Attracting Angels And Cross-Border Investment Across Asia

The recent Singapore Budget 2010 announcement of a new tax incentive for angel investors is only one of the efforts in Singapore in attracting more angel investment in Singapore. The Business Angel Network of Southeast Asia (BANSEA) recently organised the inaugural Asian Business Angel Forum (ABAF) held last week over 2 days here in Singapore. The primary aim of ABAF was to talk about cross-border angel investment and to help exchange ideas and discuss the possibility of an Asian Business Angel Network (ABAN).

Barriers in Cross-Border Angel Investment

One key subject highlighted at ABAF was the lack of familiarity with foreign markets and a lack of connections there. This is a significant barrier to say an angel investor in Philippines who may want to invest in a Malaysia-based startup. But because (s)he may not know the territory very well, the kind of help and value (s)he might be able to provide is limited.

Also, some angel investors like to get really hands-on with their portfolio companies and have a rule of thumb to not invest in any company more than a 2-hour drive away. Having an investment in a company located in another country that requires a plane flight to get there is also another barrier to cross-border investment.

Facilitating Cross-Border Investments

The best way to be able to help a company grow in a market is to be familiar with the market yourself and hopefully be located within a certain distance of the company office. Another way is to engage other angel investors who are already well established in the respective markets and are based there, so you don’t have to.

Last year, BANSEA and the Angel Association of New Zealand (AANZ) did just that. They inked a new partnership to help Singapore and New Zealand companies enter the other’s domestic market.

This is an example towards facilitating cross-border investment. But the angels here are more ambitious and are looking to establish an Asian-wide network, rather than a few centered around specific countries.

Attracting Angels To Invest In Singapore

On a related note, angel investors probably saw some cheer when the Singapore Budget initiatives were announced. The new tax incentive gives a 50% tax break on investments of upward of 100k in a year, allowing the angel investor to reduce his/her tax liability and thus making it more attractive for angels to pump more money into startups here in Singapore.

This is a good thing for angel investors already investing in Singapore, with this incentive possibly being a catalyst for new investments or as encouragement to invest more so that they are eligible for the tax break.

More details of this new tax incentive will be out in June, so we will find out more about possible limitations and definitions of investments and eligible startups.