Some analysts fear the local economy may be losing its lustre as a hub for VCs as they are drawn northwards to capitalise on China's explosive growth in start-up companies.

In recent years, Singapore has enjoyed considerable success in attracting VCs but China's magnetic attraction has proved overwhelming, say industry insiders.

An Economic Development Board (EDB) fund set up to invest in VCs stopped offering fresh funding to VCs at the end of last month, although existing investments will be maintained.

Launched in 1999, the US$1 billion (S$1.46 billion) Technopreneurship Investment Fund, or TIF, attracted VC firms such as Israel's Giza Venture Capital, Taiwan's Fortune Venture Investment Group and France's Viventures to set up operations in Singapore.

The cessation of new funding from TIF Ventures, a unit of EDB Investment, is a blow to many VCs. Still, EDB Investment general manager Anna Chan said Singapore's VC industry remains healthy.

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'With all the private sector participation, it is no longer necessary for the Government to continue participating in the same manner that the TIF programme has been doing,' she told The Straits Times.

A number of VCs based in Singapore are relocating their headquarters to China. Others are retaining their offices in the Republic but have cut staff levels amid reduced deal flow.

Industry watchers say that as the money travels to China to fund enterprise growth, fewer people will be needed here.

Among the estimated 20 Singapore-focused VC members in the Singapore Venture Capital Association, about 90 per cent have moved to China or have become very active there in the last three years, said the association's chairman, Mr Kelvin Chan.

These include Walden International, Sycamore Ventures and Venture TDF, which was spun off from the National Science and Technology Board decades ago, he said.

This group also includes Fortune Venture Investment Group and Vickers Financial Group - both of which are pulling in a rising proportion of their business from China.

Mr Chan said VCs such as Global Asset Capital and Green Dot Capital have left the scene completely, while global names DFJ ePlanet Ventures and Granite Global Ventures are still in Singapore, but with far fewer staff.

'Most of the deal flow that VCs are seeing is from China. They do look at some of the deal flows in Singapore, but the deals from overseas are usually more attractive.'

The massive China interest comes at a time that VCs with a Singapore focus are struggling to raise funds in the Republic, says Fortune Venture Investment Group president Tay Koon Chuan.

Fortune set up a fund in Singapore in 1999 and seeded local companies such as United Test and Assembly Center and Ntegrator International.

This fund was fully invested by 2005 and Fortune started to divest itself of its holdings then. This meant selling shares and returning cash to shareholders such as TIF Ventures.

'We're debating whether to raise funds next year and it really depends on how the South-east Asia region unfolds,' he said.

A number of industry players would like to see the Government take a continuing role in the VC industry.

'The VC cycle is such that it is harder to make money in this part of the world. In the last five years, the VCs making good money were all in China,' Mr Tay said.

VCs started moving to China about two years ago, drawn by the Chinese pre-initial public offering craze. They travelled to China to scout for companies with good potential and brought them back to Singapore to list on the Singapore Exchange, said Crest Capital Partners managing partner Peter Chan.

As China has more people and a bigger pool of start-ups to choose from, VCs such as Vickers Financial Group moved their headquarters to Shanghai from Singapore early this year.

'There were a lot of success stories coming out of China,' said Vickers Financial Group partner Jeffrey Chi. He and chairman Finian Tan are now based in Shanghai.

According to Asia Private Equity Review's mid-year report, venture capital drew an unprecedented surge of interest from investors, with the amount raised in China 'well ahead of that in other markets'. Australia was in second place, followed by India.

'EDB would say that there are so many VC funds around. There are still names around, but how much exactly are they investing in Singapore?' questioned Mr Chan.

He added that they will continue to ask the Government to allocate more money for Singapore VCs in the Republic.

gabrielc@sph.com.sg