The Singapore government has invested significant resources and efforts in building up a thriving startup environment, but its inhabitants must now take risks and look beyond local shores.
Jeffrey Paine, general partner at Golden Gate Ventures, believed Singapore’s startup scene had progressed well over the last six to eight years. He said a number of successful startups had grown and executed well in the region, as well as globally.
“Considering the time spent, resources, and size of our population, we have done well,” Paine said. He also pointed to numerous programmes and events run by Singapore’s National Research Foundation (NRF) such as ESVS (Early Stage Venture Fund) and TIS (Technology Incubation Scheme) as well Tech Week and Slush Singapore, which had helped drive the local ecosystem.
In addition, close coordination between the relevant organisations including NRF, Infocommunications Media Development Authority, National University of Singapore, and Jurong Town Council helped keep Singapore the top choice among entrepreneurs and investors looking to set up or domicile their entities, he said.
Lyon Poh, head of digital and innovation at KPMG in Singapore, concurred, adding that the government had “undeniably shown a concerted effort in funding and supporting” the startup community, in particular, over the past three years.
Poh noted that Block 71/79, also called Launchpad, had been gaining a reputation as the Silicon Valley of Asia and enticed global startups to set up base here to access other Asian markets.
In terms of securing VC investments, he revealed that Singapore stood out in the third quarter of 2016, leading Southeast Asia with 21 deals worth US$858.9 million. The region inked a total of 55 deals worth US$1.495 billion, he said, citing stats from KPMG and CB Insights’ quarterly Venture Pulse report.
One local entrepreneur, Melvin Yuan, successfully manoeuvred an exit strategy for his former technology startup, YFind Technologies, which was acquired by Ruckus Wireless in July 2013. He later left Ruckus and founded another startup, The Commissioned, about a year ago, setting up base in Silicon Valley as well as Singapore. The online service connects artists with art buyers, allowing the latter to commission personalised pieces.
Yuan applauded the Singapore government’s “sheer guts and will power” in helping to set up and drive the country’s startup ecosystem. “It knows how to consistently and systematically provide capital or funding to startups that need to build from scratch in a high-cost environment for businesses.
“And it does this without compromising integrity,” he said, noting that the high number of foreign entrepreneurs that had chosen to set up their businesses here underscored the impact the Singapore government’s efforts had on the startup landscape.
He added, however, that there were still key components lacking in the Asian market that the US startup environment was able to provide.
Hunt for willing enterprise testers, early adopters
Explaining his decision to set up base in San Francisco, Yuan said Silicon Valley provided access to clients and users that were ready to try something new. In comparison, Singapore customers resisted being early adopters because they feared the possibility of failing, he said.
He added that concerns about failure were prevalent not just among Singapore startups, but also potential clients that believed their business would be affected if they tried a new piece of technology.
“In the US, they don’t care. There are more early adopters there,” Yuan said. “Imagine a customer who’s an IT decision-maker in a large organisation and, all his life, he’s been brought up to think he can try something and return it if it doesn’t work out. Compare that to someone who’s been brought up to think if he’s not sure, don’t buy, and to ask others first and adopt a wait-and-see attitude.”
He recalled how even major organisations in the US such as Home Depot and Staples would readily try out products from YFind, but the startup then had faced difficulty trying to find customers in Singapore willing to do the same. “I couldn’t get past middle-management. The attitude was not to risk it and to let others try it out first,” he said. “It’s subtle, but it makes a big impact.”
He added that Silicon Valley also offered access to capital and advisors, which he said still was comparatively low and lacking in breadth in Singapore.
Paine said the lack of willing testers in Singapore was typical of any young ecosystem where there was slower technology adoption among businesses. This, he said, would change over time, especially as more organisations in the country and region had been adopting technology in the last few years.
With continued support from the government and industry, he noted that the local business community would take notice and over time, they would see the value of deploying technology from startups.
Poh added that poor adoption of startup products could be attributed to user experience as well as scalability in a small market such as Singapore. He said adoption typically would be higher if the transition experience was positive, but this often would be hindered due to multiple legacy systems and challenges in creating a seamless user experience.
To resolve this, there would need to be open collaboration with “adjacent ecosystem players”, including regulators, he said.
“The next challenge for startups is scalability and Singapore’s market is just too small a playing field, [offering] at best, a testbed,” he noted. “To scale, there must be ready corridors for exporting tested solutions to bigger markets like the US and China.”
Asked what he thought was still lacking in Singapore for startups to thrive, Paine said: “More knowledge, more travel, more friends in different parts of the world. More confidence, think bigger.”
Startups here should learn to be “crazier” and more daring, he said, but noted that Silicon Valley startups also needed to be more empathetic and localise their products to cater to other markets.
Amid an industry that values innovation, Poh said organisations were expected to break the rules and accept failure. “This, therefore, requires a culture change in Singapore to one that embraces risk and tolerates failure,” he said. “Such acculturation needs to start with our young and making tweaks to our education system is one way to achieving this.”
Need for more late-stage funds
Poh noted that while Singapore had a good base of accelerators, incubators, and Series A investors, the country still faced a challenge attracting investors that can lead larger funding rounds.
In the fintech space, for instance, more startups in the “scale-up” stage had been setting up base here, he said. He explained that these late-stage startups were looking to scale up by expanding into Asia, which also was part of their growth plans, and sought strategic investors able to help fund such plans and provide market access. This typically would require funds in excess of US$10 million, he said, adding that some targeted as much as US$30 million to US$50 million.
He also pointed to the maturing of Singapore’s tech VC sector over the past four years, resulting in VCs becoming more selective about the startups they invested in.
Poh said: “To attract more VCs, Singapore should relook existing incentives or grants available that are more geared towards early-stage companies. These are currently focused on the funding of accelerators, incubators, innovation labs, as well as proof-of-concept initiatives.
“The government also could consider co-investments for later stage investments with some risk-sharing or de-risking schemes,” he added.
Yuan further stressed a need to build out the supporting ecosystem, which was more established in Silicon Valley. Logistics services there, for instance, were sophisticated and designed to support the likes of former startups Amazon and eBay.
“[Logistics providers] there know how to integrate their backend and use the same language to work with startups,” he said. “They know how startups work and ensure their systems support startups. We don’t have that here in Singapore yet.”
He described how logistics providers here required PDF forms to be filled out for art pieces to be picked up and delivered between buyers and artists on The Commissioned platform. Their backend systems still could not be integrated to automate the various processes involved, he said.
“People here and those working on the ground with the startups don’t get it. People in Silicon Valley get it,” Yuan said, adding that startups constantly were pushing the envelope to improve the user experience and needed an ecosystem of players to support this.
His advice to aspiring entrepreneurs? “Get into a good accelerator,” he said, pointing to the likes of NFX Guild and 500 Startups. “Being in an accelerator allows you to very quickly understand global markets. If you want to build a successful tech startup, US is a critical market. That’s where ideas are tested and validated.”
Paine urged Singapore entrepreneurs against defining success based on becoming a unicorn or a globally recognised brand.
“It is about giving it all you have with calculated risks,” he said. “And enjoy the creation, execution process of building a business. Nobody says you have to be funded to be successful. Different problems in the world yield different business and commercial outcomes. As long as you want something to exist in this world, you should have the opportunity to do it.”