Anticipation and then, disspointment

Last week, I was a bit on edge. I read how the RIEC was meeting again, and I knew that the outcome would partially address the issue of early stage VC in Singapore, and hopefully would answer some of the issues being highlighted by entrepreneurs here in Singapore.

On Friday night, I saw the running banner (at the bottom of the screen) at Channel News Asia, and boy, was I excited. Had these issues been resolved, what IS the announcement?

Unfortunately had to be called away during the regular news update, so the earliest I could catch the new was 10 pm Singapore update. Zip, nothing more than generalities. Disappointed.

On Sat, I eagerly opened up the Straits Times, to read more, and again I found the piece on VC funding lacking. Disappointed again.

So I went into the NRF website to see if they had done a press-release. The Cheng hu types usually have quite a comprehensive press release.

THis is what I got, and I only copy and paste the bit on VC funding.

"To spur the formation of start-up companies, funding will be provided for various enterprise support structures, such as proof-of-concept studies and technology incubator programmes, which will bridge the gap between university research and market needs. In addition, several early stage venture capital (VC) funds, managed by professional VCs, would be set up with matching investments from the government. These funds would invest in technology-based start-up companies in Singapore, particularly those linked to the IHLs."

Under the Annex A, there was more infomation:
1) We know the amount to be committed is 350 MM from 2008 - 2012, translating to 70 MM per year.
2) However, this is to be split between the Academic Entrepreneurship portion (50 MM), Creating Enterprise Support Structures (160 MM)  and Tech Transfer (125 MM)
3) Therefore, for the VC portion, the amount allocated is out of 160 MM over 5 years, translating to 32 MM per year.
4) Under this funding, it would include
- POC grants
- Incubators
- Early stage VC funding
- Disruptive Innovation Incubator.
5) Of interest would be the early stage VC, which would have a 1:1 co-funding for funds raised by VCs in Singapore companies.

This is a good start, but it is definitely short of details. I have many questions,
- As I read it, it would seem that NRF would be funding the VCs, or is it matching the investment made by the VC into the company (ala SEEDs)
- What is the basis of selection for the VC?
- Who manages the VCs?
- What are the terms of exit, IRR or is NRF jumping into this knowing full well that it may score a GOOGLE exit, or worst case scenario, loose it all?

Good first step, now to see it in action.

To read the entire press release, go here.

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XiD on ST: Bright ideas aplenty, but where's the money?

I read this with interest as I have interacted with Dr Roberto Mariani in my previous job. He is a good chap, and an entrepreneur through and through.

From ST, Joanne Lee wrote:

IF ROBERTO Mariani gets the latest application of his patented face-recognition technology off the ground, Singapore might well be the birthplace of a new Internet phenomenon.

With just a two-dimensional photograph, FaceTheater will allow web surfers to render their very own avatar into 3D, dress up their character and interact with others in various online communities.

It has potential for use on social networking websites and computer games popular with Netizens everywhere.

But all this is moot unless the 40-year-old French scientist is able to raise venture capital for his Singapore-based company XID Technologies.

Venture capital is essential for technopreneurs like him. The seed money helps them survive the lean years as they develop their technology.

Often, they need a further injection of capital before they can deliver the final product to the mass market.

In return, venture capitalists (VCs) or angel investors get a stake in the start-up - a gamble that could produce a handsome payout or end up a complete write-off.

In recent years, Singapore has seen an influx of VCs setting up their Asian offices here.

After the dot.com bubble burst in 2000, American start-up financiers like Walden International Investment Partners and Draper Fischer Jurvetson hailed Asia as the next frontier in early-stage technology investments.

Walden struck gold with Singapore's Creative Technologies when it listed here in 1994.

But Creative remains one of the rare home-grown technology companies that VCs call a 'double-digit-bagger' - an investment that returns more than 10 times the initial investment.

The problem is that until there are more Sim Wong Hoos soundblasting their way to the big time, there seem to be few angels willing to bridge the financing gap.

This funding purgatory is precisely where Dr Mariani is trapped right now.

In 1997, the physics and computer science PhD-holder from France's National Geographical Institute moved to Singapore to work on a mobile robot project between A*Star and the Japanese government.

He quit his job in 2003 when he raised US$1 million (S$1.4 million) from angel investors here and founded XID. Since then, he has registered three patents and expanded his team to 17 staff members.

He is now looking for US$12 million to expand and break into the international security and mobile consumer markets.

His hook to reel in the VCs is the possibility of an initial public offering in 2011.

Exits, he knows, are all-important to VCs. The shorter the runway before the company's profits take off, the higher the returns on investment. The longer this period, the less willing the VCs to stomach the risk.

Over the past five years, he has dealt with at least 15 VCs, almost all of whom told him to come back when he had secured a million users for his product.

His retort: 'If I have a million users, I won't need to come back!'

Lamenting the lack of risk-taking VCs here, he said: 'We have a solid story, proven revenue streams and clear growth. If we had started up in Silicon Valley, we'd probably be overfunded by now.'

What keeps entrepreneurs like him based here are the considerably lower business costs and taxation.

But of course, they need revenue before tax even becomes an issue. It is a chicken-and-egg problem that has plagued entrepreneurship here for a long time.

Of the estimated US$20 billion of assets under management here, Singapore Venture Capital Association chairman Kelvin Chan estimates less than US$100 million is invested in local companies.

He says: 'The focus here remains on later-stage pre-IPO investments. They mature quicker and offer better returns.'

There appears to be a lack of entrepreneurship among the VCs themselves.

Mr Carmelo Pistorio, founder and managing partner of Upstream Ventures, who invested in XID Technologies in the first round of funding, explains: 'The larger VCs here are just not comfortable with the smaller deals. Their minimum bitesize before they invest is usually US$5 million when the company is already preparing to IPO.'

Aside from common complaints about the lack of talented entrepreneurs and internationally-scaleable ideas here, early-stage investors say local start-ups are averse to relinquishing meaningful ownership stakes.

They want the funds, but are not willing to part with their shares or sell stakes to perceived competitors who might add value to the business.

Mr Mark Thornton, who co-heads British investment house 3i's Asian business in Singapore, says: 'It seems to be the culture here for entrepreneurs to hang on to as much ownership as possible until they list on the stock market - even if they get a good offer from other players who might be in a better position to develop the business.'

Professor Wong Poh Kam, chairman of a group of early-stage investors called Business Angel Network South-east Asia, explains that Singapore is new to the ways of knowledge-based businesses.

He notes: 'Even Silicon Valley took a while to build its venture-capital support. Until Singapore has more successful entrepreneurs who understand the start-up model and are willing to take risks, angel funding and VC will continue to be lacking here.'

Prof Wong notes that like the VCs, angel investors here still tend to stick to old-economy industries which they made their fortunes in.

However, as an entrepreneur-turned-angel who is currently invested in two IT companies, he is confident that this will change.

'We just have to give the industry more time to produce entrepreneurial venture capitalists.'

--

So let's analyze this:
- we have an entrepreneur, with a potential technology that is very Web2.0 (if you don't know that, stop dunking your head in the sand"
- While we wait, the government RIEC (Research, Innovation and Entreprise Council) meets in the next couple of days, and I suspect based on the noise being made by the NRF since Dr Tony Tan's visit to Israel, would now include a VC component
- The question is: will they have a TIF Ventures Redux, or will they look and adopt a model that is more local enterprise and VC friendly. Case in point is all the VC's mentioned in Joanne's article above with the exception of Walden is no longer around.

I think this article is timely because 2 days in a row,we have see what our own local technopreneurs can do with how little resources that they have available to them in Singapore. So I think it's about time the scholars and policy makers at MTI and MOF and PMO start looking at how to deploy Singapore surplus locally to generate local content and companies instead of bailing out foreign one, even though it should be done as they will return a profit. But bottom line is now is the time to take a risk, a risk for both the investor and the entrepreneur.

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Veredus Labs

For the very few times I watched the telly at night, I managed to catch a short snippet of the new flu test kit that was the culmination of effort between Veredus Labs and ST Microelectronics.

In short, what they have done is to put together their expertise in developing diagnostic kits using known genetic markers, and coupled with the use of bioelectronics from STM, and VIOLA!!! lab tests with a 2 week turnaround time (and what more how many other people infected while waiting for the test results) can now be done within 2 hours.

While not in the biomedical sector, I have had the opportunity to meet up with the tenacious lady who is the CEO of the company, and I must say that she is one of those entrepreneurs who will bet the house to make sure her company succeeds.

In fact, anecdotally, I was told that she traveled for business meetings within like 2 weeks of giving birth to her child. WOW! That to me is an indication on how tenacious she is. One could see it as good (committed CEO) or bad (founder unable to let go), but at this stage, her attitude is definitely a big plus for the company.

My congratulations to her, and I certainly hope that it will be a successful product as I definitely believe we will come to use it at one stage, especially with the recent flu scare in Hong Kong and the potential of H5N1 mutating to cross human to human.

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Nasi Kandar Boycott - WTF???

Lately it has been said in the news that there is an SMS circulating in the state of Penang for non-Malays to boycott nasi kandar sellers.

WTF??

Why must boycott?? Evidently, this came about when some indian muslim demonstrated in Komtar after the new CM was misqouted by Bernama.

But according to my in-laws in Penang, business really has been hit.

Why penalize some poor sop who has been dishing out nasi kandar all this years, without fear or favor of the NEP? He most probably did not know enough big wig in UMNO to qualify as an UMNOputra to enjoy the fruits of the NEP.

I call to all the state EXCO in Penang to show solidarity with the Nasi Kandar sellers and to dispel the ugly SMS and put this to bed sooner than later. Quite simply, just have lunch at a Nasi Kandar shop to proove that that SMS is from a stoopid person, most probably an UMNO-crat looking to ferment and spread ill will amongst the food-loving people of Penang.
      

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Squash

Been playing squash since beginning of the year with a couple of my kids' classmates dads.. phew!

Anyways, I must say I am quite happy with the progress since we've only played like 3 games since Jan.

Let me recount what the heck happened.
Jan game - twisted my knee.. so out for the whole month.
Feb - CNY
Mar - well this is our 2nd game for the month of March,

And surprisingly I could still manage to hit the gym this morning for a light workout.

I think I will enjoy playing more once I get my stamina back to ... hmmm .. I guess better than it is now.

At least I no longer walk like something strange happened to my A**E the day after my game!

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Malaysian New Cabinet

I've actually quite neutral on this, but again a bit disappointed at the inclusion of one ex-Selangor MB who was caught with a bag full of cold hard cash in Australia years back.

Hasn't Pak Lah learnt anything from that episode?? The guy is tainted, worst still the only stupid reason he could come up with was that he couldn't understand the English used in the declaration form.

If someone that stupid can go on to become a Minister... oh well, we might as well have a cow being the PM since the IQ is not much better than that Minister.

Instead, I believe what the Opposition should do is to set up a shadow government, much like the UK and Australia. I believe this should keep the BN government on their toes. The same goes for those states where the Opposition is the state government and BN being the Opposition.

But the whole shadow government thing should be viewed through the lens of objectivity, and not just criticizing for the sake of criticizing. Good policies and execution should be lauded, and bad ones objected to.

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Malaysia: The Next Generation???

As a dislocated Malaysian, I view politics there with a certain detachment. My kids are more Singaporean than Malaysian. They know Majulah Singapura, but not Negaraku - heck, even I don't know which revision of Negaraku it currently is and to what tune. THey speak English and a smattering of Mandarin, but not much Malay. During the SEA games, they cheered for Singapore, whereas I am thoroughly confused on who to cheer for (I ended up cheering for both)

But the latest GE has been an eye-opener. There is still some hope that Malaysia will pull itself out of the funk that the BN government has instilled over the past 50+ years.

Then reality set in.

Penang looks like their trying to annex itself off from Malaysia.

Perak.. well history repeats itself. Remember how the Brits got Perak, because the royalty couldn't get along and started playing politics and then one of the ang mohs got assasinated? While the royalty now takes no sides, politics; and more dangerously, race and religious politics are being played to the detriment of the new hope in Malaysia.

Selangor, hopefully nothing untoward is happening, though RPK has said some back office jockeying is occuring.

Kedah, my home state looks quite peaceful and hopefully I will still be able to hold my wife's hand when I go home the next time.

Hold on guys, let's not throw the baby out with the bath water.

Let's take an objective view of the NEP: much the bane for the recent losses of the BN.

IT IS a good thing. But it's implementation with the BN government is very haughty with corruption. So there is nothing wrong with Guan Eng wanting to stamp out corruption, and put in place an open tender system that is transparent and all. But rather than stoke the fears of racial marginalization, perhaps he should have activated his pause button and leave it as that.

And rather than saying everything that comes from his brain, he, as CM of Penang, should put in a place a commission, of respected persons (much like the ASEAN one for the ASEAN charter) from all races to study and recommend how to bring Penang to the next level. This should include investments, education, poverty eradication etc etc, for all races. The end objective could be what Koh Tsu Koon had said before the election: To to catch up with Singapore in 10 years.

One just needs to drive from Perak or Kedah to Penang to see the vast difference in lifestyle of the people there. Penang is just not the island, but encompassing the rural areas as well.

Therefore, one should seek to eradicate poverty of all races, which is why BN lost it's absolute 2/3 majority. They were only seen as trying to eradicate poverty amongst the Malays, and leaving the Chinese and Indian to fend for itself.

The old saying of "Give a man a fish, he eats for a day, teach the man how to fish, he eats for a lifetime" holds true.

I have said before, the key is supporting those in need of support to move them up the economic value add. For instance, the lone fisherman, or the rubber tapper, or the padi farmer, or the hawker, be it Ali, Ah Meng or Lingam. If they have kids, and the kids show promise, the kids should be given assistance to go all the way to University if possible.

Instead of serving a bond in their next career, get them to contribute 1 or 5% of their paycheck (for 10 years) to a foundation that provides education scholarship to the needy. This is paying it forward. They must never be lulled into thinking the scholarship is their entitlement or birth right, but a gift to do better and help their families out.

As for Perak, if indeed what RPK says is correct, then it is almost certain that when the next GE comes along, Perak will return to BN because it shows that the opposition is nothing but an opportunistic party brought together out of convenience (or desperation) to deny BN of the state.

For the PAS man to be MB, it doesn't matter, because he cannot single handedly run the state. He still needs the state legislative to approve the proposals and again, no man is an island.

So why hanker over one post, when there are more important things to do in the state.

The Great Wall of China wasn't built in a day, but it certainly doesn't help if people start arguing about where to place the bricks.

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