SINGAPORE — The Monetary Authority of Singapore (MAS) is reviewing the regulatory policy framework around venture capital (VC) firms, in a bid to improve funding availability for financial technology start-ups.

Shortage of capital and tech talent are the two key challenges the Republic faces, as it positions itself as one of Asia’s top destinations for fintech companies, said MAS managing director Ravi Menon at the official opening on Wednesday (Aug 24) of the regulator’s fintech innovation lab, which has been christened Looking Glass @ MAS.

“In terms of capital, we are lagging the leading centers (in funding opportunities for tech-start-ups here),” said Mr Menon. “Although there are a lot of VCs here, there are (also) many startups and good ideas chasing funds.”

To address that, MAS said it is reviewing some of the regulatory requirements that it places on VC funds.

“We have just started the review so I can’t say more ... Our policy framework is evolving,” Mr Menon said.

According to a report released by Google and Temasek in May, VC investment in South-east Asia accounted for 0.04 per cent of its gross domestic product in 2014; compared with 0.15 per cent in China, 0.25 per cent in India and 0.3 per cent in the US. Singapore companies got the bulk (72 per cent) of the region’s estimated US$1.1 billion VC funding, the report said.

Still, more needs to be done even as the Government — through its agencies such as SPRING, National Research Foundation and MAS — continue to plug the funding gaps.

Nine of the fourteen most well-funded SEA startups are in Singapore, noted Mr Daren Tan, Managing Partner, Golden Equator Capital.

“To increase this momentum, investors would want to see more vibrant Series C (onwards) rounds, creating an energetic capital market for companies invested in by VCs,” said Mr Tan.

According to Mr Tiang Lim Foo, Operating Partner at SeedPlus, several components are needed for the fintech ecosystem to thrive, including a transparent and efficient regulatory environment, access to talent, and efficient funding sources.

The Government can also play a larger role in helping start-ups get quality funding by allowing for tax benefits, simplified procedures, and easing regulations on foreign manpower, other VCs said.

Mr Ethan Pierse, Managing Partner at Nest Venture Capital, said he is looking forward to Singapore having a clear legal framework for fintech innovations such as blockchain and peer-to-peer lending.

The authorities here should also consider collaborating with regulators in Malaysia, Indonesia, Australia, Thailand, Hong Kong or Philippines so that a VC licensed in another jurisdiction will be able to go on the fast track when applying for licensing in Singapore, Mr Pierse suggested.

“There should also be tax benefits for high-net-worth individuals deciding to invest capital in venture capital funds, as well as simplified procedures to apply to set up a venture fund under RFMC (Registered Fund Management Company), which currently requires six to 12 months with high set up fees. There should be continued support from the government in providing matching funding for specialised funds for specific sectors,” he added.

Meanwhile, several startups in Singapore said that roping in funding has not been easy.

“Technology-based startups in Singapore chase smart money, but don’t get the right valuation or a value proposition from an investor with capabilities of scaling up the project or taking it global,” said Mr Kuldeep Singh Rajput, founder & CEO of data analytics firm Biofourmis, which secured US$1 million in angel funding.

“The focus of the right kind of VCs for such tech-driven companies are limited in Singapore as they are more focused on the US or Europe,” he added.

Mr Vaibhav Dabhade, founder and CEO of Anchanto, which provides ecommerce fulfillment, lamented the difficulty in securing VC funding for smaller deals. He secured funding from Japanese investors.

“Small ticket size VC fundings in Singapore are on a decline. Given the economic slowdown, the environment is such that there is more pressure on startups to show the path to profitability instead of market share and growth opportunities,” he said.