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Singapore’s COVID-19 resilience is attracting even more venture capitalists
FINANCIAL INSIGHT: VENTURE CAPITAL Singapore’s COVID-19 resilience is attracting even more venture capitalists
There is still plenty of uncertainity lingering around the world economy, but venture capital firms say Singapore offers a resilient new foothold for the sector.
The COVID-19 pandemic continues to wreak havoc across the globe, yet whilst its disruption is still felt today, one could say Singapore is amongst the states that’s faring better during the crisis. And this, coupled with Singapore’s COVID-19 resilience package, has helped to encourage further venture capital (VC) firms to move to the region.
The package, under the 2021 spending plan, covers additional funding support for businesses hardest hit by the pandemic. The Ministry of Trade and Industry has projected the economy will expand by 4%-6% in 2021, signaling that Singapore is well on its way to recover, albeit unevenly across sectors. The economy contracted by 5.4% in 2020, but the Government says this could have doubled to 12.4% had it failed to place enough fiscal and policy measures to mitigate the impact of the crisis.
VCs move to Singapore
Despite hurdles in startup investments in 2020, the VC scene is expected to expand in 2021. The first quarter of the year already saw Hong Kong based travel firm Klook raise US$200m under the Series E round from Aspex Management, Sequoia Capital China, and Softbank Vision Fund 1 amongst other investors.
The Singapore VC scene continues to thrive in 2021, especially benefitting from the stellar reputation in its COVID efforts
“The Singapore VC scene continues to thrive in 2021, especially benefitting from the stellar reputation in its COVID efforts,” KK Fund Co-Founder and General Partner Kuan Hsu told Singapore Business Review.
“I have seen VCs travel to Singapore and base themselves here because they feel it is safer for them compared to staying in their home country,” he added.
KK Fund started in 2021 with a $26.6m (US$20m) deal with Malaysian multibank supply chain finance company CapBay, under its Series A funding round. Capbay, also a peer-to-peer financing platform, is the first and only financial technology (fintech) company to partner with Telekom Malaysia for its vendor financing programme.
Hsu added the 2021 budget, which covers the $11b COVID-19 Resilience Package that will partly extend assistance to businesses, will lead to more successful startups emerging from Singapore. Golden Gate Ventures (GGV) founding partner Vinnie Lauria also projects US-based investors to enter the Southeast Asian market, particularly in countries with resilient economies.
“On a global scale, as an American in the region, I look at Southeast Asia and across the globe and how it compares to the US market,” Lauria said.
Venture capitalists share insights on Singapore’s VC scene this year
SEA to be the global growth drivers in the next decade
“It’s really where the whole COVID situation is much, much better, especially Singapore where the economy has been way more resilient,” he added, noting US investors will likely realise the region will be one of the global growth drivers in the next decade.
Expect “audacity”, and lots of it
The pandemic in 2020 sent countries into lockdowns, businesses to temporary closures and nearly everyone home, and its impact continues in 2021 as hesitance in opening up remains.
Whilst businesses have yet to fully recover, GGV still sees a bullish outlook ahead. After all, 2020 was just a blip.
Golden Gate Ventures, along with AC Ventures, and Quona, invested a total of $26.5m (US$20m) in 2020 in sharia fintech firm Alami Technologies based in Indonesia. The VC firm has also made an investment in bookkeeping app BukuWarung made for Indonesian merchants.
In the same year, Singapore’s Ninja Van raised $370m (US$279m) from France’s GeoPost SA, B Capital Group, Monk’s Hill Ventures and other VC firms, including Golden Gate Ventures.
Lauria expects entrepreneurs, who are rebounding from the impact of the crisis, to be bolder as they strive for a comeback in 2021.
“They’re optimistic about the future and they’re going to be launching something new. So, I think what we’ll see in 2021, is audacity and a lot of it,” he said.
Hive Ventures founder and managing partner Yan Lee said whilst the pandemic has led to disruptions, it also has paved the path for startups in the Southeast Asian region to reimagine ways to deal with pain points. “The pandemic has created many opportunities for startups to develop new and better solutions to global public problems, and this trend will continue,” Lee said.
“Innovative ideas are not restrained by lockdowns or vaccinations and we believe that investments into technology and innovative solutions will continue despite the ongoing pandemic,” Lee added.
The Taiwan-based firm, which is largely focused on deeptech companies and solutions, has made investments in tech and startup school ALPHA Camp in Singapore.
KK Fund, meanwhile, believes the 2020 experience prompts startups to plan with a more realistic perspective as the country awaits the evolving “new normal” to take its final form.
He noted that not even startups engaged in digital health and education can guarantee that they will benefit from the optimism of investors.
He added investments will continue to pick up in 2021, are unlikely to reach their 2019 levels as investors are “cautiously optimistic”.
VCs sustain rebound
Investments were down in the first half of 2020 as venture capitalists and startups alike grappled through the disruption brought by the coronavirus pandemic; but this started to recover in the second half of 2020, driven by the digital economy.
VC firms noted startups in fintech, digital health and education technology, and logistics are among the high-demand sectors this year.
“The digital economy thesis took shape in 2020 and we continue to be validated by its emphasis by both the public and private sectors in economies in Singapore and across Southeast Asia. We believe that 2021 will continue to show an emphasis on the digital economy as it permeates across traditional industries,” Quest Ventures managing partner James Tan said. Quest Ventures led the funding of Popsical, a karaoke system, for $6.9m (US$5.1m) in June 2020. Tan said he considers the deal as notable as it signifies traditional industries giving way to technology.
“Quite reasonably the top home karaoke market in the world at the moment, the designed in Singapore product tapped into the zeitgeist of the moment and the opportunities brought about by the shift in entertainment from on-site to at-home,” he said.
Tan said in Singapore, there will be a sharper and stronger focus in sustainable investments and investments with an environment, social and governance angle—a development he welcomed as it gives a nod to Quest Ventures’ long-time advocacy toward sustainability.
Hive Ventures’ founder Lee sees health technology, e-commerce digitisation and fintech to lead the growth, especially in light of the serious impact to retail and traditional sectors.
“We’ve seen industries expedite their long shelved digital transformation initiatives, posing exciting opportunities for startups in various sectors,” Lee said. “Furthermore, getting around lockdowns and travel bans, startups and investors alike have acclimatised to remote communications and virtual due-diligence meetings. This has helped further extend the reach of startups to investors beyond traditional geographical confines and proves to be a net positive opportunity for both sides of the deal table,” he added.
