This document discusses trends in business angel investing. It provides an overview of angel investing in Singapore, including the profile and rate of angel investing from 2000-2006. It also discusses angel networks like BANSEA and government schemes in Singapore to promote early stage investing, like SEEDS and BAS. Finally, it briefly discusses early stage venture capital in Singapore.

1. © Wong Poh Kam
Trends in Business Angel
Investing
Prof. Wong Poh Kam
Chairman, Business Angel Network
Southeast Asia Ltd (BANSEA) &
Director, NUS Entrepreneurship Centre

2. © Wong Poh Kam
Brief Outline
• Business angel investing as a mode of
financing for early-stage, knowledge-
based/high-tech start-ups
• Profile of angel investing in Singapore
• Angel Networks
• Business Angel Network Southeast Asia
(BANSEA)
• Government schemes to promote
investment in early-stage start-ups

3. © Wong Poh Kam
Funding of New Businesses
• Equity vs. loan financing
• Knowledge-based/high tech/creative business:
“intangible” assets not acceptable as collaterals by
banks
• Staging of equity fund raising (seed, first round,
second round,…, IPO or other forms of exit)
• Sources of Investors (own, family & friends, angel
investors, early stage VCs, later stage VCs,
corporate investors)

4. © Wong Poh Kam
Financing Mechanisms at different stages
of the Start-Up process
High Founder, Friends,
and Family
Business Angels
Level of Venture Capitalists
Investment Non-financial
Risk Corporations
Assumed
Equity
By Investor
Markets
Commercial Banks
Low
Seed Start-up Early growth Established
Stage of Development of Entrepreneurial Firm
Source: Onasbrugge et. al. (2000)

5. © Wong Poh Kam
Professionally Managed VC Funds vs.
Informal Investment
• Although much attention has been paid to the role of
professionally managed VC funds, the potential contribution
of the informal investment sector has been under-researched
in most countries
• Even in the US, where the formal VC industry is the most
advanced, angel investors have played an important role in
the development of high tech start-ups in the Silicon Valley
• Worldwide, it has been estimated by the Global
Entrepreneurship Monitor (GEM) Study that informal
investing contributed 3 times more than VC investment.
• The role of informal investment is more than just money at
the critical early stage; it provides the mentoring, coaching to
guide the start-up to reach the next stage for funding by the
formal VC firms

6. © Wong Poh Kam
Role of Informal Investors in the US & UK
• Estimates from the Global Entrepreneurship Monitor
(GEM) Study over 2000-2006 suggests that as much as 4-
5% of adult population aged 25-64 in US engaged in some
form of informal investing
• One estimate indicated that there are about 260,000 active
angel investors in the US in 2007 (UNH Centre for
Venture Research).
• In the UK, estimates of business angels range between 30-
50,000 in the 1990s, investing 3 times more than the
amount invested by UK VCs in start-ups (Van
Osnabrugge(1998))
• Estimates from GEM2000-2005 Study suggests that 2-3%
of adult population aged 25-64 in UK engaged in some
form of informal investing

7. © Wong Poh Kam
Informal Investing in Other Countries
• According to GEM survey over 2000-2005, most
countries have informal investment rate of
between 1.5%-5%, with a mean rate of about 3%
• In Asia, China had informal investment rate of
over 5%, Hong Kong and Taiwan about 3%, and
Singapore 1.5-3.5%
• Globally, about half of all informal investments
are by family members/relatives, while about half
are by people unrelated to the family of the
entrepreneurs

8. © Wong Poh Kam
Relationship of Investor to Investee, Global
Average 2000-05 (GEM Study)
%
Close family member 43.7
Other relative 8.9
Friend or neighbor 29.2
Work Colleague 8.9
Stranger 9.3

9. © Wong Poh Kam
Rate of Informal Investing in Singapore 2000-06
Year Informal Total
Investment Entrepreneurial
Rate (% of Activity (TEA)
Adult Rate (% of Adult
Population) Population)
2000 1.3 4.2
2001 2.0 6.6
2002 3.6 5.9
2003 1.6 5.0
2004 2.7 5.7
2005 3.5 7.2
2006 3.0 4.9
Source: Wong et. al., GEM Singapore Reports, 2000-06

10. © Wong Poh Kam
Relationship of informal investor to
investee, Singapore 2000-06
2000-04 % 2005 % 2006%
Related (Family
Investors) 41.7 35.9 53.0
Close Immediate
Family 31.0 22.9 35.3
Other Relative 10.7 13.0 17.7
Non Related
(Business Angels) 58.3 64.1 47.0
Work Colleague 5.2 6.1 6.8
Friend/ Neighbour 49.6 52.7 34.6
Stranger/Other 3.6 5.3 5.6
Total 100.0 100.0 100.0
Source: Wong et. al., GEM Singapore Reports 2000-2006

11. © Wong Poh Kam
What does an experienced angel
investor look for?
• At least 10x expected return for very early stage
deal
• Quality of business plan (the 3 Cs)
• Commitment & passion of entrepreneur
• Quality & Experience of management team
• Valuation
• Likelihood of follow-on investments

12. © Wong Poh Kam
Exit Mechanisms for Investors
• IPO (typically after a lock up period)
– Organic growth
– Roll-up
• Mergers & Acquisition by a Corporate Group
– For Cash
– Share Swap
• Trades Sales
• Hold for Dividend Yield
…try to avoid
• Living Dead

13. © Wong Poh Kam
Importance of Business Angel Networks
• Many Angel Investors Participate in Formal
or Informal Networks
– Information exchange/knowledge & practice
sharing
– Exchange of deal flows
– Joint Investment/Pooling of risks
– Forum for networking & professional
development

14. © Wong Poh Kam
Examples from North America & Europe
• Informal Business Angel Network, e.g.
– Silicon Valley Band of Angels, California
– Angel Forum-Vancouver, Canada
– Tech Coast Angels
• Investment Clubs, e.g.
– The Angels’ Forum (TAF), Silicon Valley
– CommonAngels, Boston
• Formal Private Equity Fund
• Investment Advisory Services/brokerage & Incubation
Services
• Online Investor-Entrepreneur Matching & Networking
Services (e.g. angeldeals.com, investmentnetwork.sg)
• Association of angel networks (e.g. Angel Capital
Association (US), European Business Angel Network
(EBAN), Australian Association of Angel Investors (AAAI))

15. © Wong Poh Kam
Business Angel Network (Southeast Asia)
(BANSEA)
• Established in 2001 in Singapore as a Public
Company limited by guarantee by a group
of Singapore-based angel investors, with
network connections to investor groups in
Thailand, Malaysia, Vietnam and Indonesia
• Membership is open to bona-fide angel
investors, recommendation by an existing
member

16. © Wong Poh Kam
Business Angel Network (Southeast Asia)
(BANSEA)
• Website www.bansea.org
• Receive and circulate business proposals to
members; A sub-committee vets submitted plans
for presentation at networking lunch
• Regular networking lunch, usually with a guest
speaker and invitation of 3 start-ups to make
business plan pitches & network; Members can
invite 1-2 guests to attend
• Mentoring service
• Participate in various activities (e.g. serving as
judges in business plan competition, providing
inputs to government policy making etc)
• Angel investment forums and workshops

17. © Wong Poh Kam
Singapore Government Schemes to
Promote Angel Investing: SEEDS
• Lack of early stage risk financing is main bottleneck to
development of high-tech/knowledge-based/creative start-ups
• Government co-investment to leverage private sector investors
who are taking the risk themselves
• The SEEDS Program was introduced in 2000 by EDB, now
administered by SPRING
– 1:1 Co-investment between S$75K to S$300K with third party investors
who are not related to the early stage start-ups; increased to 1.5:1 and
S$750K (cumulative) in 2009
– If there is a profitable Exit within 5 years, the Scheme will first recover
its investment cost + accrued interests, and give one-third of any
remaining surplus gains with the third party investors
– If no profitable exit after 5 years, SEEDS will seek to dispose of its
investment by selling back to entrepreneurs or other investors
• Over 150 start-ups have been funded under SEEDS by end ‘08

18. © Wong Poh Kam
Government Schemes to promote Angel
investing: The case of Singapore
• The BAS Program (administered by SPRING)
was introduced in 2005
– Co-investment of S$10 million with 3 or more
experienced angel investors who collectively commit to
invest at least S$10 million over 5 years
– 1:1 Co-investment of S$1 million per deal
– In 2009, co-investment terms improved to 1.5: 1, up to
S$1.5 million per deal
• Three active BAS Funds have been co-funded so
far
– Sirius Capital
– BAF Spectrum
– Accel-X

19. © Wong Poh Kam
Early-Stage Venture Capital in Singapore
• Although Singapore has attracted a decent amount
of Venture Capital funds to base their operations
in Singapore, these funds are predominantly later-
stages funds, and are investing mostly outside
Singapore
– A large proportion of the US$1 billion TIF fund-of-
fund established in 1999 has gone to US-based VC
funds, with extremely limited investment activities in
Singapore
– Most members of SVCA do not invest in early stage
• In Q4 2008, the NRF announced a new early-stage
VC fund co-investment scheme, providing 1:1
matching fund of up to S$10 million to each of 6
selected new VC funds