An updated & practical guide to schemes and grants for startups in Singapore for 2017

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In this article, lawyer WanHsi Yeong from ArrowGates LLC talks about funding and offers practical advice for existing and aspiring startup entrepreneurs.

Funding is undeniably a priority for startups. Staying true to its renowned reputation as a business friendly hub, Singapore offers a myriad of schemes and grants to aid startups in growing and expanding their capabilities.

However, given the wide range of schemes and grants that are available, it can often be confusing and challenging for startups to navigate through them and evaluate which one would be most applicable to their respective businesses. To make this process easier, I have compiled a non-exhaustive guide of the key schemes and grants that are available to startups.

This guide is divided into the following sections:

Co-Investments: Equity funding
Funding Grants: Funding in the form of cash/vouchers
Tax Incentives: Cash or Tax deductions

Here is a brief overview on the types of schemes available

1. Co-Investment

Co-investment schemes are schemes in which the sponsoring organization makes an investment alongside a financial sponsor or other private investors for an equity stake in the startup.

When to pick co-investment?

Co-investment schemes are most suitable for startups that are in the process or are planning to raise funds in the near future, and when the quantum of funding sought is relatively high.

Benefits of co-investment schemes

Disadvantages of co-investment schemes

Generally able to procure a greater quantum of funding under co-investment schemes than other forms of funding
Potential to have renowned venture capital firms and government agencies as investors

A certain percentage of equity has to be given up in exchange for investment which means the founder loses a certain degree of control
Application process can be more challenging and time consuming compared to other forms of funding as startups would have to fulfill the requirements of two entities. i.e. the government organization and the external investor
Eligibility requirement for some of the schemes are more stringent
Schemes might only be applicable to startups in particular industries

What are the co-investment schemes that are available?

SPRING Singapore and the National Research Foundation (NRF) provide the following co-investment schemes:

Scheme	Overview	Eligibility	Comments
Business Angel Scheme (BAS) By SPRING Singapore	SPRINGS may match the sum invested by investor(s) dollar-for-dollar up to a maximum of S$2 million. SPRING and investor(s) will take equity stakes in the start-up in proportion to investments.	Obtain investment commitment from investor(s) Singapore-based with core activities carried out in Singapore Incorporated as a Private Limited Company for less than 5 years Paid-up capital of at least $50,000 Demonstrate substantial innovative and intellectual content for products and/or services and/or applications Demonstrate high growth potential with scalability for international markets	Investment commitment of any participating Business Angel investor(s) Angel Investors refer to investors that have been approved by SPRING Singapore.
Startup Enterprise Development Scheme (SEEDS) By SPRING Singapore	Same as above	Same as above	Investment commitment of any independent 3^rd party investor(s) (Corporate / Individual investor) Requirements of 3^rd party investor(s): No prior interest in the company at the point of application i.e. independent and objective Invest at least S$75,000 each Possess management / technical expertise that can add value to the startup Willing to take up a Board seat in the startup
Sector Specific Accelerator (SSA) Programme By SPRING Singapore	SPRINGS co-invests with accelerators on a 1:1 basis. Accelerators invest and help startups build up management teams and meet regulatory requirements	No specific guidelines currently available	Programme is currently focused on startups in the medical technology sector Current accelerators Clearbridge BSA Singapore Medtech Accelerator (SMA) ZicomMedTacc Med-Tech Alliance Venturecraft Group
Early Stage Venture Fund (ESVF) By National Research Foundation (NRF)	NRF invests S$10 million on a matching basis, to seed corporate venture capital (VC) funds that invest in Singapore-based early stage high-tech companies. VCs will be given an option to buy out NRF’s share of the fund within five years by repaying the capital and interest	Contact respective VC firms to seek funding eligibility	Selected VC firms CapitaLand Limited DeClout Limited Wilmar International Limited YCH Group Private Limited

Which co-investment scheme should you pick?

The type of scheme that is most suitable for your startup depends on the type of investors that you are seeking and on the particular sector in which your startup is engaged in. For example if you have an independent 3^rd party investor and wish to seek matching funding from SPRING Singapore, than you would want to consider SEEDS. However, if you do pick SEEDS, you would have to ensure your independent 3^rd party investor is able to meet the criteria outlined by SPRING Singapore in order to qualify for the scheme. This might pose its own challenges compared to picking BAS in which the Angel Investors have already been approved by SPRING Singapore and therefore it might easier for startups to qualify for the scheme.

The sector in which your startup operates is an important consideration as well. Most Angel Investors, Venture Capital firms and Accelerators focus on particular sectors and you would have to approach the most appropriate one when seeking funding. For example if your startup is in the medical technology sector, the SSA scheme would be a good option to consider as the Accelerators in the scheme are currently focused on developing startups in that specific sector.

As a general guide, if your startup is under one of the following sectors, than you may wish to consider the respective schemes as follows:

Sector	Scheme
All sectors	Startup Enterprise Development Scheme (SEEDS) Business Angel Scheme (BAS) Angel investors: Accel-X
Medical Technology	Sector Specific Accelerator (SSA) Programme Business Angel Scheme (BAS) Angel investors: AITventures August Capital Partners Majuven BAF Spectrum
Information Technology	Early Stage Venture Fund (ESVF) Business Angel Scheme (BAS) Angel investors: EnchantVC Majuven BAF Spectrum Individual Angels Jungle Ventures
Engineering / Clean Technology	Business Angel Scheme (BAS) Angel investors: Green Meadows Accelerator JCS Venture Lab Majuven Small World Group Angels TRIREC Wavemaker

2. Funding Grants

Startups are provided with grants in the form of money and prepaid vouchers for various purposes including improving technological capabilities, internal systems, licensing and even international expansion.

When to pick Funding Grants?

Funding grants are suitable for startups that do not wish to part with equity and those that might not require a significant amount of funding.

Benefits of funding grants

Disadvantages of funding grants

Equity need not be given up in exchange for funding
Grants are available for a wide spectrum of development activities

Quantum of funds available under grants may be lower compared to co-investment schemes
Approval time for grants may be lengthy and vary depending on complexity of claim
Usually required to make payment for development first and claim later which means sufficient liquidity is required
Some grants expire soon

What are the Funding Grants that are available?

Sponsoring organizations such as SPRING Singapore, Info-communications Media Development Authority and IE Singapore provide the following schemes:

Scheme

Overview

Eligibility

Comments

ACE Startup Grant

By SPRING Singapore

Grant matches S$7 to every S$3 raised by the entrepreneur, up to a cap of S$50,000.

Mentor is assigned to guide the start-up in the first year

Singapore Citizen / Permanent Resident
First-time entrepreneur
Hold at least 51% equity in the company
Key decision maker of the company
Business idea is not one of the following: Cafes, clubs, lounges, bars, foot reflexology, massage parlours, beauty salons, gambling, prostitution social escort services, employment agencies and geomancy

Evaluation criteria of applications:
- Business is differentiated
- Feasibility of business model
- Potential market opportunity
- Management team

Technology Enterprise Commercialisation Scheme (TECS)

By SPRING Singapore

Scheme provides early-funding to help startups commercialize their proprietary technology products and services.

Two grants are available under TECS depending on the stage of development of the technology or solution/concept

The Company

Carries out core activities in Singapore
Is registered for less than 5 years at time of award
Has at least 30% local shareholding
Group annual sales turnover is not more than $100 million
Group employment not more than 200 workers

The Tech solution

Demonstrate how science/technology is applied
Be of a breakthrough level of innovation
Lead to or build on proprietary know-how/IP
Commercially viable

Type of grants

Proof-of-Concept (POC) Project

Applicable to technological solutions that are at the conceptualisation stage
Up to 100% of qualifying cost, up to a maximum of SGD$250,000

Proof-of-Value (POV) Project

Applicable when there is a working prototype
Grant is for the further research and development of the working prototype to validate the commercial viability of the solution
Up to 85% of qualifying cost, up to a maximum of SGD$500,000

Qualifying Costs

Basic Manpower Costs
Professional Services
Equipment / Software
IP Rights

Operating Expenditure

Innovation & Capability Voucher (ICV)

By SPRING Singapore

Maximum S$40,000 in vouchers of S$5,000 (i.e. 8 vouchers cap).

Vouchers can be used to procure Consultancy Services or implement pre-scoped Integrated Solutions

Vouchers are to be redeemed from participating Service Providers. i.e. Consultancy and Integrated Solutions Service Providers.

Registered and operating in Singapore
At least 30% local shareholding
Group annual sales turnover is not more than $100 million
Group employment not more than 200 workers

Participating Service Provider – Consultancy service and Solution providers that have been approved by SPRING Singapore

Consultancy services

Innovation
Productivity
Human resources
Financial management

Integrated Solutions – tried and tested tools to improve productivity

Appointment Scheduling and Booking System
Asset / Personnel Tracking and Identification
Clinic Management System
Etc

Note: Max 2 vouchers to implement pre-scoped Integrated Solutions or per capability area for supported consultancy services

Capabilities Development Grant – Technology Innovation (CDG-TI)

By Info-communications Media Development Authority (IMDA)

Grant for Small and Medium Enterprises to develop capabilities across 10 key business areas.

Funding of up to 70% of qualifying project costs.

Registered and operating in Singapore
At least 30% local shareholding
Group annual sales turnover is not more than $100 million
Group employment not more than 200 workers

Development areas

Technology Innovation
Brand and Marketing Strategy Development
Business Excellence
Business Strategy Innovation
Enhancing Quality and Standards
Financial Management
Human Capital Development
Intellectual Property and Franchising
Productivity Improvement
Service Excellence

Qualifying Project Costs

Consultancy
Training
Certification
Equipment costs

iSPRINT

By Info-communications Media Development Authority (IMDA)

Grant to develop technological capabilities.

Up to 70% of costs, capped at $20,000 for procuring packaged solutions.

Up to 70% of costs for procuring sector specific solutions.

Solutions have to be procured from IMDA approved vendors.

Registered and operating in Singapore
At least 30% local shareholding
Group annual sales turnover is not more than $100 million
Group employment not more than 200 workers

Packaged Solutions – solutions that are available off-the-shelf or on a pay-per-use basis

Customer Relationship Management
Enterprise Resource Planning (Inventory/ Warehouse Management)
Enterprise Resource Planning (Inventory/ Warehouse Management/ Project Costing)
Etc

Sector Specific Solution

Logistics / F&B – Distribution Management System
Account and Auditing Services – Audit Software
Construction – Fleet Management
Etc

Market Readiness Assistance Grant (MRA)

By IE Singapore

Grant for international expansion.

70% of eligible cost for supported activities in relation to expansion, capped at S$20,000 per company per fiscal year.

Maximum of two applications per fiscal year, starting on 1 April and ending on 31 March the following year.

Valid till 31 March 2018.

Global HQ based in Singapore
Annual turnover of less than S$100 million per annum

Supported Activities

Overseas market set-up
Identification of business partners
Overseas market promotion

Global HQ refers to global management control and decision making functions are based in Singapore

SME is defined as is a company whose turnover is not exceeding S$100 million based on the most recent audited report

Global Company Partnership Grant (GCP)

By IE Singapore

Grant for international expansion.

SMEs get up to 70% of eligible costs.

Non-SMEs get up to 50% of eligible costs.

Eligible costs are costs incurred in engaging a third-party professional to develop the business in the following areas: (1) Capability Building (2) Market Access (3) Manpower Development.

Valid till 31 March 2018.

Global HQ based in Singapore
Annual sales turnover of at least S$500,000 per annum based on the most recent audited report
Minimum paid-up capital of S$50,000

Capability Building

Internationalisation strategy
Branding
Franchising and licensing
Etc

Market Access

Market research
Market feasibility studies
Identification of overseas distributors
Etc

Manpower development

International manpower strategy
Talent attraction
Talent development
Etc

Which scheme should you pick?

As seen above, there are numerous schemes that provide funding to improve various aspects of your startup and each scheme has its own merits and demerits that you would have to consider before applying.

For example, the Ace Startup Grant is attractive in that not only does it provide substantial funding but also assigns a mentor which is imperative for young startups that need the guidance of more experienced individuals. However, the evaluation criteria of applications are rigorous and you would have to show, among other things, how distinct your business is from other applicants. Further, unlike other grants that may be given in lump sums, funding under this grant will only be given over two to three tranches when the startup hits certain pre-determined milestones.

Another one is the Technology Enterprise Commercialisation Scheme (TECS). Startups that satisfy the requirement may get up to 85% or 100% of qualifying costs depending on the type of grant they apply for. The amount offered under the scheme would significantly relieve the financial burden on the startup. Nonetheless, similar to the Ace Grant, the eligibility criteria to qualify for TECS are stringent and proving that your technological solution is of a breakthrough level might be a challenging task.

If you desire to expand your business overseas, you might want to consider the Market Readiness Assistance Grant (MRA) and the Global Company Partnership Grant (GCP). The grant supports critical areas such as internationalisation strategy, manpower development and identification of overseas partners. However, in order to qualify for GCP for example, your annual sales turnover has to be at least S$500,000. Most startups that are in their infancy would find difficult to meet this target. Therefore, if you wish to consider expanding your business overseas, you might have to grow your sales and prove that you can meet the target which might take considerable amount of time.

Overall, the purpose of your application would dictate the type of scheme that is suitable for your startup. Therefore, it is essential to determine which aspect of the business the funding is being sought for. The following provides some guidance as to which scheme might be suited for your startup based on the purpose of your application:

Purpose	Scheme
General Development	Innovation & Capability Voucher (ICV) ACE Startup Grant Capabilities Development Grant – Technology Innovation (CDG-TI)
Commercialization of Technological Products/Services	Technology Enterprise Commercialisation Scheme (TECS)
Developing Technological Capabilities	iSPRINT Capabilities Development Grant – Technology Innovation (CDG-TI) Innovation & Capability Voucher (ICV)
Overseas Expansion	Market Readiness Assistance Grant (MRA) Global Company Partnership Grant (GCP)

3. Tax Incentives

Perhaps the most common and well utilized tax incentive is the Productivity and Innovation Credit (PIC) scheme by the Inland Revenue Authority of Singapore (IRAS) which will be in effect till 2018. Businesses that meet the eligibility criteria can opt between receiving tax deductions or cash payouts for expenditure incurred in any of the Six Qualifying Activities.

Benefits of PIC

Disadvantages of PIC

Option to have cash payout for 40% of qualifying expenditure
Eventual capital outlay is lower
Covers a wide category of activities

3 employee requirement might be difficult for early startups to satisfy
Usually required to make payment for qualifying activities first and claim PIC later which means sufficient liquidity is required
Cash payouts may take up to 3 months to be disbursed
Due to frequent news of the abuse of scheme, applications might take a longer time and involve a few rounds of clarifications before being approved

Overview of PIC

Scheme

Overview

Eligibility

Comments

Productivity and Innovation Credit (PIC)

By Inland Revenue Authority of Singapore (IRAS)

Tax deduction – 400% tax deductions or allowances on up to $400,000 of spending per year in each of Six Qualifying Activities.

Cashpayout – convert qualifying expenditure of up to S$100,000 for each year into cash at a conversion rate of 40%.

Registered and operating in Singapore
Incurred qualifying expenditure and are entitled to PIC during the basis period for the qualifying year

Cash Payout

Minimum qualifying expenditure for each cash payout application is $400
At least three local employees (Singapore Citizens or Singapore Permanent Residents with Central Provident Fund (CPF) contributions) excludingsole-proprietors, partners under contract for service and shareholders who are directors of the company

For PIC IT and automation equipment claims relating to 2016 onwards, equipment has to be “in-use” when opting for cash payout

Qualifying Activities

Acquisition and leasing of PIC IT automation equipment
Training of employees
Acquisition and licensing of intellectual property rights
Registration of patents, trademarks, designs and plant varieties
Research & Development
Investment in design projects

OVERSEAS COMPANIES

There is another scheme available in Singapore, which is more geared towards overseas companies, and particularly for the financial industry. This scheme is termed Financial Sector Technology and Innovation (FSTI) by the Monetary Authority of Singapore (MAS). It is essentially a financial assistance scheme, where a sum of Financial assistance scheme where a sum of S$225 million is to be granted to participants over 5 years.

The purpose of the scheme is to (i) attract financial institutions (FIs) to set up their R&D and innovation labs in Singapore; (ii) catalyse the development by FIs of innovative solutions that have the potential to promote growth, efficiency, or competitiveness; (iii) support the building of industry-wide technology infrastructure that is required for the delivery of new, integrated services (Applicable to start-ups/tech companies)

There are presently no guidelines from MAS as to the eligibility of participants to the scheme.

Maximize and explore your options in order to grow your business

Given the availability of schemes and grants in Singapore as discussed above, startups are encouraged to explore and maximize these options to grow their businesses.

Before deciding whether to opt for a co-investment scheme, a funding grant or a tax incentive you would have to consider a multitude of factors including the

technical and operational needs of your startup,
the urgency in which you would require funding and
the level of control that you would be comfortable giving up

If control is your biggest consideration	Funding grants might be your best option.
If you require a large amount of investment in a considerably shorter amount of time	A co-investment scheme would better suit your needs.
If you require tax deductions or cash payouts	Tax incentives might be your best option

Need Advice?

If you need advice on any aspect of funding, grants, and/or business documentation, you might consider having a Quick Consult with me where I can advise you and answer a specific question you may have on Startup or Fintech-related issues over a 15-minute discussion on the phone for a transparent, flat fee of S$69 here.

This article was co-authored with Seah Ern Xu, Content Strategist at AsiaLawNetwork.com.

If you want to know more about finding a lawyer

This article is written by Yeong WanHsi from ArrowGates LLC and Seah Ern Xu from Asia Law Network.

This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.

WanHsi Yeong

Yeong WanHsi practices at ArrowGates LLC. She has extensive corporate experience including multi-jurisdictional mergers and acquisitions, venture capital, initial public offerings, private equity investments, regulatory compliance, financial markets, corporate restructuring and general corporate work. Always seeking to be at the forefront of evolving markets, WanHsi has continually expanded her capabilities to cater to the emerging start-up and Fintech markets. WanHsi is also the founder and benefactor of the Love Changes Nations charity which has done voluntary work over the last 8 years in disaster stricken countries all over the world, including Philippines, Mozambique, Pakistan, Nepal, and Brazil.