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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