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- A 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- co.uk/Singapore 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. firstname.lastname@example.org 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 Q&A 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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