Facebook, Amazon, eBay. Other than cultures of innovation, disruption and now serious valuations, something that all these once start-ups now tech-giants have in common is that they aren’t Singaporean.
Ok, obviously global tech start-ups are largely an American phenomenon. But even at the level of local and regional start-ups, the Little Red Dot is lagging behind with very few recognisable names in the start-up game.
What about Grab taxi, you ask? Well, it is Malaysian-founded, though now Singaporeanised thanks to investment and this too is another recurring problem where local start-ups are struggling despite Singapore’s financial ecosystem pouring money into regional ventures.
With strong intellectual property legislation, excellent connectivity, a range of government programs in support of innovation and diverse options for funding, Singapore is — on paper at least — a paradise for start-ups.
However, as regional ventures have flourished on Singapore’s soil local entrepreneurs appear to be missing out. According to a recent Tech in Asia article, local ventures have raised only a fraction of the funding raised by their foreign counterparts.
This after billions of dollars’ worth of government funding directed at local start-ups for several years.
To some extent, of course, the discrepancy in the performance between local and regional ventures is inevitable. Start-ups operating in Indonesia, India or China benefit from huge domestic markets and are an attractive proposition to investors.
Also there are clear gaps to be filled in these markets that don’t always exist in Singapore where international companies already operate comfortably.
However, Singapore with its sizeable economy and talent pool should be producing internationally and regionally competitive start-ups. Just look at Israel, a country with a similar population, GDP and high-tech base, which is churning out start-ups at a formidable pace including the home-grown navigation app Waze which was bought by Google for US$1 billion (RM4.47 billion).
Something isn’t quite right, our start-up ecosystem is not working for local entrepreneurs and this is a problem.
Though some might say it’s simply meritocracy with foreign start-ups having better revenue models and harder working teams, the reality is that Singapore as a nation must develop its core at every level particularly at the level of tech-innovation and entrepreneurship.
If you look at the labour market, Singaporeans are now heavily favoured — with restrictions on S-passes and employment passes benefiting qualified Singaporeans.
But in terms of the start-up ecosystem, we seem to be at an active disadvantage, seen as consistently less worthy of investment than those operating in larger markets with lower barriers to entry.
Here’s my hypothesis:
1. Singapore start-ups haven’t moved to capitalise on the country’s competitive advantages. While we don’t have a large market we do have a sophisticated research base, and a more complex financial ecosystem than most of our neighbors. This means Singapore can compete in niche products like genetics and robotics, but for too long our local start-up offerings have been along the lines of retail solutions, payment gateways etc. simple clones that haven’t developed deeper technologies even though we should have the talent to do so.
2. The second problem may also be the government’s own largesse. Billions of dollars’ worth of grants, incubators and ambitious funding programs don’t guarantee success. One of the dangers of these schemes is that a lot of start-ups become vehicles for obtaining funding and don’t have the business plans and commitment needed for success. Better targeted funding which offers to co-fund or match funding raised by founders with clearer milestones is essential to propelling a healthy start-up economy.
3. The global start-up narrative has focused on a small number of visionaries — fearless leaders in their garages and basements ingeniously disrupting their way to success. It must be noted though that most successful businesses in Asia are family businesses with family and community support structures. It might be time our funding and development models reflected this with family units encouraged to fund projects and ownership structures, loans etc that facilitate this. While this is somewhat unconventional, involving the family/community has the advantage of removing the fear of failure many isolated Singaporean entrepreneurs have — as risks are now shared.
4. Finally, the key weakness in terms of creating successful start-ups is our increasing distance from our immediate region. Despite amazing transport connectivity to every part of Asia, Singaporeans are too used to seeing the country as a bubble. As such, Singapore’s conditions do not reflect those of the region and Singaporeans are not geared to solving the regional problems which present the largest opportunities. A population that’s increasingly speaking Mandarin and English but not Malay, leave alone Tagalog or Bengali, is not well-equipped to succeed where we have the greatest competitive advantage – our neighbourhood. Raised to see our neighbours as dirty and dangerous, young Singaporeans are not willing or able to scrap it out on the streets of Jakarta or Dhaka but this is where the opportunities are and if we don’t break down these psychological barriers, start-up success will remain elusive.