Singapore’s venture capital (VC) market is declining, reflecting a global trend of reduced investment activity.
This downturn, often referred to as a “funding winter,” has been observed across major startup ecosystems worldwide, including Silicon Valley, London, and New York City.
This trend is evident in Singapore’s decline in deal volume and value in the first nine months of 2024.
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Data from Enterprise Singapore and PitchBook reveals that venture funding deal volume by Singapore-headquartered firms has decreased steadily since 2022. In the first nine months of 2022, there were 518 deals, dropping to 410 in the same period in 2023 and further down to 369 in 2024.
Similarly, the deal value has also fallen from US$8.5 billion in the first nine months of 2022 to US$4 billion in the corresponding period of 2024.
This decline can be attributed to various factors, including:
- Global economic uncertainty: Rising interest rates and inflation have made investors more cautious, leading to a pullback in venture capital investments globally.
- Extended fundraising timelines: Startups face longer fundraising timelines as investors conduct more comprehensive due diligence and seek more favourable valuation targets.
- Emphasis on profitability: Investors increasingly prioritise companies with a clear path to profitability, making it more challenging for early-stage startups to secure funding.
The decline in Singapore’s VC market is particularly pronounced in the deep tech sector, characterised by longer funding cycles and higher capital requirements. Deep tech venture activity has experienced a steeper downward trend than general tech, indicating investors are becoming more selective in their deep tech investments.
However, despite the current downturn, Singapore remains a prominent player in the Southeast Asian VC landscape. The country leads in ASEAN deal activity, accounting for 58 per cent of deal volume and 68 per cent of deal value in the first nine months of 2024.
Moreover, the island nation remains among the top five global startup ecosystems, demonstrating its strong foundation and attractiveness to investors.
The Singapore government is actively addressing the challenges posed by the funding winter and remains committed to fostering innovation and growth, particularly in the deep tech sector.
Key initiatives include:
- Increased funding for deep tech startups: The government has allocated an additional SGD440 million to the Startup SG Equity scheme, expanding the total pool of government funding to over SGD 1 billion. This will enable the government to co-invest with global and local VCs in Singapore-based deep tech startups, supporting their growth and global expansion.
- Support for early- and early growth-stage startups: In 2025, two government-backed investor arms, SEEDS Capital and EDBI, will merge to form SG Growth Capital. This merger will expand the funding range to cover both early-stage and early growth-stage startups, providing more comprehensive support throughout their development.
- Collaboration with venture builders: The government is strengthening its partnerships with local and global venture builders, leveraging their expertise and proven business models to bring impactful technologies from lab to market.
- Launch of Stage One: A multi-agency initiative led by Enterprise Singapore and the Economic Development Board, Stage One will be a one-stop platform to support startups throughout their journey, from setting up in Singapore to scaling globally. This platform will connect local and global startup communities, fostering collaboration and growth.
The report also includes insights from prominent figures in Singapore’s VC ecosystem, who offer a mix of caution and optimism for the future. While acknowledging the challenges of the current funding environment, these industry leaders emphasise the long-term potential of deep tech investments and the opportunities for Singapore.
Also Read: Shifting tides: Vietnam and Philippines challenge Singapore and Indonesia in startup investment
Overall, while the current funding winter presents challenges, Singapore’s venture capital market remains resilient, supported by a strong foundation, government initiatives, and a vibrant startup community.
The country’s strategic focus on deep tech and its commitment to fostering innovation position it well to emerge stronger from this downturn and capitalise on technology’s transformative power.
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