Risk Capital

Risk Capital in Singapore 
Ranking 4th in Blockchain and 5th in Fintech in the global ecosystem by Startup Genome, Singapore is recognised as the startup investment hub in Southeast Asia, especially with bigger funds secured year by year.  

Further increasing the vibrancy of our ecosystem, there is a surge in investors’ interest in the deep-tech domain, attracting many deep-tech startups worldwide to set foot on our sunny island. 

Investment in Singapore has grown seven-fold since 2015. Investments in the deep-tech sector have shown high growth too as reported by Enterprise Singapore. Advanced Manufacturing, Urban Solutions and Sustainability, and Healthcare and Biomedical Sciences domains gained investment traction, with a 25% growth in investment amount in 2019 as compared to 2018.  

As of 2020, there are reportedly more than 160 VC firms in Singapore. To boost the startup investment landscape, the Singapore government implemented several measures to drive investments in startups and increase support into Innovation and Enterprise. Some of the schemes are: 

• Startup SG Equity: Aiming to catalyse more investments into Singapore startups, the government has set an additional S$300 million in Startup Equity, in hopes to increase interest in Singapore-based deep-tech startups. Investment cap for general tech startups and deep tech startups are S$2 million and S$8 million respectively.  
  • Co-investment ratio are at:
    • For general tech – 7:3 up to first S$250K, 1:1 thereafter up to S$2M
    • For deep-tech – 7:3 up to first S$500K, 1:1 from S$500K to S$4M, 3:7 thereafter up to S$8M
• Section 13H/Fund Management Incentive:Aims to encourage the inflow of local and foreign venture capital funds into Singapore and catalyse more financing options for locally based startups and SMEs. During Budget 2020, S13H and FMI were enhanced and extended for five years till 31 December 2025.S13H provides tax exemption for income from funds that meet the scheme’s requirements to invest into unlisted Singapore-based companies, while FMI offers fund management companies managing associated S13H-approved funds a concessionary tax rate of 5%.
  For more information, please visit the Startup SG Investor (S13H/FMI) webpage. 
• Section 13 series: Other tax incentive schemes for Singapore funds are outlined in section 13CA, 13R and 13X under Singapore Income Tax Act.
• 13CA: Suitable for funds that are not wholly owned by Singaporean investors. Fund’s Residence need not be Singaporean-based. Exempted from filing income tax and the need to seek approval from MAS.
• 13R: Similar to S13CA. However, requires the company to be incorporated in Singapore, must be a tax resident, at least S$200,000 business spending in a year, requires approval from MAS, as well as the need to file income tax. 
• 13X: No restriction on the percentage of shares by local or offshore investors, but requires approval from MAS, a minimum of S$50 million Asset under Management, at least S$200,000 local business spending in a year, and income tax filing. 
• Variable Capital Companies (VCC): A new corporate structure for investment funds, complementing existing suite of investment fund structures available in Singapore. To be managed by a Permissible Fund Manager, under the purview of the Monetary Association of Singapore (MAS). Aims to provide flexibility in issuance and redemption of shares, as well as countering against finance terrorism. 
  

ACE, being the heart of Singapore’s startup ecosystem, is well-positioned to drive curated deal-making opportunities between regional risk capital and tech startups!