Singapore FinTech Festival (SFF) hosted a webinar event Thursday evening (Mar 24), as part of their Green Shoots Series to nurture and grow new ideas in the business community. Experts in the startup ecosystem in Singapore were invited to speak on exit strategies for startups and current trends.
The experts include Pauline Wray, Head of Asia at Expand Research, a business management consultancy company, as well as Chris Sirise and Neil Parekh, seasoned investors and portfolio managers at Saison Capital and Tikehau Capital respectively. Founder and Chief Executive Officer of Triple A, Eric Barbier, also participated.
So what did the experts have to say about the startup scene in Singapore?
FinTech funding is growing, and this is a good sign
According to Pauline, fintech companies worldwide raised US$131 billion in 2021, which was a 167 per cent growth from 2020.
In Asia, investment from the public sector declined in proportion to private investment, and funding for these startups came mostly from mega rounds. These investments were mainly directed at payments and lending.
In Singapore, the fintech industry saw a 184 per cent growth in terms of investment, thanks to the increased investment in fintech as an industry.
This is a sign of a growing and maturing startup economy, says Chris. He attributes the rise in funding to the presence of more venture capital (VC) firms and angel investors, and notes that investors are now doing much more to support startups.
“Now, most VCs working with early stage companies are also a lot more knowledgeable about preparing their founders for fundraising in the future. So I do think the circumstances are quite different (from the past).”
Funding is important, but it isn’t everything
Capital is an important element for startups – without capital, no business can run properly. But, as Chris reveals, the priority should not be for startups to get funding at all costs.
“It’s important to first recognise that not every good business is a venture backable business, because of how venture funds are structured,” Chris says.
Rather, the priority for founders seeking funding should be to find investors that align with their values and believe in their company. Triple A’s CEO Eric agrees, saying that “raising money is not a metric of success.”
“Sometimes, for the younger founder, they have to realise that the interest of the founder and the interest of the VCs are not fully aligned,” Eric adds.
Additionally, it would be helpful to seek funding from a variety of sources, Chris says. Local investors are important as they are able to provide networking opportunities for founders, while larger investors can draw on their experiences investing in other countries to properly judge a startup’s business model and future profitability.
And startups in Singapore can afford the luxury to be choosers because the startup ecosystem is maturing.
As Varun Mittal, Chief Growth Officer at Singlife with Aviva notes, a few years ago the ecosystem was an accelerator-driven economy. But now, with an excess of capital and a democratisation of access to funding, startups are no longer price takers, and VC firms risk less when investing early on.
Begin with the end in mind
In order to ensure that the right VC invests, founders must first determine what they want for the company in the future. In a separate discussion at the SFF event, Jeeta Bandopadhyay, Co-founder and Chief Operations Officer at Tookitaki says “exit is not a runaway option”. Instead, it’s something to be given due consideration from the start- and the options are not easy.
With that in mind, Jeeta has several recommendations, depending on the founder’s personal choice.
The first option is for the company to be acquired. This option is for founders who have built a product, but do not want the pain of scaling up and growing big.
The second option is for the company to merge or acquire other companies, to get an advantage over other companies.
The third option is to run a lifestyle business, with profits going to sustaining the founders and scaling as necessary.
The final option is to bring the company to initial public offering (IPO) stage, which is the most unlikely for most startups as only six in every one million companies actually make it to IPO. While to bring a company to IPO as Grab has done might be considered a laudable end goal, founders should remember that the business itself must have a strong equity structure to create gains for the team and the investors. As Varun jokes “you are sexy until you go public”.
So there remains much for startup founders to ponder over. But the business outlook in Singapore appears to be favourable for startups – especially fintech startups. Investors are interested in funding startups in the fintech space, and founders have the option to pick who they want for their investors.
But founders have their due diligence too. They have commitments to their team, and to their dreams. And it always helps to begin with the end in mind.
Featured Image Credit: Singapore FinTech Festival, screengrab by Vulcan Post