Lightspeed Ventures, a California-based firm established a new office branch in Singapore with aims to distribute nearly $4 billion worth of investments in the city’s large tech field. Mostly, the company is aiming to diversify Singapore’s mobile industry and ensure better penetration of the market as well as a simplification of all business opportunities coming into the region.
Lightspeed, alongside many other US investment firms, is looking for opportunities to find a potential mega-corporation candidate that both Indonesia and Singapore have been producing for the last few years.
Even though the majority of the funds dedicated to this venture are planned for the tech industry in the country, most local experts believe that there will be a massive trickle-down of those funds to Singapore’s booming fintech industry.
But why the fintech industry?
One thing we need to consider about Singapore is its Geographic location as well as its access to raw resources, and various other methods of revenue generation that larger countries are known for. Singapore is in an extremely important geographical location that basically connects the East to the West, thus it has quite a lot of revenue from just the logistics industry.
But an extremely fast-growing region, even if it is just one city cannot survive on just one industry. Plus it’s extremely dangerous if anything happens to that particular industry. Therefore there has been a sort of financial technology craze going on in Singapore for the last couple of years simply because it doesn’t require a lot of investment, not does it need too much manpower. What it needs is a large pool of potential customers.
Fintech rubbing off on Singapore’s FX scene
One of the main “clients” so to say that fintech companies have found in Singapore are FX companies. The clear difference between local companies and Western ones seems to be a bit more interesting for the residents of Singapore as well as surrounding countries. This mostly has to do with not only a large list of online regulated forex brokers in the city, but also the huge mobile penetration of fintech that redirects them to their VIP clients, of which FX companies are a part of.
Furthermore, local FX traders note that trading SGD with local FX companies is a lot more profitable than finding it on foreign firms as the exchange rates differ considerably. Considering the volume of new business in Singapore, both retail and institutional FX volumes are through the roof, putting this small country or city as people like to refer to it in the list of largest FX countries in the world.
Series of investments
All firms involved in the new venture have already outlined their desired focus industries, chief among them being enterprise software alongside financial technology for financial service providers residing in the city.
The series will be divided into A and B both encompassing anywhere between $500,000 and $20 million for select few brands.
It is worth noting that there are no real technicalities in reference to the fundings. The only requirements that a potential startup needs to have are a confirmed registration in the city of Singapore and a clear alignment with the industries chosen by the venture capitalists. Anything outside of this spectrum is not necessarily eligible for investment as it’s considered there’s a limited number of funds.
It may sound surprising that $4 billion is considered limited, but based on the business plan that most Singapore startups go for, they’re most definitely going to need as much as they get.
Sure the local market is booming and profitable, but most firms target a more global playing field.
The most likely markets to benefit from these types of investments are the developing countries surrounding Singapore as that’s where most firms test their new products or services. What this means is that the majority of South East Asia is going to get an onslaught of well-funded fintech companies bringing tech adoption to their borders and potentially growing the local prosperity as well.
Other than that, the investments will most likely go to adjusting to the regulatory requirements in China as a source of large clientele and finally mandatory resources for a breakthrough in the US and EU markets well into the future.
The reason why this is such a well-followed tactic is quite simple.
First, the firms start testing their products in markets where costs are very low but demand and “innovation factor” are really high. Then they test it in a market that is heavy with regulation, but rich with a customer base and limited “innovation factor”.
Finally, though, the finished product makes its way to a market that has almost no “innovation factor” as there is a lot of competition and a limited customer base. But the redeeming factor for the US and EU is that even if there is a limited number of customers to be had, most of those customers are worth as much as dozens of clients from developing markets.