Singapore govt pushes venture debt financing for startups, M&As, skills education

Singapore has announced new measures to invest in innovation and modernize its economy. Finance minister Tharman Shanmugaratnam mentioned in his Budget speech on February 23 that the government has added “advanced robotics” and “additive manufacturing” – 3D printing in other words – to a list of areas Singapore should be a leader in.

To support its ambition, it is starting a SkillsFuture program that will finance every Singaporean’s pursuit of new skills. As a start, citizens who are 25 years and older will get S$500 (US$367) in credit to pay for courses relevant to their careers, which can include software development, satellite engineering, or other forms of craftsmanship. Top-ups will be given over the years. They’ll be able to access a website to plan their skills education.

In addition, selected individuals will get SkillsFuture study awards and fellowships to pursue areas they’re interested in – think of it as a scholarship program for skills as opposed to academic studies, which the country is famous for. The government is expected to spend about S$1 billion (US$734 million) annually from now to 2020 on what it calls “lifelong learning.”

Singapore will also put more money into supporting startup R&D as well as their financing efforts, working mainly through government agency SPRING. It is increasing the cap for its co-investment scheme SPRING SEEDS, which now stands at S$1 million per investment. The government will also partner with more angel investors through SPRING’s Business Angel Scheme (BAS). Startups supported by a BAS investor are eligible for a SEEDS grant.

Next, SPRING will pilot a venture debt financing initiative in which it will share 50 percent of the risk with partner banks to provide loans to startups. Unlike traditional loans, venture debt works with minimal collateral and takes equity in the company instead of charging interest. This eases a startup’s access to capital.

DBS Bank earlier announced a venture debt program with partner venture capital firms, although these are mainly for startups that are operating for a year, raised at least US$1 million in series A funding, and showed that their business is financially sustainable.

The government also wants to make mergers and acquisitions easier in Singapore. It’s increasing its tax allowance for the acquiring firm from 5 percent to 25 percent of the acquisition value. The benefits can be claimed with a 20 percent ownership in the target company, down from 50 percent in the previous version of the scheme.

Finally, SPRING will be making it easier for startups to apply for the Capability Development Grant, which supports initiatives to improve productivity. It is introducing a simpler process for projects below S$30,000 (US$22,000). Software-as-a-service startups could benefit here, since companies can use the grant to pay for subscriptions.

See more: The A-Z of Singapore startup grants and schemes