepreneurs with innovative and revolutionary ideas to set up business in Singapore
T-Up: T-Up grants businesses access to talent from top tier research institutions, helping them in their research and development, should they fulfil the following conditions:
Be registered as a local business
Have a minimum of 30% local shareholding
Have less than 200 employees
6）Startup SG Loan
Via the Enterprise Financing Scheme, this scheme offers government loans providing companies with working capital and financing for equipment, factory, and trade. Such loans include:
SME Micro loan： Provides financing of up to SG$100,000 to support companies with 10 or fewer employees in their business operations.
SME Working Capital Loan: Grants financing of up to SG$300,000. In this scheme, SMEs can rely on the Equipment and Factory Loans that grant up to $15 million, if they intend to purchase equipment or factory properties.
Challenges foreigners face as startup founders
Venture capitalists, angel investors and more from private investors are avenues of funding for all. However, certain kinds of programmes like the Startup SG Founder requires individuals to be Singapore Citizens or Permanent Residents. Not to mention, government grants are typically not available for foreign owned companies. All things considered, there are still large amounts of funding available for foreigners.
2. High Costs
The cost of setting up, maintaining, running and operating in general can be more expensive compared to our counterparts in Indonesia or Malaysia. However, Singapore’s key attraction of a conducive startup environment with our many resources and concentration of VCs should outweigh the high cost.
3. Talent shortage
“Singapore is aiming to become a regional tech hub but faces a severe talent crunch as more firms move in, interviews with more than a dozen recruiters, companies and workers show.” – Singapore faces talent crunch as tech giants scale up from The Straits Times on Jan 27, 2021. However, founding a startup is a different path and there are programmes like Entrepreneur First in Singapore helps you meet your co-founder, CTO or CEO.
If your startup is in hardware, you’ll find that Singapore has lesser manufacturing capabilities compared to the rest of our counterparts like Malaysia, Indonesia or China. It makes sense since Singapore has high cost of operations. This may result in you flying back and forth for product tests, troubleshooting etc. It is always a good idea to have your prototype closer to home, even if the costs are going to be higher.
Seed: It is the first official equity funding stage. It typically represents the first official money that a business venture or enterprise raises, the most common being from Angel Investors (see above). This phase seeks the first materializations of a startup.
Series A / Development: Series A financing is primarily used to ensure the continued growth of a company. The common goals in the series A round include reaching milestones in product development and attracting new talent. In this stage of development, a company intends to continue the growth of its business to attract more investors to future rounds of financing.
Series B / Growth: Investors in this stage help startups get there by expanding market reach. While Series A is used to grow substantial user base and market reach of the product, Series B is used to grow the company so that it can meet these levels of demand. This is also the stage where Venture Capitalists and late stage investors usually join in.
Series C / Expansion: During this stage, companies are usually expected to create new products, reach new markets and even make sure that others don’t meet the expectations of comparable new business deals. They may even acquire other startups. As the business is more stable, investment banks, hedge funds and private equity firms show up during this stage.
IPO: This is the stage if the company decides to sell corporate shares to the general public. It is the last stage of a startup, whereby it will be formally transitioned into a listed company.
6 methods of funding Singapore startups
Especially in the initial stages, bootstrapping is the quintessential method every business owner starts out with. This includes borrowing from friends and families as well,
Pros: Minimizing interest rates and providing quicker funding.
Cons: With every business comes risk. You run the risk of your business failing which will put such funds at stake, possibly damaging relationships.
With this option you raise the total amount of funding you need online from the general public. People can either lend you the money (peer-to-peer lending) or take a stake (shares/equity) in your business. This is especially suitable to businesses which can feed well into the social media trend and are excellent at their branding. You may find popular crowdfunding platforms here
Pros: The widespread influx of social media penetration simply means this: There is no cap to your crowdfunding potential.
Cons: There is a possibility of having to pay extra expenses as well as the need to invest your efforts to publicity and branding
3. Angel Investors
Angel Investors are high net-worth individuals who can provide a large amount of funding for startups and small businesses in exchange for a stake in their business. Most Angel investors are likely accredited investors with substantial knowledge of running a business and can provide insightful ideas and advice to grow your business.
Pros: Accompanied with business knowledge, Angel Investors can provide more than simply monetary wealth. Angel Investors may sometimes even be close friends and family, providing crucial liquidity when needed.
Cons: Retaining a full stake in your business is out of the question when it comes to Angel Investors
4. Venture Capitalists
Venture Capitalists and Angel Investors have much in common. Sometimes they may even be used interchangeably depending on the situation. However, the main difference between Venture Capitalists and Angel Investors is the stage in which they invest in. Angel Investors provide funds earlier in the business cycle, making them more susceptible to risk. Venture Capitalists are also known to have larger funds to work with.
Pros: Venture Capitalists oftentimes have a network of contacts and partners that can help develop the business. They also have a large pool of funds that can be used to invest in you.
Cons: Because of the large amount of funds, the stake that you may have to give up in exchange for it will likely be huge, even larger than that of Angel Investors
5. Incubators and Accelerators
While used interchangeably like Angel Investors and Venture Capitalists, Incubators and Accelerators are programs designed to develop and scale start-ups. They provide mentoring and insights to help ambitious start-ups grow their businesses.
Pros: Such programs usually include funding and mentoring
Cons: There is a selection process that a company is required to qualify for, which can take up valuable time and effort. Selection can also be grueling.
6. Government Funding
The Singapore government has put our several initiatives to aid start ups and small businesses in Singapore. Scroll above to read more about initiatives of Startup SG.
Shares 101: Understanding Shares and Stamp Duty in the Singapore context for Startups and Small businesses
The government has put our several initiatives to aid Singapore startups and small businesses. Scroll above to read more about initiatives of Startup SG.
Q: Is there a minimum number of shares to be issued?
The minimum issued capital must be at least SGD$1.00, however there is no minimum paid up capital needed. This means you can start a company by issuing only 1 share worth SGD$1.00. In the future, if your company wishes to issue more shares, ie. Increase paid-in capital, you can choose to do so anytime as companies are free to do so after incorporation.
Q: What is the stamp duty rate in Singapore?
Like many countries, Singapore imposes a stamp duty when buying the shares of a company. Stamp duty is basically a tax on dutiable documents relating to any (immovable) property in Singapore and stocks or shares. In the context of Singapore, stamp duty is 0.2% of the purchase price for share transfer documents.
Q: Methods to pay stamp duty for shares
There are numerous methods to pay stamp duty in Singapore. See below for the full list:
FAST via DBS/POSB Account
Internet Banking Fund Transfer
Cheque / Cashier’s Order
Stamp duty has no installment, it must be paid in full.
Q: Deadlines for Stamp Duty
Document needs to e-Stamp before signing it. No penalties will be charged if the document signed or e-Stamped within the following time frame:
Within 14 days after signing the document if it is signed in Singapore
Within 30 days after receiving the document in Singapore if the document is signed overseas
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Themain difference is that an entrepreneur has a financial motivation behind venturing into a business, while a startupis innovators of new ideas or solutions to existing problems, they sell their ideas as a solution to problems rather than as a source of income.
Does the Singaporean government assist foreigners who contribute to the growth of local startups?Jeremy2020-11-23T14:04:32+08:00
Yes. Singapore through Startup SG Talent assists foreign investors in acquiring an EntrePass, a work permit to enable them the finishing touch to Singaporean local skillset of upcoming entrepreneurs. It also has a T-UP scheme that avails them access to talent from top–class research institutions and caters for up to 70% of the cost related to research.
What grants exist for SMEs and startups in Singapore?Jeremy2020-11-23T14:04:09+08:00
Singapore ranks second in Asia as second best when it comes to investments in a startup because of the readily available Government Schemes, Startup Incubators, Angel Investing Networks, Venture Capital Firms, and Private Equity Firms for startups. It worth noting that these startups have excellent innovation and ideas that qualify them for the benefits.
What is the startup ecosystem?Jeremy2020-11-23T14:02:27+08:00
A startup ecosystem begins with the brainstorming of ideas, then innovations and research. At different stages, a startup will include entrepreneurs, team members of the startup, advisors, mentors, and investors. An ecosystem will also involve support and funding organizations, gig companies, research organizations, service providers, and universities.
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