Venture capital funding in Singapore slightly weakened in 2022 following a bumper 2021 as investors took a cautious stance amidst a challenging macro environment, a report from DealStreetAsia and Enterprise Singapore showed.
Industry leaders, however, are optimistic that 2023 will see a growing number of new deals and an initial recovery in investor sentiments but warned that challenges will continue to persist.
“Although 2023 may present challenges, I believe the worst is behind us, and stability has been restored,” said Michael Blakey, founder and managing partner at Singapore-based early-stage venture capital firm Cocoon Capital.
The report, titled ‘Singapore Venture Funding Landscape 2022’, showed that annual deal volume in the city-state dropped 11% to 651 last year while the total deal value slipped 3% to $10.99 billion. The report also noted that deal activity was on a downward trend since the first quarter of the year.
Despite this, Singapore continues to be the top destination for venture capital investment in Southeast Asia, accounting for 56% of the total deal volume recorded in the region and 64% of the total money raised. Indonesia accounted for 21.9% of the deal value in SE Asia while Vietnam was at 4.1%, the Philippines at 3.7%, Malaysia at 3.5%, and Thailand at 3.1%.
The report, however, noted that Singapore’s quarterly data raises concerns over the potential for a further slowdown this year.
Singapore also saw four new unicorns last year, bumping the number of tech companies in the region that surpassed $1 billion in valuation to nine, down from 2021’s 24. Home interior and renovation platform Livspace became the first Singapore-headquartered firm to announce its unicorn status last year, with a $180-million Series F round in February.
Outside Singapore, the drop in total funding value was even more significant last year, plunging by 42% year-on-year due to the absence of mega-funding rounds in Indonesia, Malaysia, the Philippines, Thailand, and Vietnam.
“However, there are silver linings. Global early-stage VC fundraising and funding activity remain fairly robust, signifying that dry powder is still available in the market,” said Tan Kaixin, general manager at SEEDS Capital, the investment arm of Enterprise Singapore.
The report also noted a change in valuations across funding stages as investors clearly shifted their focus from growth to sustainability. Early-stage investments — classified as funding up to Series B rounds — saw an 8.2% year-on-year drop in volume but recorded a 12.3% increase in proceeds.
In contrast, the total value of late-stage funding dropped by 11.7%, despite deal volume remaining nearly flat. The median value of seed rounds surged 82.4% to $2.7 million last year, while that for Series A rounds jumped by 60% to $10 million.
The median value for both Series B and C rounds saw a 14.3% drop while the values for Series D recorded a 66.1% decline.
Last year, at least 21 startups graduated from seed to Series A, amassing $642 million in fresh capital, while seven completed Series B rounds worth $356 million. The report also noted that Singapore’s focus on deep tech has paid off as two companies focused on advanced biomedical technologies, Biofourmis and MiRXES, secured late-stage funding with a $320 million Series D and $87 million Series C, respectively.
Despite a relatively stable deal volume, the total value of funding in late-stage startups dropped slightly as many crossover funds, which were active in late-stage investments, took a step back after their publicly-listed portfolios took a beating in the stock market rout, the report pointed out.
For this year, VCs are expected to focus on their existing portfolio, according to Chua Kee Lock, chief executive officer at Singapore-based venture investor Vertex Holdings.
“Although there is an available dry powder, many VCs in the region have over-invested in the last few years and will deploy the dry powder on their existing portfolio rather than make new investments,” Chua added.
Overall, fund managers are optimistic that Singapore, with its rich ecosystem of talent, infrastructure, and government support, is well positioned to weather the current headwinds, according to the report.
“Venture investors expecting clearer skies ahead will be open to continue backing innovative ventures with a bottom-up thesis, while early growth-stage startups may see an initial recovery of interests in the second half of 2023 onwards tied to the IPO market development,” said Heritas Capital CEO and executive director Chik Wai Chiew.