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Venture Capital in Singapore
Venture capital (VC) is a form of private investment and a type of financing that investors provide to start-ups and small businesses that are believed to have long-term growth potential. Venture capital is usually provided by high net worth investors, investment banks and other financial institutions.
In Singapore, despite the covid-19 pandemic, the venture capital market continues to reach new heights.
Here is a summary of the key points of the Singapore venture capital market that you should know.
Singapore VC market trends
In general, it is worth noting that venture capital in Singapore is steadily expanding, which is unlikely to change given Singapore’s position as a regional, if not global, hub for start-ups.
In Singapore, alluring targets for VC investments are indeed most often start-ups in sectors with high growth potential, such as FinTech, decentralised finance and blockchain start-ups, e-commerce, agri-tech, advanced manufacturing, etc.
Although access to accurate and correct data on venture capital figures is complicated, recent reports have shown that start-ups in the Southeast Asian city-state raised USD 4.1 billion in 2022, topping the global rankings of venture capital investments per capita.
VC Fund structuring in Singapore
While the most common corporate structure in Singapore is undoubtedly the private limited company, the structuring of a venture capital fund must be approached in a completely different way for two main reasons: flexibility and confidentiality.
To meet these criteria, there are two types of structures in Singapore that are relatively new to the country’s business landscape, namely the limited partnership (2008) and the variable capital company (2020), which are now attractive structures that can be incorporated in Singapore and are capable of competing with the usual offshore venture capital funds.
What are the licensing requirements for Venture Capital funds?
In Singapore, fund management is a regulated activity under the Securities and Futures Act (SFA). Companies wishing to engage in such activities will need to obtain a capital market services licence or be registered with the Monetary Authority of Singapore (MAS). If these conditions are met, companies will be able to operate as a registered fund management company.
Please note that venture capital fund managers may also apply to operate under the Venture Capital Fund Manager (VCFM) regime which is a lighter regulatory regime for venture capital funds.
Tax framework and incentive schemes
Fund management activities in Singapore may be subject to taxation. Indeed, it is possible for the manager to create a taxable presence in Singapore and as a result certain income and gains derived by the fund may be treated as arising in Singapore and subject to tax in Singapore. However, this tax liability could be eliminated under Singapore’s tax incentive schemes for funds, provided certain conditions are met.
There are three main tax exemption schemes available to funds managed by fund managers in Singapore namely the Offshore Fund Tax Exemption Scheme, the Onshore Fund Tax Exemption Scheme for Singapore Resident Company and the Enhanced Tier Fund Tax Exemption Scheme.
All these schemes have different characteristics, but more importantly, as mentioned above, specific requirements for them to be applicable, such as the legal form of the fund, the residence of the fund or authorisation and reporting requirements. Determining eligibility for one of these schemes will therefore require a thorough examination of the fund, which can be difficult as the flexibility of their structure makes them unique.
Examples of VC companies in Singapore
While the venture capital industry in Singapore is relatively new, however, it has been developing at a solid pace and many companies have started operating. Below are some examples of VC companies available in Singapore:
DreamLabs – DreamLabs looks to invest in companies who operate in the areas of Cleantech, Fintech, eCommerce, Healthcare and Energy. They also provide mentorship, networking, and physical infrastructure at their incubator in Singapore’s CBD.
B Capital Group – Founded by Facebook’s co-founder Eduardo Saverin, B Capital Group supports the next generation of ground-breaking technology companies.
Jungle Ventures – One of Singapores first VC companies, Jungle Ventures currently boasts a portfolio valued at over $12 Billion.
500 Startups – 500 Startups is a global venture capital seed fund which has invested in over 51 companies and 2,600 startups from all over the world including one of the most popular South-East Asian companines.
Quest Ventures – based in both China and Singapore, Quest Ventures is one of Asias leading VC businesses and has invested in over 100 companies such as Tencent.
Question about venture capital in Singapore?
Singapore’s startup ecosystem is thriving and internationally recognised, which goes hand in hand with a vibrant and lucrative venture capital market. Singapore is now one of the best places to manage funds for a number of reasons, including business-friendly policies and tax certainty, as well as political stability. In addition, the recent favourable legal framework for fund management makes the Southeast Asian city-state a prime destination for investors looking to the APAC market.
Please note that this article is for information purposes only and does not constitute legal advice.
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Frequently Asked Questions
How to set up a venture capital fund in Singapore
- Submit the forms for operating a Venture Capital Fund Manager to the MAS. This form has the details of the business, team, nature of the investment, sources of fund, history of the company, etc
- Identify the amount of assets under the funds management. Venture Capital Fund Management Companies do not have a minimum value for their assets.
- Establish the number of Directors and their experience – VCFM should have a minimum of two directors, one of them should work full-time and should also be a Singapore resident.
- Minimum Base Capital Requirements – Venture Capital Fund Management Company does not have exact minimum base capital criteria.
- Investor Type – VC funds can handle both Institutional and Accredited funds only but not Retail.
- Investment Type – 80 percent of this fund’s portfolio must be in firms that are less than ten years old.
- The number of investors – Venture Capital Fund Management Company handles unlimited numbers of accredited investors or even Qualified investors.
How can I create a VC fund in Singapore?
VC funds can be created using the following steps in Singapore:
1) Submit the forms for operating a Venture Capital Fund Manager to the MAS.
2) Identify the amount of assets under the funds management.
3) Establish the number of Directors and their experience
4) Identify the minimum base capital requirements – Venture Capital Fund Management Company does not have exact minimum base capital criteria.
5) Identfy the investor type
How much does it cost to start a venture capital fund?
Startup investors generally expect a 20% or more yearly return on their investment, and will take this number into account when determining how much to offer you for your business. A lender will typically charge 7.9-19.9%.
How do I open a venture fund?
- Submit the forms for operating a Venture Capital Fund Manager to the MAS.
- Identify the amount of assets under the funds management.
- Establish the number of Directors and their experience
- Identify the minimum base capital requirements – Venture Capital Fund Management Company does not have exact minimum base capital criteria.
- Identfy the investor type
What is the minimum investment for a VC fund?
Typically VC funds tend to be around $1 million or more but can be as low as $250,000. A typical minimum investment in a VC fund varies between $1 to $5 million.
How many venture capital firms are there in Singapore?
There are currently over 100 VC firms currently active in Singapore.
Are private equity funds regulated in Singapore?
Yes, equity funds in Singapore are regulated by the Monetary Authority of Singapore (MAS) under the Securities and Futures Act (Cap. 289) (SFA).
What is 13X Singapore?
13X is formally know as the Enhanced-Tier Fund Tax Exemption Scheme (Section 13X of the Income Tax Act). 13X applies to funds with a minimum size of S$50 million that are managed or advised by a Singapore fund manager, which can be an exempted SFO or a licensed multi-family office.
What is VCC Singapore?
The Variable Capital Company (VCC) is a new type of corporate structure for investment funds VCCs are governed by the Variable Capital Companies Act which took effect on 14 Jan 2020. The VCC will complement and go alongside the existing suite of investment fund structures available in Singapore.
What is a mas Licence?
The MAS licence is required in order to conduct regulated financial services activities. MAS Licenses are made up of either a Capital Markets Services or Financial Advisers License .
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