SINGAPORE, Jan 16 — It was not so long ago that policymakers and the business community lamented the dearth of entrepreneurs here, with high-profile corporate leaders even joining hands to try to discover Singapore’s next Sim Wong Hoo.
In 2002, the Singapore Overseas Network US Working Group submitted several radical recommendations to the Economic Review Committee (ERC) to boost entrepreneurship, including debunking the “iron rice bowl” concept of job security in the Civil Service by letting go of underperformers in economic downturns, and cutting the pay of civil servants in order to reduce the incentives for potential entrepreneurs to remain in the service.
These unconventional proposals were not taken up. Nevertheless, the entrepreneurship scene has grown by leaps and bounds.
Today, the start-up community is thriving and Singapore is even regarded among investors as an entrepreneurial hub. Dubbed by The Economist as “the world’s most tightly packed entrepreneurial ecosystem”, “Block 71” — located at JTC [email protected] — is Singapore’s equivalent to Silicon Valley, with more than a thousand people in hundreds of start-ups and incubators.
By 2017, JTC [email protected] — which started with just one block but has grown to three — will increase further to six blocks, housing 750 start-ups.
Between 2012 and last year, Singapore moved up seven places to 10th in an international report which ranked start-up ecosystem. The report by Compass — an automated reporting and benchmarking software provider — was based on publicly available data.
By 2035, technology start-ups alone are projected to contribute 2 per cent of the Republic’s gross domestic product, according to PricewaterhouseCoopers.
Edwin Chow, Group Director (Industry & Enterprise Development) at SPRING Singapore, said: “We have seen encouraging growth in high-technology or knowledge-intensive sectors, with the number of such start-ups increasing by more than 90 per cent from about 2,800 in 2004 to 5,400 in 2014.”
Over the same period, the number of active young companies have more than doubled from 23,000 to 55,000. As of 2014, these companies accounted for about 345,000 jobs.
Singapore’s startup scene has been “flourishing” for the past decade, said Associate Professor Sarah Cheah, from NUS Business School’s Department of Management & Organisation, crediting the schemes rolled out public agencies including the National Research Foundation (NRF), SPRING and Infocomm Development Authority of Singapore (IDA). In 2014 alone, more than S$1.2 billion (RM3.6 billion) were raised by local startups, said Assoc Prof Cheah.
Dr Walter Theseira, Senior Lecturer at SIM University, noted that the number of new businesses set up over the last five years has accelerated significantly, particularly in the information and communications, education, health and social services sectors.
The universities and polytechnics make up a big part of the ecosystem, nurturing the entrepreneurial spirit in students and lecturers and providing them the platform to turn their business ideas into reality.
Between 2011 and last year, Nanyang Technological University (NTU) has nurtured a total of 163 start-ups, with 48 of these set up last year.
At Nanyang Polytechnic for instance, there is a heightened interest in entrepreneurship among its students. It has funded about 20 students in their ventures that include app development, online retail and food and beverages services. “We are quite certain that many students and alumni are starting to see and embrace that entrepreneurship is a viable career,” the polytechnic spokesperson said.
In recent years, several Singapore start-ups have caught the eye of big name investors.
In particular, 2014 was a bumper year for Singapore: Its start-ups received between US$5.5 million (RM24.3 million) and US$6 million for an average Series A round — a firm’s first significant round of venture capital financing — compared to between US$6.5 million and US$7 million for start-ups in Silicon Valley, according to the Compass report.
That year, homegrown messaging company Zopim, for example, was acquired by San Francisco-based customer support firm Zendesk for US$29.8 million (S$37.4 million). Online beauty retailer Luxola also raised US$10 million from investors led by Japanese firm Transcosmos while cloud developer Nitrous.IO received US$6.65 million from a range of global investors that included Facebook’s co-founder Eduardo Saverin.
Last year, Saverin — who is based in Singapore — also invested over S$1 million in homegrown property portal 99.co.
“We have seen great improvement in the overall entrepreneurship scene in Singapore over the last 10 years,” said a spokesman from investment capital company Intellectual Ventures (IV). Headquartered in the US, IV has offices around the world, including Tokyo, Seoul, Beijing, Sydney and Bangalore. It opened its Singapore office in 2008. Back then, it was already feeling bullish about the Republic’s prospects of becoming an entrepreneurial hub.
Nicholas Gibson, head of marketing for IV, cited Singapore’s fair and transparent legal system as an important factor for both investors and startups. “That gives businesses a lot of confidence that if they open an office there, or enter into an agreement or contract with a company in Singapore that they have sufficient legal protections available,” he said.
He noted that the “excellent” universities here have a strong science and technology curriculum, and this was another pull factor for investors. Singapore is also recognised as a global business hub where opportunities are abound, he added. “It doesn’t really matter where a particular start-up company comes from in terms of its fundamental idea, product or service being potentially valuable or important,” Gibson said. “I do see a future where a company from Singapore may become a worldwide force.”
In November last year, IV set up a new technology centre here — through its subsidiary, the Invention Development Fund — to identify inventions with potential for growth. It will also work with Singapore partners to develop new prototypes and carry out further scientific testing and research.
Speaking at the launch, Edward Jung, founder and CTO of IV, said he has watched Singapore “really rise up in their intent to become great at technology”. “So now seems to be the right time to start a centre that is about taking Singapore’s expertise in developing technology, and couple it to the big problems that we have seen with our customers and the big solutions that are coming out from our global inventor network,” he added.
‘Build on the momentum’
However, this is no time for Singapore to rest on its laurels, as businesses and observers stressed the need to build on the momentum. There is still some way to go for the start-up ecosystem here, compared to other countries.
Assoc Prof Cheah pointed out that the maturity of a start-up ecosystem is defined not only by new venture creation but also by venture exits. “For the past 15 years, Singapore has grown from its infancy stage to the current adolescent stage. While we have more start-ups receiving bigger investments from the venture capitalists... we have not yet seen many successful exits that are typically seen in mature ecosystems such as Silicon Valley. It takes time for startup ecosystems to develop and mature and Singapore is not as developed yet.”
There is also a need for greater entrepreneurial activity in industries where productivity is low, Assoc Prof Cheah said. Citing the construction, and marine and process industries for example, she said: “These industries may not be as glamorous as the high-tech industries. However they offer many opportunities for radical innovation in business model and technology enablement.”
She added: “The existing talent working in these sectors is a potential pool that can be tapped on for innovative ideas. To promote industry growth and renewal, the relevant government agencies may consider programmes to develop such talent with the necessary training and schemes to encourage innovation and entrepreneurship.”
Apart from the tech sector, food and beverage services have been a popular choice for those looking to start a business. Alluding to the intense competition in F&B services, Assoc Prof Cheah said: “To entrepreneurs, ideal sectors are those where opportunities exist with minimal competition. If the entrepreneurs are in sectors that are highly competitive, where they can’t differentiate themselves from the other players with a strong value proposition, they may want to re-assess their business model or re-consider their positioning in the industry value chain.”
Peggy Chang, 30, had quit her marketing executive job in 2011 to become a full-time blogger selling desserts online. She then went on to set up The Tiramisu Hero, a café on Tyrwhitt Road. “The (F&B) industry is pretty saturated,” Chang said. “We have to constantly find ways to stand out among our tough competitors.” To succeed in F&B, eateries have to go beyond “serving good food and providing good customer service”. “It also means being strong on social media, having pretty and photographable spaces to make the entire dining experience memorable, or even having a story or concept with your brand,” she said.
Dr Theseira noted that a policy of attracting entrepreneurship has to be based on an argument that “either, there is a positive externality to more entrepreneurship in that sector ... or there are some market failures or distortions that prevent the appropriate level of entrepreneurship from arising”.
In that regard, “it’s not clear how society benefits from having more entrepreneurship in F&B”, he said.
On whether society should prefer a brand of entrepreneurs over others, Dr Theseira said: “For most entrepreneurs, particularly in enterprises which don’t use a lot of capital, the largest cost is likely to be that of their own time, and possibly the time of their relatives as well (since family labour makes up a huge part of many start-ups).”
He added: “Entrepreneurs should make sure that they are valuing their own time appropriately when making the decision to become an entrepreneur or when they are considering whether to remain or exit from an industry.”
In its position paper released last week, the Singapore Business Federation (SBF) urged the Government to help local start-ups internationalise, and expose them to global competition. Existing initiatives are largely aimed at helping start-ups get off the ground and grow domestically, the SBF noted.
It also called for a more pro-active approach in promoting entrepreneurship. “There is a need to maintain the momentum of entrepreneurship as it is not just the ecosystem that needs to be built but a broader mindset change of creativity and risk and reward of entrepreneurship which need to start in schools and be accepted by the broader society,” the SBF said.
Apart from proposing that the Government foster a more entrepreneurial mindset and culture early in schools, the SBF suggested the introduction of programmeming, engineering and robotics in the primary and secondary school curricula, among other recommendations.
Nevertheless, Dr Theseira felt that the Government needs to step back, when it comes to providing financial support and incentives for entrepreneurs. He noted that there is a relative lack of experts in the public sector who are able to pick out good business ideas from the clutter.
“There are substantial Government incentives available for entrepreneurs. However, there are several issues with implementation,” he said. “The first problem is that when you have what amounts to a public subsidy for entrepreneurship, you will attract both good and bad ideas to apply for the funding. You then need a system to sift through the applications and retain the better ideas.”
He added: “However, the expertise to accurately sort good ideas from bad is in short supply and frankly, is not readily accessible to the Government. To put it another way, in Silicon Valley, people who have the ability to pick good start-ups for investment are highly sought after and paid vast sums of money for their talent. Such people are unlikely to want to work for Government agencies.”
He reiterated that the Government is not in the best position to provide the “important components” of the ecosystem such as mentorship, as well as access to talent, industry contacts and networks. Private sector expertise is required in these areas, he said.
“I am a bit more wary about providing excessive direct subsidies to start-ups... the Government is not in a good position to pick winners and losers,” he added. “Rather, the private market should do that because they have the strongest incentives to do so, and the most information.”
Gibson said the small domestic market could be a challenge for Singapore start-ups, making it hard to build momentum in a start-up’s initial years.
To overcome that, start-ups here need to quickly make the leap to the regional and international market. He said: “The faster a start-up can (do so), the better chance it will have to become globally relevant. This isn’t the ‘fault’ of Singapore … it is just the luck of the draw in the ‘game’ of geography.”
Adding that competition forces entrepreneurs to stay on top of their game, Gibson said: “As the world economy becomes ever more borderless, it won’t matter so much where a company starts as it will matter where it is going.” — TODAY