Venture Capital

Singapore a focus for global venture capital investors

Nicolas ASFOURI | AFP | Getty Images

A flurry of activity in Singapore's venture capital (VC) market in the past month highlights just how excited global investors are about Southeast Asia's flourishing start-up scene.

Jungle Ventures and Beenext, a fund set up by the founder and former CEO of Japanese e-commerce operator Beenos, are among firms who have raised cash to invest in the region's booming e-commerce sector, where growing wealth and explosive smartphone growth is stoking demand for everything from home furnishers to local versions of Amazon.

Online retail revenues among the six major economies of the Association of Southeast Asian Nations (ASEAN)—Singapore, Malaysia, Indonesia, Thailand, the Philippines and Vietnam—are expected to hit $34.5 billion by 2018, from $7 billion in 2013, according to Frost & Sullivan.

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Teruhide Sato, the man behind Beenext, launched his VC fund in Singapore last month with the aim of targeting mobile and e-commerce businesses encompassing vertical marketplaces not only of products, but services and knowledge. Sato told CNBC he was unable to disclose the fund's exact value but it has been widely reported at $60 million.

"I picked Singapore because of its geographical strength," the 40-year old said. Southeast Asia and India are the strongest in terms of growing middle classes after the United States and China so being close to those regions is essential, he explained.

Meanwhile, Singapore-headquartered VC firm Jungle Ventures (JV) is currently in the process of raising a $100 million second fund. "Right now, 65 percent of the fund is done, we expect the full round to be completed by early next year," JV managing partner David Gowdey, told CNBC this week.

Once scarce, funding is now abundant for entrepreneurs in Singapore, widely touted as Asia's answer to Silicon Valley.

China's market rout isn't deterring this VC firm
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"When I first arrived in 2010, every start-up I met had the same question: How do I raise money? Investing is a very local problem and at the time, most of the VCs in Silicon Valley that didn't have international offices weren't interested in this part of the world," remarked Vinnie Lauria, founding partner at Southeast Asia-focused Golden Gate Ventures (GGV).

But the opening of a Singapore office by Silicon Valley heavyweight Sequoia Capital in 2012 and the rising interest of private equity players like SoftBank and Tiger Global have helped Singapore register strong VC growth in the past five years, Lauria added.

Total VC investments in the country topped $1 billion last year, up from $454 million in 2013, on the back of increased appetite and government incentives, according to the Singapore Venture Capital and Private Equity Association.

Key investors

Singaporean sovereign wealth fund Temasek is a major player in the city's VC industry. Over the past year, it's injected S$190 million into the local VC market, with S$100 million going to its subsidiary Vertex Venture Holdings while S$90 million was allocated to four local VCs: NSI Ventures, Monk's Hill Ventures, JV and GGV.

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"The investments into the VCs will be used to grow their capabilities and business related activity such as hiring, marketing, opening new offices overseas and other activities," a Temasek spokesperson told CNBC.

Indeed, Temasek's support is already bearing fruit. On Thursday, GGV, whose portfolio is expected to generate more than $60 million in revenue this year, announced its single largest investment to date. It's leading a $3.5 million funding round into Singapore-based online home furnishings store HipVan, with participation from East Ventures, LionRock Global and individual investors like Skype co-founder Toivo Annus.


But it's not just Temasek; international players are also getting in on the action.

When GGV raised $35 million for its second fund in July, its investors included Facebook co-founder Eduardo Saverin, Europe-based Monitor Capital Partners and South Korea's Naver.

Beenext is backed by a $5 million investment from Beenos, and Sato describes himself as the fund's largest individual investor, though he was unwilling to disclose his stake. Founders of other start-ups throughout Asia and the U.S, whom Sato calls his 'founder friends,' make up the rest of Beenext's cash.

"International investors are attracted to this part of the world for the same reasons I am. This region has the largest magnitude for change over the next 10-20 years, while the U.S. and China have already grown a lot," Sato noted.

Meanwhile, JV also counts the International Finance Corporation—the World Bank's private sector lending arm—and Silicon Valley entrepreneur Kumar Malavalli as key investors.

Despite rising interest, getting international players to participate in fundraising remains tricky.

"One key issue is there's not a lot of data on the VC market, such as how much companies have raised, who's funding who...Unlike the U.S. and China, the awareness for Singapore's market is not high so there's a lot more education that needs to be done," JV's Gowdey noted.

HipVan CEO Danny Tan echoed those sentiments, warning that Singapore still has a long way to go before it can top Silicon Valley: "Singapore is far off from a VC bubble since we're not seeing the same risk appetite as India or San Francisco."