SIBNNGAPORE : Six venture funds have become the first to receive funding under the Early Stage Venture Funding scheme. They were awarded S$10 million each from the National Research Foundation (NRF).

The scheme was launched earlier in the year, with the aim of helping start-ups within the IT sector.

Nanotechnology and digital media are just a few of the areas which the foundation is looking to boost with its latest S$60 million investment into venture funds.

The government body hopes the move will help to patch the biggest problem facing IT start-ups - a lack of venture capital.

Teo Ming Kian, Permanent Secretary, National Research and Development, said: "With the (new) technologies and new markets, it's always a big risk as nobody will know whether these technologies will amount to anything, so the risk is very high.

"Unless you have venture capitalists who understand the technology, who are able to forecast the demands... and are prepared to invest and put their money, it's often very difficult for these early stage companies to... start up and grow.

"We need to capitalise and help build a few of these venture funds that are prepared to take the risks and (invest) in these high-risk companies. And very often, the returns are very high."

The foundation called for proposals for the early stage venture funds on April 18 this year, and 22 proposals were submitted. Only six companies were chosen. They are BioVeda Capital II, Nanostart Asia, Raffles Venture Partners, Tamarix Capital, Upstream-Expara and Walden International.

On top of the S$10 million invested from the foundation, the fund managers are also required to raise an additional S$10 million from third party investors. The S$10 million is to be raised over the next six months.

Fund managers will have the option to buy back the National Research Foundation's investment within 5 years at a rate of 1.25 times the original investment.

Some venture funds have already begun the hunt for local start-ups.

"We've been viewing, over the last 6 months, 10 potentials in Singapore, primarily from spin offs, A*STAR, and universities like NUS and NTU. So this is a very good timing for us to kick off the investment," said Lerwen Liu, Managing Director of Nanostart Asia Pte Ltd.

"Based on our guidelines, we hope to have 10 to 12 companies within the portfolio. We expect to fund up to S$3 million, so starting from S$500,000 to S$3 million in total exposure per company," said Pierre Hennes, a partner at Upstream Ventures.

The National Research Foundation said if the six funds are successful, it will be looking to bring more on board. - CNA /ls