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									review insight     í                                                                                                                                              ●   THE STRAITS TIMES FRIDAY, MARCH 12 2010 PAGE A21

                 Singapore is wooing “angels” through tax incentives. Just who are “angels”, and what does “angel investing” entail?
                   Bill Morrow, founder of Britain’s largest angel investor network which has set up shop here, explains why angels
                     are turned on by passion and pain rather than by government measures, business plans and financial returns.

         Why angels play with ‘fun money’
                                              big thing for most angels but it’s not. Tax       break from the “old way of doing things”      speedfunding event in which entrepre-              Investors in China, for instance, are of-
                                              saving isn’t what they’re investing for.”         in which investors provide capital, a list    neurs pitch their business ideas to inves-     ten keen to support start-ups, but offer
                                                  But he admits that Angels Den                 of key performance indicators, and check      tors in three minutes at the Standard          paltry amounts of just a few thousand dol-
                   BY CASSANDRA               sign-ups by Singapore angels shot up              in only at the end of the year.               Chartered Bank on Battery Road, on             lars, and expect entrepreneurs to work
                   CHEW                       from one or two daily to 42 on the day               “We don’t go for the traditional angel,    March 23.                                      with it.
                                              after news of the tax incentive broke.            the pinstriped bowler-hatter sort of guy         When it kicks off, it will have to com-         In Britain, almost half of the entrepre-
                                                  Based in Suntec Tower Four, Angels            reading The Financial Times. It’s a much      pete with a peculiar Singapore mentality       neurs fund their start-ups with credit
                                              Den Asia has a growing database – the re-         younger, YouTube generation who kind          about entrepreneurship.                        cards, at an interest rate of 28.8 per cent
                                              sult of word-of-mouth and Mr Morrow’s             of gets bored after three minutes,” says         What struck him during his bi-weekly        a month, while others turn to the tradi-

            STRUGGLING woman entre-
            preneur, who runs a handbag       cultivation of high net-worth individuals         Mr Morrow, garbed in black trousers and       visits here was Singaporeans’ heavy reli-      tional “friends, families and fools”.
            business from her home here,      here. The Web address is www.angelsden.           a long-sleeved striped shirt, his right       ance on the Government.                            There are a handful of government
            snags a deal with a top depart-                                   sleeve rolled back to reveal five colourful      “There is almost an expectation of gov-     grants in Britain but very few receive
            ment store.                           He attributes the surge of interest to        thread bracelets tied around his wrist.       ernment support, and with that expecta-        them, Mr Morrow says.
   But to expand her business, she needs      nothing more than a sign of people not               That angels make their choice based        tion comes a sense that people don’t feel          As a result, entrepreneurs are forced
funding urgently. She seeks an angel in-      wanting to get left behind.                       on personality signals to Mr Morrow a         the need to work the hours that they do        to pull themselves up by their own boot-
vestor – a wealthy person who provides            Explaining how angels think, he says          “democratisation of the market”, where        in the States and get it absolutely right.”    straps. They learn how to take a small
capital in start-ups in exchange for debt     that they invest with their “fun money” –         anyone with passion and a good idea can          At the same time, he says bluntly, the      amount of money and multiply it.
or equity.                                    a small percentage of their wealth set            get funding.                                  proliferation of government grants to              Mr Morrow subscribes to the theory
   Enter Mr Bill Morrow, the founder of       aside for “cars, rugs, cigars, fine wine or          “You don’t necessarily have to have a      start-ups gives entrepreneurs an excuse        that pain is a good incentive to push entre-
Britain’s largest angel investor network      equity funding”.                                  degree, you don’t have to wear a tie and      to wave away ideas of seeking angel fund-      preneurs towards success.
which has spread its wings to Singapore.          Most of their wealth is already being         cufflinks, you don’t have to have the prop-   ing.                                               With their own money on the line, Eu-
   During the meeting, he does not check      taken care of by their private bankers, so        er accent and gone to the proper schools         His current tally: 32 government initia-    ropean entrepreneurs have displayed a
                                              they do not necessarily require their an-         to attract money.”                                                                           greater hunger to succeed than he has
out the strength of her business plan or                                                                                                      tives to help start-ups, including some
                                              gel investments to bring in returns.                 Angels Den Asia will hold its first                                                       seen among those here.
the quality of her products. What he was                                                                                                      that offer capital of up to $50,000.
                                                  In fact, the common wisdom in these                                                                                                            “People here are still passionate, they
looking for was her love for the work, the                                                                                                       If you can navigate your way through
                                              circles is that angels are more likely to                                                                                                      still want it to work. But because there’s
49-year-old Scotsman said, in recount-                                                                                                        the minefield, he says, then Singapore is
                                              lose money, than to gain money.                                                                                                                government support, it takes the edge off
ing the encounter to Insight.                                                                                                                 one of the best countries in the world to
                                                  Hence, angels invest “to do a little bit                                                                                                   what it means to succeed.”
   Impressed by her enthusiasm, he has                                                                                                        set up a company.
                                              of good for the world, and to help compa-                                                                                                          Although the Government recognises
arranged for her to make her first pitch to                                                                                                      “But the corollary is also quite painful.
                                              nies start up, and not make the mistakes                                                                                                       that start-ups must succeed for a success-
angel investors at a speedfunding event                                                                                                       It could be argued there’s too much sup-
                                              that they made when they were at that
on March 23. He is confident that she will                                                                                                    port...$50,000 almost promotes a sense         ful economy, it behaves like an overpro-
                                              stage”. In short, Mr Morrow says, angels
secure funding.                                                                                                                               of laziness.”                                  tective parent, he says.
                                              invest to be mentors. “No angel wants to
   He notes: “Three of the four deals we                                                                                                         To him, the relative ease with which            “There has to be a little bit of pain for
                                              be seen as just a cheque book, as a bank.
did in Europe last month have been based                                                                                                      start-ups can secure handouts from the         them to be successful. Some day they ac-
                                              That doesn’t turn them on in the least lit-
on personality, on the angel seeing some      tle bit.”                                                                                       Government also paints an unrealistic pic-     tually do have to fly the nest.”
spark, and almost investing in the person         To illustrate his point, he paints two                                                      ture of investor funding.            
rather than the idea.”                        scenarios: Entrepreneur A whose compa-
   Experience tells him that angels are       ny board includes a collection of gradu-
drawn to entrepreneurs who know well          ates from Ivy League colleges, and Entre-
what they are into, and are able to com-      preneur B who admits to being weak in
municate their passion.
   Mr Morrow should know, as head of
                                              certain areas of the business, and is                                                           Investing in entrepreneur, rather than firm
                                              seeking help.
London-based Angels Den which boasts a            “On the surface, you
membership of more than 3,000 angels          might think that Entrepre-                                                                        AN ANGEL investor is usually a               investment capital.
and 10,000 entrepreneurs worldwide,           neur A would be really at-                                                                           wealthy individual who provides               In Singapore, existing networks
and as an angel investor to more than 10      tractive. But actually                                                                                 capital for start-ups, usually in       include the Business Angel Network
companies in Europe.                          human nature says                                                                                        exchange for debt or equity.          (South East Asia) and Singapore
   Since Angels Den Asia was set up here      ‘You know what, I’d                                                                                           Unlike traditional investors,    Investment Network. The latest on the
on March 1, it now counts more than 300       like to do some-                                                                                            angels are usually looking to      scene is Angels Den Asia, which will hold
angels, mainly from property and finan-       thing, I want to                                                                                              invest not just in the           its first speedfunding event on March 23.
cial services circles here, and 11 compa-     get my hands a                                                                                                  company but also in the            Speedfunding is one way in which
nies, including a fish farm, a yoga club, a   little bit dirty                                                                                                  entrepreneur. Investing      angels are matched to entrepreneurs.
palm oil factory and three high-tech          again with En-                                                                                                      in the person may              It is similar to speed dating, in that
firms.                                        trepreneur                                                                                                           matter more than          entrepreneurs have three minutes to
   After graduating from the University       B. This sort                                                                                                          investing in the         pitch their businesses to a few angels,
of Edinburgh, Mr Morrow started out as        of reminds                                                                                                             business plan.          who sit behind a panel. Investors who
an accountant with a venture capital or-      me what                                                                                                                    They tend to        are keen on specific entrepreneurs can
ganisation and became an investment           it’s like to                                                                                                             develop close         follow up with them directly.
banker before striking it out on his own.     be in the                                                                                                                mentoring                 Other methods include online
   After a series of negative attempts to     field again,                                                                                                             relationships with    matching, lunch meetings and forums.
secure angel funding for his own projects,    so I want to                                                                                                             the entrepreneurs,        The first Asian Business Angel Forum
he decided to start his own network with      be in there.’”                                                                                                          share lessons on       was held at the Pan Pacific Hotel here
his partner Lois Cook, 48, in 2007.               Angels get ex-                                                                                                  what they have learnt      earlier this week. The two-day event
   Having experienced it first-hand, he       cited about being                                                                                               as businessmen, and            was attended by about 150 participants,
understood the difficulties of entrepre-      able to use their                                                                                           provide valuable contacts          including 50 entrepreneurs and 75
neurship. That is why he is doubtful the      strengths and experi-                                                                                    who can give the entrepreneurs        angels.
Singapore Government’s new tax incen-         ence to help an entre-                                                                               a leg-up.                                     The event also marked the formation
tives will draw more angel investments.       preneur in his areas of                                                                              Well-known angels here include            of a regional angel network, Pan-Asia
   During his Budget statement on Feb         weakness. It is all about                                                                       DBS Group chairman Koh Boon Hwee,              Business Angel Network, comprising at
22, Finance Minister Tharman Shanmuga-        the personal relationship,                                                                      former Singapore Exchange chief                least seven members such as the
ratnam announced a 50 per cent tax de-        Mr Morrow stresses.                                                                             executive Hsieh Fu Hua, and chairman           Australian Association of Angel
duction on investment for angels who              This makes it crucial that                                                                  and chief executive of Creative                Investors, China Business Angel Network
commit at least $100,000 to a start-up        angels select entrepreneurs                                                                     Technology Sim Wong Hoo.                       and Mumbai Angels.
for two years. The deduction will be          they trust and like.                                                                               Angel investors sometimes group into            It is slated to kick off before the end
capped at $500,000 of investments.                “And through their con-                                                                     networks to trade information and pool         of the year.
   According to Mr Morrow’s sums, the         tacts, relationships and their
incentives could work out to an immedi-       little black books of friends,
ate 10 per cent return on investment for      they can add so much value to
angels. But angels very rarely invest on      start-up companies and help
the back of tax incentives, or tax regimes,   make their money.”
he points out in an interview at The Full-        This is the face of a new
erton Hotel.                                  wave of investors: younger
                                              with a bigger finger on the
  “You imagine that would be a really         pulse, and involved – a clear

  í Why was Singapore picked to be            í Why is private funding more
  Angels Den Asia’s headquarters?             exciting?
  One clear reason was the government         I think there’s something about en-
  support. The Government was totally         trepreneurs and (being) entrepre-
  all over us in terms of supporting          neurial that’s more exciting.
  what it was that we were looking for.           Any government with its transito-
     The other: the transport links in        ry officials choosing entrepreneurs
  Singapore. We can service the whole         on their own metrics is very different
  of the South-east Asian marketplace         from one entrepreneur giving another
  in an extraordinarily easy way.             entrepreneur a leg-up – making sure
     Finally, it has to do with access to     the mentees don’t make the mistakes
  capital. Hong Kong is more mature in        they made as entrepreneurs, just men-
  terms of its money, but the current an-     toring and guiding the entrepreneurs
  gel that we are after is sort of a new      along the way. With angel funding,
  generation of angels.                       it’s more the expertise that comes
     It’s the kind of people who, at the      with the money that is going to help
  back of their minds, don’t think of         the entrepreneurs.
  themselves as angels. They are look-
  ing to spend 8 per cent to 9 per cent       í Given the high risks of angel
  of their total net wealth on cars, rugs,    investing, why do it?
  cigars, fine wine or equity funding.        Because the old way of doing things –
  For them, it’s kind of fun money.           where people didn’t truly understand
                                              the business and weren’t quite as
  í Were there any obstacles?                 hands-on, the ‘Here’s a cheque, I’ll
  The Government is very welcoming            see you in a year, here’s a bunch of
  to any company setting up here, par-        metrics I’d like you to keep to. Give
  ticularly so because it understands         me a call when you get there’ days –           Mr Morrow
  the nature of angel investing. So I         are completely gone.                           says angels
  don’t have to explain.                          It’s younger people now. Angels            make their
     With other governments, I have           are younger, have a bigger finger on           choice
  had to sit down and explain why small       the pulse and they want to be in-              based on
  and medium-sized enterprise invest-         volved.                                        personality,
  ment is of the essence, or why equity           They’ll be bringing help, they will        rather than
  funding, actually taking private mon-       be all over the company just making            the idea
  ey and plonking into private compa-         sure they are where they said they             itself.
  nies, rather than the government            were going.                                       ST PHOTO:
  putting in money, is slightly more ex-          And with the Internet and Skype,                    RAJ
  citing.                                     it’s much easier to keep in touch.               NADARAJAN

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