March 27, 2019
Over the next few weeks, MEDICI brings you a series of articles, exploring FinTech in the ASEAN region. The articles, each focused on a different ASEAN country, provide comprehensive insights into the FinTech investment landscape in the region.
ASEAN in figures
ASEAN (the Association of Southeast Asian Nations) is the third-largest Asian region. It is home to more than 630 million people. One-fourth of the population lives in urban areas. ASEAN has an annual growth rate of 4.7% and USD 119.97 billion in FDIs; it is also one of the fastest-growing regions as well as the seventh-largest economy globally.
Its population is young and educated with a literacy rate of over 80%, phone-savvy with more than 0.5 phones per person, and enjoys a low-to-mid unemployment rate of 0.5%–6.9%. ASEAN members also have an average to a high life expectancy of 69–82.7 years, and a gender parity of 49.9% males to 50.1% females.
The previous week, we took a look at Thailand, to understand its FinTech investment landscape. This week, we take a look at a fascinating and dynamic country in terms of FinTech growth: Singapore.
According to SmartKarma’s Co-founder & CEO Raghav Kapoor, There’s no other city in the world where you have such a progressive government when it comes to supporting innovation today – be it grants, to having funding vehicles to operational support.
The 5.7 million inhabitants’ city-state tops the ASEAN region in terms of literacy (96.8%), life expectancy (82.7 years), cell phones per person (1.46), internet connectivity (82.1%), and urban population (100%). Singapore also has one of the lowest unemployment rates (2.8%) and is regarded as one of the easiest countries to do business in (ranked second worldwide), with a 100% foreign ownership regulation. The corporate tax rate is also favorable with a gradual rate of up to SGD 290K of chargeable income and 17% flat above this amount. Besides, the city has a negative inflation rate of 0.6%, and a limited annual growth of 2% compared to its counterparts.
Singapore is the fastest-growing private wealth hub in the world. The industry turmoil in Switzerland has driven investors to shift their wealth to Singapore, and funds from flourishing ASEAN economies have also contributed to the sector’s expansion.
Singapore banks are expanding their wealth management business as foreign players exit. Foreign banks struggling to achieve sufficient scale and profitability have been exiting their private wealth businesses in the country, while local banks have acquired the wealth businesses to build the scale they required to overcome the challenges that their foreign counterparts faced.
Family offices are favoring private-equity over hedge funds and reported that clients’ disappointment with high fees & average returns of hedge funds have prompted them to make greater allocations into private equity. The mounting risks in China’s debt market are also reinforcing this shift.
Regulation and governance requirements continue to put pressure on fund managers. According to a survey released by the Investment Management Associate of Singapore (IMAS), 40 out of 57 fund managers (70.2%) regarded rising costs of governance to be the biggest threat to growth in the next three years. About 64.9% of respondents believed that mounting regulatory obligations could impact their business.
Big data and risk/compliance talents are in short supply. The increasing use of data analytics and compliance demands in the industry are posing a challenge for fund managers as they struggle to find people with the appropriate skills to meet demand.
Hedge funds are facing considerable pressures, with demand declining driven by investors’ aversion to paying high fees. Additionally, stricter regulations have driven up the cost of operations and robo-advisers are threatening business expansion.
Blockchain offers opportunities and disruption. The technology can be leveraged by sell-side businesses to address a multitude of issues including reducing fees for investors, lowering risks & costs for firms, as well as improving transparency. Brokers and custodians are evolving to take into account digital disruptive forces and will streamline their activities in line with blockchain developments.
Regulatory endorsement for leveraged and inverse ETFs represents another opportunity. With the Monetary Authority of Singapore’s (MAS) recent endorsement, providers are planning to launch these products on the Singapore Exchange this year. This will help Singapore grow its share of the ETF market. EY estimates that the global ETF market AUM could double from USD $3.4 trillion in August 2016 to USD $6 trillion by 2020.
Singapore offers Venture Capital (VC) funds easier access through a proposed simplified regulatory regime which will speed up time-to-market and lessen compliance obligations.
Singapore has enacted the Common Reporting Standard (CRS). On December 2, 2016, Singapore enacted the Income Tax (International Tax Compliance Agreements) (Common Reporting Standard) Regulations 2016 (the Rules). The Rules which came into effect on January 1, 2017, will help prevent tax evasion and require financial institutions to collect and report specific information on their clients.
The MAS has also proposed new rules for VC funds to assist funding for startups. The rules will see relaxed requirements for VC managers in relation to the assessment of fitness & propriety, base capital requirements, and business conduct rules. The MAS is also looking to streamline rules for PE managers.
Finally, MAS is piloting a centralized KYC utility to help streamline and automate KYC processes for financial institutions via the MyInfo service.
Startup SG — Singapore’s nurturing hand towards startups and their investors
Startup SG is a government program that has the mission to fulfill the all-important needs of the startups establishing an office locally. It is aimed to provide the best environment possible for the company’s growth, and hence protect any investment in it.
Startups SG provides entrepreneurs with a Launchpad to connect them to the global stage, and a platform to access local support initiatives, and gyrates around six main axes:
Startup SG Founder: A platform matching mentors to startups. Funding $3 to every $1 raised by the entrepreneur for up to $30,000 for first-time entrepreneurs.
Startup SG Tech: Fast-tracks the development of proprietary technology solutions. It catalyzes the growth of startups based on proprietary technology and a scalable business model.
Startup SG Equity: An initiative in which the government co-invests with independent, qualified third-party investors in a startup managed by SPRING SEEDS Capital (SSC), an investment arm of SPRING Singapore.
Startup SG Accelerator: An accelerator which works with incubators and accelerators in strategic growth sectors. It catalyzes the growth of high potential startups with mentorship and networks of selected partners.
Startup SG Talent: Facilitates a conducive environment for global talent to join local startups and set up innovative businesses in Singapore.
Startup SG Loan: Highlights government-backed loans for startups’ working capital, equipment/factory financing, and trade financing needs. It is offered through participating financial institutions.
ESVF – When the government matches 1:1 VC capital for equity stake in startups
The state-run Early Stage Venture Fund (ESVF) aims to help small high-tech companies in Singapore grow through co-investments by the Singapore government and local private-sector players – Jungle Ventures, Tembusu Partners, Monk’s Hill, and Walden International. The fund brings in venture capital firms to help grow the ecosystem by matching VC investments in early-stage tech startups on a 1:1 basis.
The fund had invested a total of S$100 million into Singapore-based startups. Success stories rank from still operating and expanding ventures to others that were acquired with significant premium – HungryGoWhere, Ninja Van, brandtology, and YFind.
FinTech and Innovation Group (FTIG)
The Monetary Authority of Singapore (MAS) has established the FinTech and Innovation group in 2015. It aims to formulate regulatory policies and technologies to better enhance and strengthen competitiveness in the financial sector. FTIG views itself not as an obstacle but as a positive catalyst for challenging established financial industry norms. MAS and FTIG want to help FinTech firms overcome hurdles. The FTIG also gives grants towards FinTech firms in the range of SGD200K to SGD1M for selected innovative ventures.
The MAS is encouraging FinTech experimentation innovations to be tested in real market conditions:
The regulatory sandbox enables FIs as well as FinTech players to experiment with innovative financial products or services in the production environment but within a well-defined space and duration.
The MAS provides the appropriate regulatory support by relaxing specific legal and regulatory requirements which the sandbox entity would be subject to for the duration of the sandbox.
Smart Nation: Smart Financial center
Smart Nation’s purpose:
Vibrant and collaborative FinTech ecosystem
Open banking platform via application programming interfaces (APIs)
Financial Sector Technology & Innovation (FSTI) scheme to support the creation of a vibrant ecosystem for innovation
Strong talent pool of researchers, innovators, and experts
The Smart Nation action:
Strengthening cybersecurity – In March 2016, the Singapore Cyber Security Agency carried out its first multi-sector exercise
Forming of Financial Technology & Innovation Group (FTIG) within MAS
Enabling digital financial advice and insurance
Promoting secure cloud computing
Investor Summit is an example of yearly events MAS organizes for the FinTech industry to continuously promote innovation in the financial sector
Singapore recently went ahead of rival Hong Kong to become Asia’s FinTech hotspot through light-touch regulation and a recent move to allow startups to test financial products in a controlled environment. There are more than 25 innovation labs for FinTech companies in the city-state, and 350 financial technology firms vs. 1200 in the region. In terms of funding, USD $1.4 billion went to startups in 2016.
Both FinTech-focused VC funds and sector-agnostic funds investing in FinTech have invested regionally in ASEAN.
In terms of volumes, 4 FinTechs focused funds are among the top 10 financial services most active investors in the country: Startupbootcamp, GMO Venture, Life.SREDA, and the FinLab, with respectively 10, 8, 5, and 5 investments. Startupbootcamp and GMO Ventures lead ahead of 500 Startups and Wavemaker in the number of FinTech investments. In terms of values, regardless of the fundraising size, FinTech/financial services investors are very present. To illustrate, Alipay and Citi Ventures were part of the M-Daq USD $104 million fundraising, which was the largest FinTech deal in the country; GMO Venture Partners co-invested with financial service firm Credit Saison in MatchMove Wallet’s 30-million-dollar transaction, which was also one of the largest FinTech funding rounds.
In terms of volumes, Singapore Venture Capital funds dominate the market. Cross industries, Wavemaker Partners lead far ahead of 500 Startups with 45 investments. Among the top 6 most active investors 5 out of 6 are local players, covering more than 80% investments volumes. Regarding the FinTech sector, one out of two of the most active investors is local, covering over 50% of investments volumes. In terms of fundraising value, it seems that foreign players are predominant across industries. Despite some exceptions with the involvement of large local players such as Vertex Ventures, GIC or Temasek, foreign investors seem to dominate the market, with the involvement of major global players such as GGV, Didi Chuxing, SoftBank, 500 Startups, Goldman Sachs, and TPG among others. Similarly, the largest FinTech fundraising sees a strong presence of foreign interest such as Ant Financial or Citi Ventures. Meanwhile deals smaller than USD $30 million see a broader presence of local players such as Life.SREDA, Jungle Ventures, Golden Gate Ventures, or Wavemaker, or Expara.
Key Banks & Financial Services Corporate Accelerators
DBS HotSpot Bootcamp: This is a two+four-month program designed to cultivate entrepreneurship in the island, providing exclusive investors pitching opportunities, mentorship, training, co-working space, and meeting facilities. No equity is taken and $25,000 SGD entrepreneur is provided upon the start of the program.
FinLab by UOB: This is a Joint venture between SGInnovate and UOB, which provides FinTech startups with unparalleled access to a global network and mentoring. To be eligible, FinTechs need to be less than three years old, have a strong team, have existing clients & revenues, as well as a minimum viable product.
The Open Vault by OCBC: This is a mentor-driven program designed to help entrepreneurs build the financial technology companies of the future, faster and more efficiently. The accelerator is powered by NEST. It combines OCBC mentors’ guidance, NEST expertise, and insights validation through the OCBC data sandbox. It is a full-time 12-week program, established for 8 companies per batch.
Citi Venture Accelerate: It is a four-month program. Launched in 2013, Citi is one of the first banks to have set up a FinTech accelerator. The program is offered in the US, Ireland, and Israel. It particularly gyrates around the most disruptive business models and emerging technologies such as blockchain technology, cryptocurrencies, wearables, the Internet of Things, next-generation commerce, and authentication.
Wells Fargo Startups: This is a hands-on program designed to advance startups that create solutions for enterprise customers – inside and outside the financial industry. It is a six-month program. The accelerator invests up to USD $500,000 against a minority equity stake and provides its participants with Wells Fargo network, business mentors, VCs, and enterprise executives.
Innotribe by SWIFT: Launched in 2011, Innotribe Startup Challenge’s mission was to bring visibility to activities at the edges of its ecosystem, highlighting the importance of these new emerging companies called startups and their revolutionary way to think and work. Over the years, the Startup Challenge has become one of the leading global startup competitions, connecting the financial services industry with more than 650 FinTech startups around the world and reaching over 4,000 audience members through global showcases and networking events.
PayPal Incubator: PayPal provides a nine-month program with a co-working space at PayPal’s Singapore Technology Center in Suntec City; learning, coaching & mentorship by PayPal executives and external business/technical subject matter experts; access to PayPal talent from within and outside the firm; funding access through PayPal network; VCs connections; and a favorable environment to work in.
Mastercard Start Path: Mastercard Start Path is designed to meet businesses’ needs with a dedicated team that moves fast. The program enables companies to gain access to Mastercard’s global ecosystem and to break new markets through relationships with Mastercard and its customers.
Bank innovation INV: This is a FinTech accelerator that targets any facet of the FinTech ecosystem. It works with partners and members to create the best startups, technologies, and financial services products.
Key Fund Accelerators
InspirAsia by Life.SREDA: Run by Life.SREDA, this is a one-to-six-month program that targets FinTechs. InspirAsia takes a 5 to 15% equity stake for USD $50,000 to $500,000.
East Ventures Alpha by East Ventures: It is a 100-day startup accelerator program that will push the founders to demo and launch their products at the end of the program.
Wavemaker Labs: Wavemaker Labs is an approved technology incubator under the Singaporean government’s National Research Foundation (NRF). Under the Technology Incubation Scheme (TIS), Wavemaker enjoys a 5.6x leverage on its investment capital with the NRF providing up to S$500,000 per startup on top of the S$89,000 that WaveMaker invests per company.
Other Key Accelerators
TNF Ventures: Approved under the TIS Scheme, the incubator was founded by key shareholders comprising of entrepreneurs, senior corporate executives, venture capitalists, and ITs. TNV wants to contribute to Singapore by nurturing the next generation of entrepreneurs.
JFDI: It is one of the first accelerators, as well as the largest, with a high success rate where >50% of the alumni raised over $500,000. It is prestigious and internationally known. The program lasts 100 days and takes 8.88% of equity for SGD $50,000.
Startupbootcamp: This is a FinTech-focused accelerator which provides financial innovation, funding, mentoring, workspace, and a global network of investors. They target up to 10 startups per year. It is a three-month program collaborating with more than 200 mentors, partners, and investors. Perks for a 13-week program – 8% equity up to SGD $25,000 and up to 450,000 euros in exclusive partners deals from firms such as Google, and continued post-program support.
Impact HUB Singapore: Impact HUB is among the pioneers in developing and growing the startup ecosystem in Singapore. They have a strong network of startups, investors, and universities to leverage.
Red Dot Ventures: Initially selected as an official startup incubator under the TIS, the company has been positioned as a key pillar in the creation of an entrepreneurial environment
SPH Plug and Play: This is a media and technology-themed accelerator program which brings SPH’s vast media expertise and resources; IIPL’s network of industry stakeholders including government-linked agencies and research institutes, and Plug and Play’s experience in running multiple themed-accelerators globally.
muru-D: It is a leading international corporate-backed accelerator. Its unique offerings are:
6-month program that provides enough runway and continuity to significantly grow business.
Access to world-class advisors and supporting businesses from its global network.
The full-time leadership team at muru-D Singapore has startup experience as well as strong C-Suite networks within the MNC community.
It has a network of partnerships with other accelerators around the world and its graduating teams pre-qualify for other programs like 500 startups.\ \ Muru targets: web and mobile, smart energy, and digital health. The accelerator is backed by Australia’s largest telco Telstraa.
Rockstart: The largest accelerator in the Netherlands, Rockstart is a 150-day accelerator program, which is focused on web & mobile, smart energy, and digital health. Many alumni of the program are funded by prominent VCs.
NRF Technology Incubation Scheme (TIS): Established in March 2008, TIS is an initiative under the National Framework for Innovation and Enterprise (NFIE) program. Under the TIS scheme, the National Research Foundation (NRF) Singapore can co-invest up to 85% of investment (up to S$500,000 per company) into a Singapore-based startup on the recommendation of the Technology Incubator.
The Singapore FinTech Consortium: This is a cross-industries initiative designed to facilitate collaboration between all stakeholders in the FinTech ecosystem.
SPRING Singapore: The Incubator Development Program (IDP) provides up to 70% grant support to incubators and venture accelerators to enhance their capabilities and programs to better assist innovative startups.
SiTF: SiTF advocates for the ICM (Information, Communications, and Media) industry, helps to accelerate the adoption of ICM technology, and promotes innovation. SiTF works closely with various stakeholders to promote emerging technologies in areas such as digital media, cloud computing, wireless, security, and governance.
Others: NTU Ventures, NUS ventures, Angel Gate Advisory, IncuVest, Clearbridge Accelerator, Fatfish, FocusTech Ventures, TechCube8, 3D FinTech Challenge, AIRmaker, Chinaccelerator, and Mercatus Capital.
Singapore Angel Network
AngelList’s Most Active Investors
L. Aderdor (Amundi)
D. Shahdadpuri (DSG Consumer Partners)
A. Warner (Google)
J. Parekh (Jungle Ventures)
S. Munich(Angel Investor)
J. Yap (Angel Investor)
J. Tan (8Capita)
W. Bao Bean (SOSV)
N. Jacobsson (SparkLabs)
A. Vranjes (Amazon)
S. Duan (BNP Paribas)
T. Annus (Angel Investor)
M. Pui (PwC)
F. Meehan (SmartUp)
Eduardo Saverin (B Capital)
Startupbootcamp: This is a UK-based accelerator and venture capital firm which specializes in the financial services technology sector. It is particularly interested in blockchain (specifically stored value accounts, compliance/KYC, financial supply chain, management, XB payments, smart contracting, and accounting); payment solutions (specifically wallets, mobile payments, P2P and remittances, financial inclusion, and data enrichment); capital markets & asset management (specifically investment tech, securities, and bonds, FX and liquidity management, real estate finance, insurance & risk, and management); alternative finance (specifically P2P lending, advanced credit scoring, and augmented reality). The firm also invests in digital health and food technology. Startupbootcamp usually takes 8% equity, provides startups with a free co-working space, and up to half a million US dollars. Out of the 12 investments made in Singapore, Startupbootcamp has invested in 10 FinTechs, among which are Toastme and Kashmi. These 10 companies raised over USD $3 million from the different investors involved in the fundraising.
GMO Venture partners: It is an early/growth-stage-FinTech-focused investment subsidiary of GMO Internet Group, one of the most comprehensive providers of industry-leading Internet services in Japan. GMO has raised over USD $100 million from its limited partners. The firm has a strong experience in EC, payment, AdTech, and enterprise SaaS. The fund seeks to invest between USD $0.5 and $1 million dollars. GMO Venture Partners Inc. has invested in over 50 startups, and close to 10 companies went public. GMO has eight FinTechs in its Singapore portfolio, which have raised over USD $100 million from different investors. The fund has co-invested with Credit Saison in MatchMove in a USD $30-million transaction, making it one of the largest FinTech funding rounds in the country’s history.
500 Startups: It is a Silicon Valley incubator, venture capital firm, and accelerator that specializes in seed investments in small-and-medium-sized startups, early stage, post-seed, pre-Series A, and late-stage FinTechs. It prefers to invest between $0.05 million and $1 million for a 5 to 10% equity stake. 500 Startups raised more than half a billion USD from its limited partners (LPs). The firm has invested in six FinTechs in Singapore, which have raised over USD $64 million from different investors. With 6 FinTech investments out of 31 investments in total in Singapore, 500 Startups has allocated 20% of its Singaporean portfolio to the financial technology industry. The firm is also the second most active investor in the country. Outside of the financial services industry, 500 has been part of the largest fundraising deal in Singapore: Grab’s multi-investor deal that raised over USD $1.4 billion.
Wavemaker Partners: A Singapore and Silicon Valley-based venture capital firm, Wavemaker specializes in seed, startup, early-stage, bridge, and growth transactions. The firm has a fund’ size of USD 180 million and invests up to USD $5 million per company with the initial investment ranging between USD $0.1–$0.75 million, which can be followed up with USD $1–$1.25 million. It has participated in six FinTech funding rounds in Singapore, which raised over USD $14 million from investors. With 6 FinTech investments out of 45 investments in total in Singapore, the investor has allocated 20% of its Singaporean portfolio to the financial technology industry. Wavemaker is also the most active venture capital investor in the city-state. Some of its notable investments are SmartKarma (USD $7.5 million) in the FinTech sector and Zilingo in the non-FinTech industry (USD $27.88 million).
Golden Gate Ventures: This is a Singapore-headquartered incubator, accelerator, and venture capital firm which invests between USD $0.25–$5 million dollars, and with a fund size of USD $70 million. The firm has participated in five FinTechs’ fundraising in Singapore and has invested in more than 30 companies across Asia since 2011. The FinTechs in which Golden Gate invested received over USD $37 million from their investors. With 5 FinTech investments out of 16 investments in total in Singapore, the financial services technology investments account for a third of the company portfolio allocation in the country. The fund’s notable investments have primarily been done in the financial technology sectors and are as follows: Lenddo, MoneySmart, CodaPay, and Xfers.
Quest Ventures: This is a Singapore-based early-stage investor established in 2011. In the financial sector, Quest Ventures is particularly interested in robo-advisory, personal financial management; trading, fund management; cryptocurrency; loan application/financing; InsurTech (UBI, telematics); RegTech, robotics (EKYC, AML, Digital ID); data analytics; cloud, open API; accounting; payment solutions; blockchain/DLT; money transfers/remittances; and crowdfunding. The fund has participated in five FinTech funding rounds in Singapore, which have together raised over USD $4 million from investors. Quest Ventures has invested in Xfers in the financial sector and also participated in the Carousell (USD $41.8 million) and Carro (USD $18 million) fundraisings in core industries. Close to one-fourth of Quest Ventures’ investments are made in the FinTech industry in Singapore.
Life.SREDA: This is a FinTech-focused fund which was set up in Singapore in 2012. The fund has raised over USD $100 million from its LPs and participated in five FinTech fundraisings in the city-state. These five companies raised over $38 million USD from their investors. The firm usually invests between USD $1 million and $5 million dollars. Life.SREDA has co-invested in fastacash with multiple investors in a USD $23 million deal, which is the fifth-largest FinTech fundraise in Singapore.
Expara: This is Singapore’s pioneer and leader in incubation and early-stage venture capital, founded in 2004. Expara seeks to invest between USD $0.08 and $2.2 million. The firm has a fund’s size of USD $24 million. It has participated in four FinTech funding rounds in the country, which have together raised over USD $18 million from investors. More than 20% of Expara Singapore’s investments are made in the FinTech industry. Some of its notable investments are 2C2P in the financial services sector (USD $17 million), and ActSocial (USD $3 million) & Wootag (USD $2.7million) outside of the financial sector.
Note: The views reflected in this article are the views of the author and do not necessarily reflect the views of his employer or any other professional affiliations.