With entrepreneurs and venture capitalists seemingly aplenty, how far along are We in asia’s tech start-up revolution, asks Justin Harper
With entrepreneurs and venture capitalists seemingly aplenty, how far along are we in Asia’s tech start-up revolution?
Singapore is trying to establish itself as a hub for tech start-ups — in an effort to be Asia’s answer to Silicon Valley. The government is throwing money at tech businesses and has already attracted some sizeable venture capitalists ( VCS) and incubators here. Given Singapore’s small size and excellent infrastructure, it makes it a good place to try things out. While it is still early days, there are already positive signs that entrepreneurs are coming out of the woodwork, particularly in the technology space.
The JTC Launchpad @ one-north, better known as Block 71, is one example of the government’s efforts to nurture Singapore’s start-up community all under the same roof. Block 71 is a factory building in the heart of Singapore’s start-up technology hub and is currently home to about 500 start-ups. Block 71’s up-and-coming firms have some great role models nearby with tech giants Facebook, Google, Yahoo, Paypal, Linkedin and Uber, who have all established their regional headquarters in Singapore. Rather than compete, these big players attract experienced and talented tech professionals from all over the globe to Singapore, resulting in a tech brain gain.
At the same time, more capital is flooding into the region with venture capitalists leading the charge, keen to fund these young technopreneurs and unearth the next Facebook or Google. Among the region’s top backers is Far East Ventures (FEV), an offshoot of Far East Organisation. FEV started investing in technology funds and companies in late 2014. More than 15 funds and start-ups have been funded so far. The vast majority (about 90 percent) of these are in the tech space. One well-known example is Redmart, a Singapore-based online groceries platform which has secured funding from multiple funds.
Jonathan Ng, co-founder of Far East Ventures, says: “The growing start-up culture is a product of the support from all
constituents in the ecosystem: Government agencies, investors and entrepreneurs.’’ FEV is unique in the sense that the companies it invests in can leverage on Far East Organization’s existing businesses, which span multiple sectors.
Another potential funding source is Bansea, a not-for-profit organisation grouping together individual angel investors looking to invest in Southeast Asia. It has a strong footprint in Singapore and has built relationships with many early stage organisations in the region and some globally. It counts on about 50 active angel investors that are looking for investment opportunities.
It’s not just about providing funds, although capital investment can be a real competitive advantage for many companies that are trying to scale-up and compete globally. Jose Camacho, CEO of Bansea, says: “Besides capital, our members contribute their network and expertise for the funded start-ups. Additionally, we play a role in sharing expertise with new or prospective members as well as start-ups. For example, we work with experts in legal and finance to provide workshops and guidance on the important aspects to consider when investing.”
He sympathises with start-ups and technopreneurs as they go searching for funding. “Today, a lot of effort, time and capital is spent by entrepreneurs in trying to find — sometimes desperately — early capital. Often, this effort leads to randomly finding someone with capital. On the other side, private investors are looking to invest in the next Facebook, and face a process and terms they are not familiar with leading to an inefficient approach.”
One of the beneficiaries of this venture capital and angel investor influx is start-up Arcstone, founded in 2013 and headquartered in Singapore. Arcstone is focused on operationalising streams of data within an enterprise through its unique platform. It integrates with IOT sensors, machines, ERPS, and workstation tablets to provide fully automated processes in manufacturing, machine maintenance and warehousing. This leads to major cost reductions and quality improvements for its clients. Arcstone’s seed round consisted of YSS Capital, 500 Startups, Wavemaker Partners and Global Brain.
Explaining why he had so much interest from investors, Willson Deng, founder and CEO of Arcstone, says: “We are uniquely positioned in the sense that we have a fairly comfortable revenue stream, which allows us to select the right investors to help grow across the region. All funding operations comes with its difficulties but Arcstone was able to select the right investors with the right connections and the right attitude towards enterprise growth to successfully expand.”
He had discussions with around 30 different investors and VCS before the final four were selected. Arcstone’s seed round took about six months to complete, which involved meetings with investors and VCS, along with fact-finding meetings before a final decision was made on both sides. Now that it has the capital, Arcstone’s main focus is on expanding across Southeast Asia, increasing its presence in Indonesia, Vietnam, India, Malaysia and the Philippines.
But Deng has a few words of caution about all the cash flooding into the region for start-ups: “From an ecosystem perspective, too much easy money flowing into bad ideas can foster a misaligned ecosystem that can have significant negative impacts on how new companies are encouraged to start up and grow. This becomes part of the responsibility of investors to look at and fund truly innovative, creative and value generating start-ups instead of copy-cats, replicates and limited value-generating companies.”
Another start-up that has successfully attracted funding is Hipvan, which was launched in 2013. Hipvan sells apartment furniture and decor online that is priced up to 70 percent cheaper than brick-andmortar retailers. It was partly funded by venture capital fund Golden Gate Ventures (GGV). Danny Tan, one of the co-founders of Hipvan, says: ‘’GGV likes the fact that we are addressing a large and growing market that is coming online quickly, due to the ageing of millennials. I think they also like the fact that our founding team understands e-commerce well from our experiences at Rocket Internet and we run an extremely data-driven organisation.”
The founders bootstrapped Hipvan for six months before deciding that they should look for external capital. ‘’I think more important than the speed of raising capital is to make sure that we have a scalable business model that can be accelerated with external funding. After all, the investors are putting their money on the line, but as founders, we’re putting our time on the line, which I think is much more precious,” added Tan.
Benjamin Twoon, a graduate of the Singapore Management University (SMU), launched his own start-up called Fundnel, an online investment platform that leverages data and technology to simplify the way we invest. He is actively involved with SMU Eagles, a
“The growing start-up culture is a product of all the support from all constituents in the ecosystem: Government, agencies, investors and entrepreneurs”
group of entrepreneurial graduates and alumni of the management university. He says: “There is much debate about how Singaporeans do not take enough risk and lack the entrepreneurial mindset, but I must say that the start-up scene here is steadily growing with a palpable vibrancy that is infectious. Part of the equation involves the support of government agencies and institutes of higher learning, something not as readily present in the neighbouring countries. I do believe that a lot more millennials are seeing the impact that technology is creating in their lives — and they want to be a part of this revolution’’.