Singapore has overtaken Silicon Valley as the world’s No. 1 for startup talent.
According to a report by US-based organisation Startup Genome, Singapore has overtaken Silicon Valley as the world’s No. 1 for startup talent. Although Silicon Valley triumphed over Singapore in all other aspects, this insight has accentuated how Singapore government policies have once again prevailed.
Startup Genome mentioned that strategies here are working to establish local tech start-ups as globally relevant firms, and there are 1600 to 2400 tech start-ups currently enjoying significant government subsidies.
In Budget 2017, Finance Minister Heng Swee Keat said that the Singapore government will commit approximately $600 million to set up the International Partnership Fund, which aims to help Singapore-based companies increase their presence in the global market. It is no surprise that the fund’s objective shares synergy with Spring Singapore’s Startup SG, which aims to accelerate infant-startups through the funding process, ballooning through equity investment and finally attaining global presence or even unicorn status.|
Singapore Inc.
Many believe that Singapore is run like a corporation, where rates of return are prioritized over political dogma. According to Fortune, Singapore’s political landscape is portrayed as a blend of pragmatic socialism, freewheeling capitalism and plain opportunism. In the words of Singapore’s first Prime Minister, the late Mr Lee Kuan Yew, he simply calls it “the rugged society”.
From our school curriculum to our foreign relation policies, every move we make as a country is assessed by its cost-effectiveness. Each year, we are getting better at weighing moves thanks to the closely-knit and highly-debacled tripartite system in Singapore. Xenophobic tendencies aside, our 12th overall ranking in the world for the greatest startup ecosystems today is merely the fruit of our long-standing foreign policy of attracting and retaining foreign talent.
With the appointment of the first batch of 17 Accredited Mentor Partners (AMPs) under Startup SG Founder, the government has established clear impetus for Singapore’s long-term growth through encouraging collaboration between the usually-indifferent local private and public sectors.
According to Dr Alex Lin, Head of Ecosystem Development at SGInnovate, Singapore’s startup ecosystem is progressing at an unprecedented rate, “Within three years, we are a sustainable ecosystem of accelerators and corporate co-innovation, resulting in a six-fold increase of start-ups raising series A (a type of funding); in a year, venture capital money doubled to US$1.7 billion.”
It’s The Age Of The E-Commerce Model
That said, just like how Silicon Valley know-how is not relevant to succeeding in China anymore, Singapore should not pit itself against the Valley but rather, against China. According to Reuters, 98% of Facebook’s quarterly revenue originated from advertising.
Additionally, revenue from non-advertising sources have experienced a drastic decline of $6 million since last year. As Facebook’s competitor, Google, seeks revenue diversification in hardware and software, it is evident that the Ad-Revenue model is making way for a better model: E-commerce.
Capitalizing on Internet Users
The population size of Internet users in the country typically sets the trajectory for the famed hyper-growth E-commerce model, best represented by China’s growth spurt.
According to McKinsey, segments featuring major growth potential in China ranges from the uptake of online shopping among consumers in low-tier cities to e-commerce penetration beyond first-mover product categories such as apparel, purchases from social media platforms, as well as the use of cross-border shopping to supplement domestic channels.
In China, many traditional businesses are embarking on projects characterized by what they coined “O2O services”, or online-to-offline services. The buzzword connects brick-and-mortar sellers with the internet, and sometimes it goes both ways, with Alibaba acquiring Intime in an effort to modernize offline retail after a unrivalled domination in the ecommerce industry.
Just like how many brick-and-mortar retailers in China are launching “O2O experience zones” in supermarkets and designing their own online-grocery ordering phone applications, we see the emulation of this model in Singapore through third-party services such as Honestbee, which has partnerships with supermarket chains NTUC Fairprice and Cold Storage.
Singapore makes up for its poor domestic demand by funding these aspiring startups in their effort to expand overseas, which in the case of Honestbee, its gargantuan $15 million Series A funding in 2015 that helped poise the company for expansion to 6 new Asian countries.
Infrastructure
“Between Southeast Asia and India there are about two billion people” said Facebook Inc co-founder Eduardo Saverin. Although there is demand, the journey of e-commerce strategies may not always be smooth-sailing, thanks to vast variations in the quality of infrastructure in Southeast Asia.
Emerging economies are typically slower in infrastructural developments, and such aspects pose great obstacles for lean startups burdened with debt and hungering for light-speed growth.
Startup hotspots such as Indonesia and Vietnam only have 51% and 53% of internet penetration based on a study done in January 2017 by Wearesocial. The numbers get distinctively different when we look at Mobile Broadband connections, with Indonesia and Vietnam at 65% and 40% respectively, compared to Singapore and Thailand at 146% and 131%.
This effectively cuts half of the targeted consumers these business are poised to capture. It is impossible to ignore the structural obstacles posed by these emerging economies in their process of adopting the e-commerce model.
On the other hand, Singapore’s constant focus on developing world-class infrastructure in relation to its policy to attract foreign businesses makes it an irresistible location to set up command-and-control centres (for MNCs) and particularly for start-ups; a springboard towards the Asia-Pacific.
Pushing Forward
As the Singapore government continues to shower Singapore-based entrepreneurs with grants and subsidies, it is important to observe how they are allowing venture capitalism to thrive in Singapore’s glistening startup ecosystem.
MAS published a consultation paper in March 2017 proposing a simplified authorisation process and regulatory framework for managers of venture capital funds (VC managers), in part of MAS’s broader objectives to promote financing for enterprise development.
Mr Lee Boon Ngiap, Assistant Managing Director, Capital Markets, MAS, said, “The proposed simplified regulatory regime for VC managers recognises the lower risks they pose, given their business model and sophisticated investor base. It will allow new VC managers a faster time-to-market and reduce their ongoing compliance burden.”.
Since startups value time-to-market and rapid expansion more than anything else, the erosion of structural challenges and limitations of funding definitely makes Singapore an excellent environment to grow an e-commerce business. However, some of the characteristics of “Singapore Inc” still remain, such as the predominantly strict attitude to work and play that still prevails in Singapore society.
Someone who worked in a Global Bank for 10 years once told me that Singaporeans all think alike and that is frankly why expatriates have job security over their Singaporean counterparts. Maybe this new direction towards a startup culture is exactly what we need in Singapore society; the go-getter mentality and the spirit of innovation.