Clearbridge Accelerator has partnered with the Singapore Exchange (SGX) to to develop a fund-raising platform – specifically an equity crowdfunding (ECF) platform – for entrepreneurs and small and medium enterprises (SMEs) in Asia.
Singapore-based venture capital firm Clearbridge has an extensive history of collaboration with the Singapore government in various schemes.
The first ECF platform led by a stock exchange, its launch in mid-2015 will allow individual investors to invest in companies in return for shares. Mohamed Nasser Ismail, the head of SME developments and listings at SGX explained “The ECF platform is a new channel for growth-stage firms in Asia to raise Series A and B money – a funding crunch that is real and immediate – and for traditional investors to explore fresh business ideas and investment options.”
Clearbridge Accelerator is headed by serial entrepreneur Johnson Chen, its Hong Kong-based managing partner. Investing in healthcare, data security and technology companies, it manages an S$40-million fund for medical technology (medtech) startups via the SPRING Sector Specific Accelerator (SSA) Programme and is a participant in the National Research Foundation’s Technology Incubation Scheme (TIS). It operates in key geographic markets like Japan, China, the US and Australia.
Additionally, Clearbridge is closely associated with key people in the Singapore startup ecosystem, Dr Steven Fang, a partner at Clearbridge, is concurrently the Group CEO of Cordlife and incumbent Chairman at the Action Community for Entrepreneurship (ACE), a privately-led public organisation focused on growing local entrepreneurship.
Chen told media that “CBA is built by entrepreneurs, and has since 2010 guided companies from inception to capital markets. Our medtech background notwithstanding, we support this all-inclusive, non-sector-specific platform,” he said.
SGX and Clearbridge will establish a joint venture identifying and forming strategic-equity partnership with experienced operators to run the capital-raising platform, with other parties, included in the mix. SPRING Singapore, a government statutory board whose mandate is enterprise development, will also be involved.
Currently, the ECF platform is only open to accredited investors (i.e. individuals with net personal assets of over S$2 million or annual incomes of above S$300,000, or corporations with net assets exceeding S$10 million). This is “sizeable pool” comprising high net worth individuals and family offices, according to Mohamed.
The ability of investors to conduct transactions on the new ECF platform via SGX’s central depository also signifies administrative convenience, with cost savings and limited operational risk. However, other mechanics of the platform are being developed.
Edwin Chow, the executive director of Spring Singapore’s innovation and start-ups group stated “With the development of such a platform, we hope to interest more investors to consider the value proposition of our local enterprises.”
While a positive addition to Singapore’s entrepreneurial and financing ecosystem, this new ECF platform raises a question: Is Singapore ready to value startups?
Stefanie Yuen Thio, joint managing director at TSMP Law Corporation: “This platform will be a strategic opportunity to bridge the gap between old school market participants – who still think in terms of price-earnings ratios – and the business giants of tomorrow, the tech companies.”
Tech startups are not valued on profit generations but instead derive their value from their reach, growth potential and revenues, with sustainable profitability a mid to to long-term goal further down the road.
There are innately high risks involved in venture capital markets, where investors derive their profits from a exit via merger & acquisition or IPO of their startup venture,. By contrast, investors are more traditionally used to dividends. Investors new to venture capital and startup ventures need to be aware, mindful and educated prior to placing their money in the ECF.
Thio concluded “If this platform is intended to nurture startups and encourage them to list in Singapore, then investors have to understand how these companies should be valued. It’s a great first step, though.”