Mr Lee Yi Shyan at the Asian Business Angel Forum 2010, 8 Mar 2010

Speech by Mr Lee Yi Shyan Minister of State for Trade & Industy and Manpower at the Asian Business Angel Forum 2010 Pan Pacific Hotel Singapore on 8 March 2010 at 9:00am

Professor Wong Poh Kam, Chairman of the Business Angels Network South East Asia,

Ladies and Gentlemen,

Good morning.

Last year a few of us in the Action Community for Entrepreneurship (or ACE) conceived the vision that Singapore shall be an Angel Hub for business angels across Asia to share experiences, deals and connections. We made the suggestion to BANSEA to initiate such a forum.

Today, I am pleased that BANSEA and partners have delivered in an entrepreneurial way - the inaugural Asian Business Angel Forum. Thank you very much! Let me also add my warmest welcome to the 200 of you coming from 14 countries to participate in this exciting forum for the next two days.

For the benefits of our foreign delegates, let me explain to you briefly what ACE does. ACE was launched in 2003 as a national effort to transform Singapore into an entrepreneurial nation, where innovation and enterprise are encouraged and where diversity of ideas thrives. ACE is an inclusive movement involving both the private and public sector. As a change agent, it collaborates with various partners to build a more pro-enterprise environment - through changing culture and mindset, improving the regulatory framework, improving access to financing, and facilitating networking and learning.

The Rise of the Asian Economy

A recent article in New York Times reported that Intel and 24 venture capital firms plan to invest US$3.5 billion in American start-ups over the next two years, in an effort to stop the US from losing its bid as the global leader in technology. The article noted that fewer than 10 per cent of college graduates in the US have engineering degrees, compared to more than one-third in India and China. And while the number of patent filings increased 30 per cent increase in China, US saw a 11 per cent decline.

In a Nov 07 study, “BRICS (or Brazil, Russia, India and China) and Beyond”, Goldman Sachs projected that by 2025, three of the four largest economies will be in Asia, namely China, Japan and India. The combined GDP of these four Asian economies would make up 61% of the world’s top ten economies.

Economic activity and wealth creation come hand in hand. If we compare the ten countries with the largest economies against the ten countries with the largest number of high net-worth individuals, it will come as no surprise that there is a close match. The rising Asian growing economy will provide the opportunity for a large segment of the Asian population to generate wealth. The 2009 World Wealth Report conducted by Cap Gemini and Merrill Lynch Global Wealth Management predicts that the Asia Pacific will overtake North America as the largest region for HNWI financial wealth by 2013.[1]This suggests that we will increasingly see more individuals in Asia with the resources and the appetite to seek alternative investments.

Business Angels in Asia

New ventures often start with “informal investments”, coming from the founders themselves or the so-called 3Fs (Family, Friends and Fools).As these start-ups grow, the 3Fs can no longer support the start-ups. This is where business angels play a key role to address this funding gap. According to the US’ National Venture Capital Association, experts estimate that on a cumulative basis, the level of investments made by business angels over the last 30 years has been double that of investments made by venture capitalists in early stage start-ups. The Center for Venture Research estimates that US business angels invested $19 billion in 55,000 deals (about 35,000 small businesses) in 2008.The Kauffman Foundation further estimated that angel investments provide 90% of the seed and start-up capital in the US[2].

In addition to early-stage financing, business angels provide other ingredients necessary for a company to grow. They offer mentorship and guidance to entrepreneurs, and have the patience to allow time for normal company maturation. In addition, they provide valuable connections, bringing access to venture capital funding as well as customer referrals to the innovative startups, enabling them to grow faster.

In the late-1990s and early-2000, along with the dot-com boom, many companies were rapidly sprouting up in Asia.Sina.com and Sohu.com of China were founded in this era and to date, continue to be globally competitive. These companies did not achieve global success by simply possessing brilliant technology. Many other ingredients like funding, mentoring, network and partnerships have been essential in the early stages of development. They have secured these through their business angels. Sohu, for example, secured Nicholas Negroponte, Founder and Director of MIT’s Media Lab, as its angel investor.

Singapore has our fair share of angel-backed companies. MOZAT is one example. The company is a spin-off from the National University of Singapore and is today a provider of Asia’s leading mobile social network. MOZAT secured angel investments and mentorship from local angel group, BAF Spectrum, in its formative years. Since then, the company has managed to secure major Telco's clients in Asia and the Middle East including Bangladesh, Egypt, Kuwait and Saudi Arabia. In January this year, the company was recognized by Red Herring as one of the Top 100 Global Companies and recently, it also secured follow-on investments from a VC.

Growing an Asian Business Angel Network

The rise of Asia will lead to both more wealthy individuals, and also more innovative enterprises. This will provide the hotbed to grow a healthy and vibrant ecosystem for business angels. Singapore is happy to play a role in seeding such an ecosystem, and providing platforms to encourage angel investments in Singapore and Asia.

Building on our pro-enterprise environment and a highly-developed financial and legal infrastructure to facilitate angel investments, the Singapore government recently announced in its Budget, a new incentive for angel investors. This incentive allows a business angel who invests at least $100,000 in qualifying start-ups, a 50% tax deduction on his investment costs at the end of the second year of holding the investment. The incentive is open to all Singapore taxpayers. (If you are not yet a tax resident, you are welcome to take up residency here. Many of us in this room can help you find the dream apartment). Through this scheme, we hope many individuals will come forth and contribute more actively towards the enterprise ecosystem in Singapore.

Today’s inaugural Asian Business Angels Forum marks another significant milestone in the developments of angel investments in Asia. As part of the forum agenda, leaders of the various angel groups in the region will discuss the establishment of a Business Angel Network in Asia to champion business angel-related initiatives in the region. I look forward to the development of this initiative and I would like to commend this Forum for its effort to launch the network here.

Conclusion

We are at a point of inflexion. As today’s theme, “Seeding Asia’s High Tech Future” suggests, Asia will see more and more high tech start-ups emerging. How fast these start-ups can grow and power Asia’s rise will depend on their access to the investment, networks and expertise that business angels can bring. I therefore urge all of you to capitalize on the growth of Asia through investing in the promising start-ups.

On this note, I would like to wish everyone an enjoyable and fruitful session.

Thank you.

[1] http://www.ml.com/media/113831.pdf
[2] http://www.kauffman.org/entrepreneurship/angels-shine-brightly.aspx