Speech by Mr Lee Yi Shyan Minister of State for Trade and Industry and Minister-in-charge of Entrepreneurship at Singapore Venture Capital and Private Equity Association Annual Gala Dinner on 27 September 2007 at 7.25pm at Singapore Marriott Hotel
Mr Kelvin Chan, Chairman, Singapore Venture Capital and Private Equity Association
Distinguished Guests
Ladies and gentlemen
Opening Remarks
A very good evening to all. I would like to thank you for inviting me here tonight at the Annual Dinner of the Singapore Venture Capital and Private Equity Association, amongst fellow VC and Private Equity investors.
Local and Regional Investment Outlook
Barring the recent fallout from the turbulence in the world’s financial markets, the overall outlook of the Asian economy for the future is upbeat. Private equity deals are getting bigger and becoming more attractive to investors, as global demand continues to grow. In 2006, a total of US$67.4 billion was invested into private equity in Asia, an increase of 122 per cent compared to 2005[1]. On the back of strong and robust economic growth, these investments have attained stellar results in recent years. According to the Asian Private Equity Review, the Asian private equity market continues to show attractive returns with average IRRs of 51 per cent.
Back home, our community is growing. There are today more than 175 VC firms in Singapore, managing over $19 billion worth of funds. As a result, the number of venture-backed firms in Singapore has increased from 894 in 2005 to 943 in 2006. The types of funds being managed in Singapore have grown in diversity and complexity as well.
State of Entrepreneurship
Against this upbeat backdrop of growing community, what is the state of entrepreneurship? Over the last few years, the number of start-ups formed annually has increased from 33,000 in 2001 to 45,600 in 2006. Amongst these start-ups, the number of high-tech start ups increased from 2,900 to 4,300 in the same period. Our SMEs have also been experiencing strong growth. The recent SME Survey by DP Information showed that the proportion of SMEs experiencing accelerating turnover growth of more than 10 per cent increased from 20 per cent in 2006 to 27 per cent in 2007[2]. The generation of a healthy pipeline of start-ups remains critical Singapore’s long run growth.
Therefore, the government is committed to ensuring that the conditions for SME growth remain strong. SPRING, EDB and IES offer a wide range of debt and equity financing schemes to various companies at different stages of growth. As a result of these concerted efforts, the Milken Institute Capital Access Index (CAI) ranks Singapore as the second best country in the area of providing financial infrastructures that support entrepreneurial activity[3].
The government is also committed to removing regulatory and licensing obstacles. Our belief is that the government should play a facilitative role, so as to let SMEs do what they do best — growing their businesses. This year, Singapore was ranked first in World Bank’s ranking of 178 economies for the “ease of doing business”.
Thirdly, we will continue to strengthen the competitiveness of our enterprises so that we can compete in today’s global environment. It is necessary for SMEs to upgrade both their technological as well as their manpower capabilities.
The government will also continue to encourage start-ups and SMEs to adopt technology upgrading as their core developmental strategy. To catalyze the diffusion of technology to SMEs, SPRING launched the $150m Technology Innovation Programme in August 2006. A year later, the programme has funded the development of four industry-specific Centers of Innovation, such as the Marine Centre of Excellence and Precision Engineering Centre of Excellence at Ngee Ann Polytechnic and SIM Tech respectively, and supported two technology innovation projects with another 72 more in the pipeline.
Beside technological capabilities, our SMEs also have to invest in manpower capabilities. SPRING and IE Singapore have various programmes working with Universities to sponsor CEOs of SMEs to do various management programmes.
Mentorship Support for Start-ups
These are broad based programmes. I think that for SMEs to continue to grow, some of them would benefit greatly from customized advice and help from experienced entrepreneurs like yourself. I believe that VCs play a critical role in developing the high-tech innovative SMEs of the future and creating the ecosystem that will support these start-ups. The presence of a strong VC community underpins the entrepreneurial vibrancy of any region. One of the underlying reasons for Silicon Valley’s success is that VCs there perform the role of mentors, and devote a great amount of time and energy to nurture and advise entrepreneurs of new start-ups.
Here in Singapore, VCs have to move beyond the role of simply providing financing to providing the necessary mentorship for young companies to succeed. These start-ups require the business and technological expertise to perform and VCs play an important role in helping them tap on these expertise. This, must of course be a collaborative process with start-ups themselves appreciating the guidance and support offered by VCs instead of just simply seeing them as cash-cows.
I am aware that the pool of mentors is small. However, I believe that mentors can be found amidst experienced VCs, Business Angels, members of business chambers and associations, serial entrepreneurs, and ex-CEOs. If necessary we may even choose to tap on suitable mentors from overseas to supplement this limited pool of qualified mentors.
Distinguished Guests
Ladies and gentlemen
Opening Remarks
A very good evening to all. I would like to thank you for inviting me here tonight at the Annual Dinner of the Singapore Venture Capital and Private Equity Association, amongst fellow VC and Private Equity investors.
Local and Regional Investment Outlook
Barring the recent fallout from the turbulence in the world’s financial markets, the overall outlook of the Asian economy for the future is upbeat. Private equity deals are getting bigger and becoming more attractive to investors, as global demand continues to grow. In 2006, a total of US$67.4 billion was invested into private equity in Asia, an increase of 122 per cent compared to 2005[1]. On the back of strong and robust economic growth, these investments have attained stellar results in recent years. According to the Asian Private Equity Review, the Asian private equity market continues to show attractive returns with average IRRs of 51 per cent.
Back home, our community is growing. There are today more than 175 VC firms in Singapore, managing over $19 billion worth of funds. As a result, the number of venture-backed firms in Singapore has increased from 894 in 2005 to 943 in 2006. The types of funds being managed in Singapore have grown in diversity and complexity as well.
State of Entrepreneurship
Against this upbeat backdrop of growing community, what is the state of entrepreneurship? Over the last few years, the number of start-ups formed annually has increased from 33,000 in 2001 to 45,600 in 2006. Amongst these start-ups, the number of high-tech start ups increased from 2,900 to 4,300 in the same period. Our SMEs have also been experiencing strong growth. The recent SME Survey by DP Information showed that the proportion of SMEs experiencing accelerating turnover growth of more than 10 per cent increased from 20 per cent in 2006 to 27 per cent in 2007[2]. The generation of a healthy pipeline of start-ups remains critical Singapore’s long run growth.
Therefore, the government is committed to ensuring that the conditions for SME growth remain strong. SPRING, EDB and IES offer a wide range of debt and equity financing schemes to various companies at different stages of growth. As a result of these concerted efforts, the Milken Institute Capital Access Index (CAI) ranks Singapore as the second best country in the area of providing financial infrastructures that support entrepreneurial activity[3].
The government is also committed to removing regulatory and licensing obstacles. Our belief is that the government should play a facilitative role, so as to let SMEs do what they do best — growing their businesses. This year, Singapore was ranked first in World Bank’s ranking of 178 economies for the “ease of doing business”.
Thirdly, we will continue to strengthen the competitiveness of our enterprises so that we can compete in today’s global environment. It is necessary for SMEs to upgrade both their technological as well as their manpower capabilities.
The government will also continue to encourage start-ups and SMEs to adopt technology upgrading as their core developmental strategy. To catalyze the diffusion of technology to SMEs, SPRING launched the $150m Technology Innovation Programme in August 2006. A year later, the programme has funded the development of four industry-specific Centers of Innovation, such as the Marine Centre of Excellence and Precision Engineering Centre of Excellence at Ngee Ann Polytechnic and SIM Tech respectively, and supported two technology innovation projects with another 72 more in the pipeline.
Beside technological capabilities, our SMEs also have to invest in manpower capabilities. SPRING and IE Singapore have various programmes working with Universities to sponsor CEOs of SMEs to do various management programmes.
Mentorship Support for Start-ups
These are broad based programmes. I think that for SMEs to continue to grow, some of them would benefit greatly from customized advice and help from experienced entrepreneurs like yourself. I believe that VCs play a critical role in developing the high-tech innovative SMEs of the future and creating the ecosystem that will support these start-ups. The presence of a strong VC community underpins the entrepreneurial vibrancy of any region. One of the underlying reasons for Silicon Valley’s success is that VCs there perform the role of mentors, and devote a great amount of time and energy to nurture and advise entrepreneurs of new start-ups.
Here in Singapore, VCs have to move beyond the role of simply providing financing to providing the necessary mentorship for young companies to succeed. These start-ups require the business and technological expertise to perform and VCs play an important role in helping them tap on these expertise. This, must of course be a collaborative process with start-ups themselves appreciating the guidance and support offered by VCs instead of just simply seeing them as cash-cows.
I am aware that the pool of mentors is small. However, I believe that mentors can be found amidst experienced VCs, Business Angels, members of business chambers and associations, serial entrepreneurs, and ex-CEOs. If necessary we may even choose to tap on suitable mentors from overseas to supplement this limited pool of qualified mentors.
SPRING will be working with the relevant business chambers and associations to identify and select a group of suitable executives as mentors. I also understand that SVCA is in discussion with SMU on setting up a Private Equity Institute, similar to that of the Wealth Management Institute. Such an institute would help to provide education and training for fund managers, General and Limited Partners, and at the same time attract global and regional experts who may have the requisite skills to mentor start-ups. We commend such an initiative from SVCA and wish them the best of luck.
Concluding Remarks
As a parting note, I would once again like to thank SVCA for organizing this event, and for all the contribution in making Singapore a vibrant entrepreneurial place growth and development. Thank you.
[1]Asian Venture Capital Journal 2006
[2]DP Information’s SME Development Survey in 2007
[3]2006