What should you expect when pitching for seed funding in Singapore?

pitching for seed funding Singapore

So you’ve weighed the pros and cons of getting an investor on board your startup and you’ve decided to bite the bullet and start approaching investors.

You’ve sent your pitch deck to a carefully curated list of investors and you’ve actually gotten a few responses. Some of them want to arrange a meeting and you’re dizzy with delight.

Then you realize you have completely no clue what the process of getting seed funding is like in Singapore.

If this sounds remotely like the situation you’re in, don’t worry. Fortunately, we’re here to help.

Prepare to be grilled during the meeting.

Some investors will invite you down for a “casual chat” or a “meeting” but make no mistake, you’re being asked to attend an interview, and you should prepare for it with the expectation that you and your team are going to be asked a lot of prodding questions about your startup.

A venture capitalist who invests in your startup is taking a calculated bet and will want to know everything. You’ll be questioned about your team’s qualifications and suitability for their roles in the startup, the total addressable market, your product and services, your go-to-market strategy, why you need the amount you’re requesting for, and how you intend to use that money.

Pro tip: If you’ve sent in a pitch deck, be prepared to explain certain aspects of it in further detail. A number of seed investors make the decision for the initial interview based on something that attracted their attention in the pitch deck.

Due Diligence – Revealing the core of your business

As stated earlier, an investor will want to know everything about your startup. If you’ve already incorporated, the investor will likely want to see financial audits, cash-flow projections, agreements with previous investors, business plans, etc.

It’s going to feel like you’re laying your entire business bare, and some founders might not be very comfortable with the idea of doing so. Unfortunately, if you’re asking for funding, this is going to be something you’ll have to get used to. Every investor looks for a decent return on his investment and a savvy investor will do his due diligence before pumping in money.

Some of the documents an investor will usually want to see in Singapore include, but are not limited to:

  1. Latest ACRA Profile (Singapore) and/or Incorporation profile from any other country of incorporation (reflecting capitalisation table)
  2. Profit & Loss for 12 months trailing and 18 months projected financials (detailed)
  3. Balance Sheet
  4. Memorandum and Articles of Association (now known as the Constitution)
  5. Previous term sheets and/or contracts with other investors
  6. Any government grant applications
  7. Any significant agreements relating to alliances, sales, or intellectual property
  8. Resumes of the founders
  9. Business presentation slide deck
  10. Spreadsheet of how the requested funds will be used
  11. Employee roll-out and hiring plans

Pro-tip: Don’t ask a venture capitalist to sign a Non-disclosure Agreement (NDA). Most of them will refuse and you’ll look like an amateur for asking them to do so. Worry less about the idea and focus on executing instead.

Negotiations

Having an interested investor is only the start. What comes next can sometimes be a long and drawn-out process, depending on the parties involved.

An investor can provide you with seed funding in exchange for equity, provide you with a loan, or both (through a convertible note, with the option to convert a loan to equity).

An interested investor will usually start negotiating from the very start, but the real negotiation tends to begin after you’ve received a term sheet. At this stage, nothing is usually binding, although many investors will require founders not to shop for other investors for a certain period.

The actual contract

Once the negotiations are concluded, and the parties involved are happy with the terms, the actual contracts will be drafted with the terms and conditions agreed upon by both sides.

Generally, it’s a good idea for most founders to involve a lawyer once you’ve received a term sheet. However, you should definitely take your contract to a decent startup lawyer in Singapore before agreeing to anything. For the most part, your investor will have a lawyer trying to craft an airtight deal and while this may not necessarily always be against your interests, it’s always a good idea to protect yourself and your startup.