To the mix of venture capitalists, venture builders, accelerators and incubators in the startup ecosystem through which entrepreneurs can solicit capital to propel growth, add CapBridge.
Singapore Exchange (SGX) signed a Memorandum of Understanding with Clearbridge Accelerator in June this year to develop CapBridge, a capital-raising platform for early-stage small and medium enterprises (SMEs).
SGX will provide a SG$1.5 million (US$1.08 million) non-recourse grant to ClearBridge Accelerator to set up the CapBridge platform, which is currently pending regulatory approval.
To find out what CapBridge can offer and understand better its raison d’être, e27 had a chat with Mohamed Nasser Ismail, Senior Vice President and Head of SME Development and Listing at SGX.
The fundraising problem
SGX traditionally comes into the picture for startups at a stage when an IPO is a consideration. CapBridge was initiated to reach out to more entrepreneurs and startups — most of which are not mature enough to publicly list yet — Nasser says.
One of the problems the entrepreneurial community faces is fundraising.
“Singapore entrepreneurs face a great challenge in that after the music dies with government funding, and they have to go to the capital markets or get private investors on board, it becomes very challenging for them,” says Nasser.
In that process of fundraising, Nasser says, entrepreneurs can spend a disproportionate amount of time to obtain what may not be very attractive offers.
“Two angel investors said that [founders] had to have about 300 meetings to get one or two offers [of investment]. That’s the most inefficient way to get funding especially when you cannot afford the luxury of time and take your focus away from growing your business,” he says. “And some of these entrepreneurs — because so much time has gone into that [fundraising] — they become a bit desperate [and] give away a part of their companies very cheaply.”
Attempting to help startups solve this problem led to CapBridge.
Also Read: The 3 stages of successful fundraising
‘It benefits everybody’
“We want to aggregate good ideas (represented by the startups) and good investors, and match them (ideas to investors),” says Nasser.
By building a network of investors who will be accessible to the startups on the platform, and vice versa, there is two-way benefit, Nasser explains.
“It benefits everybody. Entrepreneurs will be able to raise capital [and] be able to meet parties that are more relevant to them in a more efficient way. For the VCs and angel investors, they will get the opportunity to see at the same time deals that are available,” he says.
“Right now, you only get to see [the opportunity] if they knock on your door or if you know them. We will offer a level-playing field for every investor to compete for investments. And that’s a good thing because you enlarge the pie.”
Another benefit of this network is in situations when startups are not able to secure the full-targeted amount of funding from a single investor.
“An investor might say, ‘I’m prepared to bring in some money but maybe not the full amount.’ Startups can use CapBridge as a syndication platform to syndicate the rest of the funding,” says Nasser.
With this network of investors, however, Nasser says that CapBridge is not modelling itself as a crowdfunding platform.
“We don’t think that an entrepreneur would want a crowd. This is [also] one of the disadvantages of a public listing because you actually have a crowd of shareholders that you have to answer to. Will that be a good and valuable use of your time?” says Nasser, who adds that companies will get the final word on who they want as investors.
“The entrepreneurs will know who the interested investors are, we will facilitate that interaction, and the entrepreneurs will decide who they want to accept as an investor,” says Nasser.
While investors are one source through which startups and entrepreneurs can seek advice, they are not the only human capital that CapBridge will provide.
“When they are on our platform, they will have a market professional with them. They would also have investors who know businesses and who can guide them. We also work with the guys [who are good] with numbers – the lawyers and auditors. So what you have is a de-facto mentorship programme already,” says Nasser, a former State Counsel.
In providing such an extensive support system, SGX hopes to play its part in helping startups succeed.
“Once you use this platform and get access to funding and sound advice, then you will see the value proposition. We want you to grow up right and be successful. And, if listing is the path you have chosen, you still have to go through the rigour of the listing process but it becomes [much more] seamless and less difficult because [CapBridge] would have prepared the company in the right way,” says Nasser, who adds that there is no requirement for companies on CapBridge to eventually list in Singapore (either through Catalist or the Mainboard) or to even file for a public listing.
But a pitch was in store nonetheless.
“When you list on the SGX, you’re actually abiding by the Singapore Story. If you’re a Singaporean company, you’re built in a way that forces you to look out […] to go regional [or] international. So it [should be] natural for you when you want to list that you look at Singapore as well because we are international.”