Singapore venture capital surges as start-ups seek room to grow

Gaming and e-commerce firm Sea, formerly Garena, went public in the US last week, raising US$884 million in its initial public offering.
Gaming and e-commerce firm Sea, formerly Garena, went public in the US last week, raising US$884 million in its initial public offering.PHOTO: SEA LTD

SINGAPORE (BLOOMBERG) - Singapore is experiencing a surge in venture capital fundraising, reflecting growing interest in South-east Asia's start-ups.

This month, Vertex Ventures and two other venture-capital firms completed fundraising efforts in the city, each with their largest fund yet. In September, East Ventures, which made early bets on successful start-ups like Tokopedia and Traveloka, raised US$30 million (S$40.87 million) that will go towards seed capital and early-stage financing.

Investors are putting money into the region's venture firms as they seek opportunities beyond the US and China, the primary focus for Asia deals in recent years. The Singapore Government is providing incentives to attract entrepreneurs and venture capitalists - cutting regulatory red tape, protecting intellectual property and allocating public money for early investments.

"In the past decade, Singapore has invested heavily in the start-up ecosystem," said Paul Meyers, head of muru-D Singapore, Telstra Corp's accelerator programme. "As a result, we're seeing more - and higher quality - start-ups appearing and getting funded."

The venture industry continues to be led by the US, which accounted for US$21.5 billion of the US$39 billion total invested in the third quarter, according to KPMG's Venture Pulse Q3 2017 report. Asia is the second-largest region at US$12.3 billion, with China pulling in US$10.2 billion of that total.

Singapore venture investments totaled US$725.3 million in the second quarter of this year, boosted by Sea Ltd's US$550-million funding round, according to KPMG. In the following three months, investments totaled US$140.3 million.

"The fact that significant upticks still occur testify to how the Singaporean start-up scene still produces companies capable of attracting significant capital," the report said.

Sea, a gaming company formerly known as Garena, went public in the US last week, raising US$884 million in its initial public offering. The Singapore-based company increased its share price and the number of shares available, signaling strong demand.

Some Singapore-based VCs are moving beyond seed and early-stage investing as start-ups grow in size. For example, B Capital Group, a VC firm that includes Facebook co-founder Eduardo Saverin, typically targets series B and C financing rounds of tech start-ups in the US, South-east Asia and India. Vickers Venture Partners, which completed its fundraising at US$230 million last week, is "stage agnostic", according to chairman Finian Tan.

VCs in Singapore are luring funds from a wide range of investors including family offices as well as multinationals and conglomerates seeking to diversify their traditional businesses and get access to promising tech start-ups through their corporate VC arms.

Jungle Ventures' SeedPlus, which targets early-stage deals in Asia, closed its first fund at S$25 million in April with backing from the investment arms of Fidelity International and Cisco Systems.

For its third fund for South-east Asian and Indian deals, Vertex Ventures, which raised US$210 million this month, invited outside investors for the first time. Its corporate backers included Thailand's Kasikornbank Pcl and Taiwan's Cathay Life Insurance Co. Vertex has had two funds focused on South-east Asia in the past, fully funded by parent Temasek Holdings, Singapore's state investment firm.

"There is a huge market potential in South-east Asia," said JP Lee, partner and managing director of SoftBank Ventures Korea, which has backed Indonesia's Tokopedia. "There is economic growth, government support and appreciation for talent. We plan to do more work there."