SMALL and medium-sized enterprises (SMEs) not only can survive the current economic slowdown, they can even thrive - as long as they stay realistic.

Mr Eugene Wong, the managing director of venture capital and finance advisory firm Sirius Venture Consulting, described SMEs as 'recession-proof'.

'They are smaller and more flexible. In a downturn, they can switch strategies quite quickly while keeping their core vision,' he said.

Sirius has launched a $30 million venture capital fund targeted specifically at helping Singapore-based SMEs grow and expand.

Mr Wong said in an interview last week that SMEs might have been 'very exuberant' in the last two years because of the booming economy, but he expected 'the entrepreneur will now be more careful'.

'We will feel more at ease investing money in SMEs, as people are always more realistic in a slowdown,' he said.

Mr Wong said the Sirius fund, which had already raised $15 million and was aiming to reach $30 million by the middle of next year, would fill a 'significant gap in the funding environment for SMEs'.

According to enterprise development agency Spring Singapore, there is much room for development in the field of equity financing in the Republic.

'While the India and China markets have been a great lure for venture capital funds, local companies with strong business models still hold their attraction for venture capitalists and business angels,' said Ms Choy Sauw Kook, Spring's group director of enterprise capabilities.

The number of SMEs in Singapore grew from 149,000 in 2005 to 161,000 last year.

Out of 1,200 firms in DP Information Group's annual SME Development Survey, 5 per cent tapped venture capital in 2005. Last year, that figure grew to 13 per cent - or about one in eight.

Sirius, founded in 2002, aims to invest in 10 to 12 companies by pumping $2 million to $3 million into each one. It expects to double or treble that amount for each company within an average holding period of three years from the initial investment.

Sirius treats every company it invests in as a partner, said Mr Wong. It seeks a 20 per cent to 30 per cent equity stake in that company.

It looks to invest in SMEs that are at least five years old and ideally have notched up profits of more than $1 million a year.

'When we invest, we help to create shareholder value. A founder may be able to bring a company from zero to $100 million. With a bit of partnership, they may be able to bring it to $200 million,' he said.

'We want to invest in Singapore-branded companies that can be global. The seed is Singapore, but the capital and market can be anywhere.'

Several of Sirius' past investments have been listed in bourses in Singapore and elsewhere in the region - and even in London. Last year, it helped casual dining chain restaurant Ajisen China to list on the Hong Kong Exchanges & Clearing.

The fund's investors include international venture capitalists - many of whom are from China - and local entrepreneurs, including Mr Goh Kai Kui, chief executive of food and beverage company Goh Joo Hin, which produces New Moon abalone.

This article was first published in The Straits Times on May 14, 2008

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