The biggest challenge for any start-up is to raise capital so as to set the business off the ground. Commonly, entrepreneurs turn to their friends and families or personal savings for the initial rounds of financing but a time comes when they need more capital for further growth and expansion of the business. Thankfully, entrepreneurs in Singapore have, currently, ample options to boost their start-ups as the city-state is attracting more and more foreign private investors to boost its start-up ecosystem.
Capital raising in Singapore has become much easier now with the launch of many government aided and private equity firms which have realized the growing potential of the Southeast Asian start-up markets. Here are some of the best options for private equity financing in Singapore that businesses, often, tend to approach.
Angel investors are private investors who are most wealthy people looking to invest in high-risk start-ups in exchange for an equity share in the company. They work either individually or as a network of angels to invest in start-ups and seed stage businesses. The wealthy individuals referred to as the angel investors form a significant part of capital raising in Singapore.
The angel investors typically invest in those high-potential start-ups that deal with a business that they are familiar with. Apart from offering capital, the investors also share their knowledge and offer valuable guidance especially on finance and management.
Compared to the US and Europe, the venture capital industry is still new in Singapore. Venture capitalists, although quite similar to the angel investors slightly differ in their operations. While they are also in search for high-potential start-ups, the return is they expect is, however, much more than what the angel investors expect. Usually, they expect a return of more 25% percent for each year’s investment.
Venture capital is the most popular option for capital raising in Singapore. Not only do they offer guidance and mentorship along with capital, they even offer the maximum amount of financing required by a start-up to grow and expand. The VCs are mostly interested in sectors like IT, manufacturing, services, biotechnology, medicine, etc.
The third private equity option for start-ups is the private fund. Banks, financial organizations and investment companies are the main sources of private funds. Unlike the angel investors and the venture capitalists, the private funds neither invest in the seed-stage or growth-stage not get involved in the investee company’s business. They just await a good return on their investment which is why they are usually considered ideal for the established businesses.
For start-ups planning for capital raising in Singapore, options are many but they have to ensure that they have a sound business plan with a sizable and scalable market. Convincing the private investors is quite a tough job; it might take several rounds of meetings and pitch preparations to ultimately find a suitable investor. For best results, it is highly advisable for start-ups to become a part of a network that drastically reduces the time required to find the right investor. Such a popular network is the Merger Alpha, based in Singapore that performs the task of bringing together buyers, sellers, investors and advisers under a single roof.
For more information on the network or capital raising in Singapore, feel free to visit http://mergeralpha.com/