The 6 main sources of funding for your startup in Singapore
Lion City continues to roll out various initiatives that help foster a thriving startup landscape in the country.
In this guide, we’ve put together a comprehensive list of 6 funding options for startups looking to raise capital to get their business off the ground and running. Continue reading to find out more!
Self-funding or bootstrapping the startup is the first and most obvious funding option founders have when outlining their business plan in its early stages.
This is particularly helpful for entrepreneurs who are only starting out and finding it difficult to get funding from external sources for their lack of a plan or proof to show a potential success.
Most founders who opt to take this path to fund their startups use their savings or get family and some friends to contribute. Bootstrapping is ideal for many founders as it requires fewer formalities and compliance as well as the minimal costs needed for the process.
Crowdfunding is an innovative system of financing a business venture or a project, which simply requires collecting modest contributions from a large group of people.
In the United States, this fundraising method is a well-known platform where several small business owners contribute and pitch business ideas, plans, strategies online with the intent of inspiring others to help and pledge money in support of the business venture.
Popular crowd-funding platforms in Singapore include Kickstarter, Indiegogo, and Funding Societies, which particularly accommodate small business startups.
The term angel investor is used to refer to private individuals who typically not only invest capital but also contribute their own business skills and expertise in the early phase of startups in exchange for a significant share in the business.
Angel investors are usually successful businessmen or wealthy HNWIs who are on the hunt for startup companies with higher risks but hold a viable promise to yield higher ROIs.
Typically, the way you get to an angel investor is through your existing networks, as individuals use the trusted ‘word of mouth’ as a filter for deals that may be of interest to them.
Singapore has a relatively new and small venture capital industry compared to Europe and the United States. High net worth personalities, large corporations, and government bodies choose to set up venture capital funds due to the appealing tax incentives and other business-friendly policies that the government has outlined for the process.
Venture capitalists are essentially professional investors who specialize in investing in startups with the condition that they are given a more hands-on role in the business whose primary goal is to ensure their own clients’ profitability.
As such, they do not only necessarily offer funding support to the startup but also advice on operational matters and in most cases how to increase your business profitability. This group of investors favors startups that hold high growth potentials such as those involved in intellectual property creation, scientific breakthroughs, and other large-impact businesses in nanotechnology, IT, and biotechnology.
Incubators and Accelerators
While used interchangeably, the terms incubators and accelerators have a few fundamental differences.
While an incubator is a funding system that works with businesses that are already in the initial stage of their developing process and are aimed at getting the business off the ground, an accelerator helps those who are ready to get the business running or take that giant leap such as branching the business out to an overseas location or venturing into a different market or industry.
While you don’t have to follow a set schedule when dealing with incubators, businesses on accelerator funding will have to work closely with the investors, mentors, and other fellow startups for several months before they are able to graduate from the platform.
The Singapore government has put in place a significant number of financing schemes and platforms to facilitate its efforts to encourage entrepreneurial activity in the country. Each of these government funding schemes focuses on different markets or industries and is practicable for the various stages in a business’s growth.