1 February 2023

A Rising Tiger Economy For Startups And Venture Capital In Asia

Foley & Lardner


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As we project ourselves forward in 2023, amidst the clouds, a bright spot for optimism is burning brightly for early stage, deep tech startup companies and investors.
Singapore Corporate/Commercial Law
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As we project ourselves forward in 2023, amidst the clouds, a bright spot for optimism is burning brightly for early stage, deep tech startup companies and investors. It's no surprise that last year we saw a decrease in venture capital investment on a global scale. But as we saw, early stage, Seed and Series A stage fundraising saw much less of a drop of in investment than later stage deals. And there is deeper liquidity in early stage than we have ever seen before. These factors weigh heavily in favor of Singapore-based companies as we move into 2023.

In a recent interview with CNBC's Squawk Box Asia, Hsien-Hui Tong, executive director of investments at SGInnovate, said the venture capital scene in Singapore has remained "very active," due in large part to the fact that the bulk of companies based in the country are early stage. This is where we are seeing more of the money flow right now.

But the early stage of these companies is not the only reason Singapore is becoming more of a tech hub and drawing the interest of investors. Several years ago, the Singapore government launched SGInnovate, which is focused on the development of the deep technology space. This includes AI, robotics, digital health, smart energy, and transportation and brings together entrepreneurs with private sector partners, educational institutions, and research organizations so they can provide mentorship, assist with business plans, securing funding, and help get products to market.

Because the government is fostering this development in the deep technology space, early-stage companies in Singapore are moving forward in areas where investors have significant interest. These are some of the most significant areas of investment right now and areas where we could see even greater investment this year and beyond. Investors want the next big thing, and this kind of deep technology is drawing their attention and their funding.

Singapore also has a Global Investor Programme (GIP) that "accords Singapore Permanent Resident status (PR) to eligible global investors who intend to drive their businesses and investment growth from Singapore." This program is designed to assist "entrepreneurs and business owners who are interested in relocating to and investing in Singapore." And there seems to be a great interest in relocating to and investing in this country.

There has been an influx of people moving to Singapore from surrounding countries such as China. In fact, there has been a wave of wealthy Chinese citizens moving to the country, and with that also comes an opportunity for a boost in funding opportunities for Singapore-based startups. The Singapore Department of Statistics says, "Singapore's total population stood at 5.64 million as at end-June 2022. The total population grew by 3.4 per cent from the previous year, mainly due to the increase in the non-resident population."

Following successive pandemic induced lockdowns in China, when combined with a government crackdown on #bigtech companies like Ant Financial, Didi and others, have made PRC-native entrepreneurs look outside for new horizons. Meanwhile, in Hong Kong, government crackdowns on free speech and strict COVID quarantines imposed on travelers made it impractical to build tech startups there. The flareup in intra-China straits relations curtailed Taiwan's ambitions to be a startup hub. India's tech ecosystem showed signs of breaking out, but many Indian entrepreneurs continue to prefer to build new companies in Singapore or Silicon Valley. Neighboring Thailand, Malaysia and Indonesia have also suffered from political and social upheavals.

Despite the tropical heat and humidity, Singapore's long history of strong and stable government, merit-based educational system, racially harmonious diversity, international trading and travel hubs, and banking system, have made it the natural default for tech startups and investors in South Asia. Long a base for semiconductor, disk drive and hardware manufacturing, packaging, testing, assembly and logistics, it is fast becoming a hub for software, enterprise and ecommerce business startups, particularly in deep tech.

In 2023, Singapore appears to have many winning attributes for regional startups: government funding, infrastructure support and talent, but now global investors are flocking to Singapore to set up their regional hubs, creating the environment for growth. Major tech companies have regional hubs there, like Google, Facebook, Amazon, Stripe, Salesforce and Grab, to name a few.

This focus on Singapore and its startup scene is gaining steam. Global investors are looking to Singapore as a new tech hub as they continue to focus on developing technologies in these cutting-edge areas.

We are likely to see a growing synergy between Silicon Valley and Singapore as we move forward, with investments flowing cross border and incredible technological advancements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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