The following are sources of funding options for start-ups in Singapore:
1. Equity fundraising
If you decide to finance your business by selling equity in your start-up company, you sell part of your ownership of your company, in form of shares, for a cash investment. Equity financing means that you pay your investors in the form of dividends on shares and this is lower as compared to interest rates that you would pay for debt financing. Private equity funding is an advisable source of start-up funding especially for companies that lack the collateral for accessing loans.
2. Angel investors
These are private investors who not only invest capital but also contribute their business skills in the early stages of a business in exchange for a significant share in the company. They can be individuals or part of an angel network that deal in investing in businesses with high growth potential and in the industries that they are familiar with. There are some business angels that play active roles in the business while others act as sleeping partners. In Singapore, business angels tend to invest in business services, retail and hospitality sectors. The networks that you can refer to when seeking a business angel investor are such as Business Angel Network Southeast Asia (BANSEA). BANSEA matches start-ups in the seed stage of enterprise formation with business angels.
3. Private funds
Such funding is not so much involved in an active role in the management of your business. Their main purpose is to receive an attractive return on their investment. Therefore, businesses that are already established, have a good credit record and generating high revenue amounts can benefit from such funding.
4. Venture capitalism
Venture capitalists are professional investors who have a more hands-on-role in your business if they were to invest in your company. Furthermore, they do so with vested interests of their own client’s profitability. Far from offering funding, they also give advice on how you can increase the profitability of your business. However, you need to know that venture capitalists are involved in their investments for between 2-5 years and seek a higher rate of return from the companies they invest in. the venture capital industry in Singapore is new and small as compared to the USA and Europe but there are actually more than 100 venture capital firms in Singapore, ranging from independent limited partnership venture capital firms to corporate-backed venture capital firms.