Mr S Iswaran at the SEEDS Ceremony 2006

SPEECH BY MR S ISWARAN, MINISTER OF STATE FOR TRADE AND INDUSTRY, AT THE SEEDS CEREMONY 2006, ON THURSDAY 2 NOVEMBER 2006, 11AM, AT SUNTEC CITY CONVENTION CENTRE

Distinguished guests

Ladies and gentlemen

Good morning.

I am happy to join you today at the Start-up EnterprisE Development Scheme, or SEEDS, Ceremony to recognize 18 promising start-ups that have been newly awarded equity funding under the SEEDS programme.This further augments the pool of SEEDS companies, which has grown from 10 in 2001 to 169 today.

It is apt that this ceremony is held as part of Enterprise Exchange, which is itself a celebration of innovative ideas and creative products.Over the past three days, this exhibition hall has been the venue for numerous entrepreneurs to pitch their ideas and innovations to potential investors and customer

A pro-business environment leads to a high-level of entrepreneurial activities

Extending the Enterprise Exchange concept to the wider economy, Singapore offers an exchange platform for enterprises to seek out and capitalize on business opportunities.Our open investment environment, transparent legal system and pro-business policies form the foundation of our value proposition to enterprises – whether an MNC, SME or start-up.This supports and encourages high levels of activity within our enterprise ecosystem.One proxy indicator of entrepreneurial activity is the formation of new companies which reached 19,500 last year - 14% more than in 2004.

Indeed, we have here in Singapore a significant and growing pool of entrepreneurs with promising business plans.And, as we make greater investments in research and innovation in the coming years, we should also see more good business ideas emerging from this sphere of activity.We must continue with our efforts to enhance the business friendly environment, and help facilitate the commercialization of ideas.An enterprise may be born from nothing more than a smart idea.But it needs external financing, business expertise and management talent for the idea to germinate and become commercially valuable.This need is especially acute for companies at the start-up stage, which find it hard to secure funding from financial institutions, and to attract management talent, due to their limited track record.The feedback from local industry is that the critical financing gap is at the early and seed stage.

It is with this in mind that the Government started the SEEDS scheme in 2001 to enhance the level of equity financing for start-up companies.Under the SEEDS programme, every dollar raised from a private investor, will be matched by a dollar of Government grant, up to a maximum of $300,000.By making funding more accessible, the SEEDS programme helps start-ups begin their operations on a stronger financial footing, and ultimately stimulate entrepreneurship and innovation activities in Singapore.

Our group of 435 SEEDS entrepreneurs represent a good mix, with more than a quarter coming from overseas.We welcome you to Singapore.By bringing your ideas and intellectual property to Singapore and setting up your business base here, you have enhanced the diversity and vibrancy of our enterprise habitat.

A “smart” system

In a capitalist system, it is ultimately the entrepreneur and the private investor who creates wealth by devoting their time and capital to pursue their hopes and dreams.The Government can and should play a strong supportive role by building a conducive business environment because we believe that our future lies in innovation and initiative, which form the basis of the knowledge economy and creative enterprise.The connection between start-ups, private investors, and the Government is a synergistic and symbiotic one that goes beyond a mere business dealing, to a mutually reinforcing relationship built on trust, respect and support.

The ability to attract investment capital affirms the commercial potential of an idea or product.The recipients of SEEDS funding have demonstrated this potential.I hope you will now be able to move with speed and enterprise to realize that potential and make your innovation a commercial success. In business, as you know, time-to-market is everything.

I am also delighted to hear that some of the earlier recipients of the SEEDS programme have banded together to form the SEEDS Alliance to help one another cross over into the growth stage.Within the group, I hear that the entrepreneurs collaborate to tutor and mentor one another, share information and pool resources to gain better access to funding, markets, and services.What is especially noteworthy is that this “peer-support” initiative was entirely driven by the private sector, a true mark of entrepreneurship!

It is heartening to note that of the 169 SEEDS companies, 20 have to date successfully raised further rounds of financing.For example, GlobalRoam Group Pte Ltd, which merged with SEEDS recipient Fatte Telecom, has raised $2.4 million through the OTC Capital platform.The number of SEEDS enterprises recording an annual turnover exceeding $1 million stands at 18 this year, up from 11 a year ago.Some of the SEEDS enterprises have also successfully expanded into overseas markets.Inphosoft, a wireless communication solutions provider, has gained traction in Malaysia and Indonesia, besides Singapore.It is expected that our group of SEEDS enterprises will contribute significantly to our economy, and generate about 5,000 jobs, by 2007.

Formation of two new Business Angel Groups with an additional $40 million in funding available

Let me now turn to the investor community. Today, some 165 VC and private equity firms manage $17.5 billion worth of funds in Singapore. We will continue to encourage more of such VC activity, as well as angel investments, to support enterprise creation and development. We need to work harder given the tremendous draw of China and India for VC funds and investors.

Under the SEEDS programme, enterprises have garnered a total of $87.5 million worth of equity financing from 233 third party investors and the Government.More than a quarter of the private sector investments was contributed by foreign business angels from 16 countries.

Angel investors are critical as they offer their personal business experience and can help mentor the investee companies.We launched the Business Angel Scheme last year to build a pool of angel investors and spur the formation of Business Angel Groups in Singapore.By investing as a group, angel investors are able to share and evaluate deals together, thereby lowering their investment risk, and leveraging off each other’s skills, expertise, and network to benefit their investee companies

The good news is that a further two new Business Angel Groups are being formed today.They are: BAF Spectrum and Sirius Angel Fund.Together with Mustard Seed BAF which was announced in September, the three Business Angel Groups bring together more than 20 angel investors and $30 million in private funds.

As the Business Angel Scheme is a dollar-for-dollar scheme, this means that there is now a pool of $60 million in funding from the private sector and Government that is available for active investments by these groups of experienced and established business angels.

We have made an encouraging start.Going forward, we will continue to look at how we can improve SEEDS and BAS, to further address any gaps in early stage financing for start-ups and enterprises.We also welcome investors to tap on our existing tax incentives - S13H, which allows approved VC funds tax exemptions on qualifying income, and the Enterprise Investment Incentive, which provides tax breaks on losses for investments in innovative start-ups.

Conclusion

On the occasion of the fifth anniversary of the SEEDS programme, I would like to commend all the SEEDS entrepreneurs and investors.Your innovation, vision and drive are key to the vibrancy and dynamism of Singapore’s enterprise environment.

Let me conclude by congratulating the new SEEDS recipients and wishing you success in your growth story.Entrepreneurship is about smart ideas, smart people and smart money.Let us ensure that all three elements continue to thrive in Singapore.

Thank you.