Funding the Future

How Urban Policy Makers are Supporting the Innovation Economy

BY KAI FEDER

As cities continue to serve as global economic growth drivers , metropolitan governments are consistently doing more to encourage and nourish access to capital for innovative companies . Whether through the launch of strategic initiatives or the implementation of regulatory reforms , a range of strategies have been employed to stimulate the flow of private capital to high-risk , fast-growth companies . This global trend provides an excellent opportunity for governments to learn from one another , and capitalize on each other ’ s successes and failures . New York and Singapore offer a number of innovative approaches .

SINGAPORE

While Singapore ’ s standing as a global business hub spans dozens of years , the city-state ’ s startup economy only began to emerge over the past decade . Startup funding has grown rapidly since 2011 , and some would attribute elements of that growth to government-led initiatives .

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“ We are fortunate to have an able , stable , and prosperous government with a strong intent to help spur the startup ecosystem . Lots of resources have been set aside and deployed .” said Jeffrey Paine , the managing partner at Singapore-based venture fund , Golden Gate Ventures . “ Overall it has been great to watch .”

Arguably , the government ’ s most impactful programs have centered on grants for product development ; the IDM Jump Start and Mentor Program is a prime example . Under this two-tier funding program administered through a network of appointed incubators , startups receive an initial grant of approximately $ 38,000 to offset the development of an alpha product . Subsequently , qualifying startups can also receive an additional grant of approximately $ 75,000 if they obtain one-to-one matching funds from the private sector .

Accessing private sector funding in Singapore has become easier for startups , in part , because of the city-state ’ s competitive tax regulations . “ Singapore has an extremely business-friendly tax regime which has been very helpful both in attracting foreign angel , seed , and venture capital into the country and , as a direct result of this , in attracting people and ideas from outside of Singapore to set up in Singapore ,” said Dennis Tan , a senior associate on RHTLaw Taylor Wessing LLP ’ s corporate technology team .

In addition to other tax benefits , Singapore doesn ’ t tax capital gains , boasts a one-tier corporate tax system , a foreign-sourced dividend income tax exemption , a 17 percent corporate tax rate , and , in 2010 , launched the Angel Investors Tax Deduction ( AITD ) Scheme , which provides individual investors a tax deduction of 50 percent of the cost of qualifying investments .

The government also offers programs that leverage taxpayer dollars to grow the city-state ’ s venture capital and startup community . According to Suleen Ding , a senior associate on RHTLaw Taylor Wessing LLP ’ s corporate technology team , the Early Stage Venture Funding Scheme was launched to seed selected venture capital funds to invest in Singapore-based early stage tech companies by providing selected venture capital funds with up to

$ 7.5 million in one-to-one matching funds for investment .

Singapore also utilizes public funds to make equity investments in startups . SPRING , Singapore ’ s enterprise development agency , offers a dollar for dollar co-investment match up to $ 1.5 million dollars for qualified startups with international scalability potential through its Startup Enterprise Development Scheme . Under another program , the Technology Incubation Scheme , Singapore ’ s National Research Foundation is able to make individual co-investments of nearly $ 400,000 into startups at the recommendation of 14 select technology incubators .

NEW YORK CITY

The Big Apple ’ s innovation economy — which saw more than $ 1.2 billion of venture capital investment in Q1 of 2015 — has experienced significant growth over the past decade , despite federal regulations that significantly restrict individuals from investing in startups . As New York City ’ s tech sector grows , policymakers in both the city and state have taken note , and have launched several initiatives that support a continued flow of investment into New York City startups .

One marked example of this is a $ 10 million investment by the New York City Economic Development Corporation ( NYCEDC ) in the $ 150 million public-private partnership Early-Stage Life Sciences Funding Initiative , which intends to spur additional investment in research and development within the five boroughs .

“ For over a century , NYC has been a world leader for basic biomedical research and clinical care . The investments we are making will activate the untapped economic potential of this sector , which is poised for enormous growth ,” said Deputy Mayor Alicia Glen .

The co-investment fund , which intends to make Seed and Series A equity investments into life-science startups , will leverage a minimum one-to-one match for seed investments of less than $ 250,000 , and a one-to-two match of public and private funds , respectively , for investments greater than $ 250,000 . By do-

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Funding the Future

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