singapore

Overview: Singapore’s Startup Landscape

https://medium.com/@elainetruong/overview-singapore-s-startup-landscape-1db20ce8e7d9

My original Medium article here

Singapore is about half the size of Los Angeles but that doesn’t keep it from being an economic giant in international trade. Its humble origins from a kampong (“village”) is found in its Peranakan shop-houses, contrasted by gleaming skyscraper facades in the Marina Bay. This Economist article recounts the last 50 years of Singapore’s accomplishments. Most notably, it makes the point that the city-state’s future may suffer from a complacent society in which current prosperity will result in policies reverting to what’s tried and true instead of self-renewal. It got me thinking recently about how these S-curve societies, where maturity corresponds to a growth plateau, can continue innovating or even jump from one S-curve to the next. Perhaps the most vibrant sector to me in Singapore is its nascent startup ecosystem, dubbed the “Silicon Jungle.” We all hear about the crazy growth of Asian tiger countries, and it’s no secret that the government has played a huge role in this economic prosperity. However, this also means the government gets to decide who makes it through the funnel, which implies that decision makers have to make educated bets on companies. Once these companies mature and policies revert, would growth decline? If activity is stagnant to begin with, then any growth will appear like hypergrowth. So is it right to compare them to startup grandfathers like Silicon Valley?

I spent two summers here, the first one working for a government research arm for groundbreaking technologies and the second summer in a Singapore-born startup. I’ve noticed a few interesting things about the ecosystem, so here are my takeaways.

Government

  • In an effort to generate the next “Google,” the government has been ramping up its startup efforts by pumping millions into investing schemes to provide capital for burgeoning startups. Co-working spaces (eg. Block 71, BASH @ Block 79), which house over 500 startups, are infrastructure projects funded by the government. Down the street are Biopolis and Fusionopolis, home to massive government divisions for technology commercialization and a factory for the next hot spin-off. In fact, the startup I worked in licenses technology exclusively with a government research arm who has injected almost S$1 million into our company, taking <4% equity in return. It’s hard for startups to ignore the enticing government grants and opportunities — even Infocomm Investments offers accelerators like StartupBootCamp or Plug & Play funding resources and curriculum support. Personally, I think this government effort is amazing and has clearly proven to drive the hypergrowth in the past years. However, I am a bit wary of startups that receive millions of government funding, build a false sense of validity, and fail in the market due to lack of product-market fit.

Wealth Power

  • In the US, a lot of the wealth is concentrated in firms and corporates whereas in Asia, it seems to follow a more traditional structure where family foundations and businesses hold more of the wealth. I’m not sure what this means for the future, but my questions are around how would this affect future investing practices? I suspect that there will be a trend towards private funds for these individuals to invest their wealth or a rise in full-service VCs who provide more than just financial resources. Additionally, more of these foundations will veer away from purely philanthropic efforts and will seek investments with measurable returns (“impact investing”). However, their investments will likely remain local or regional — a few reasons that I could think of is that most foundations operate on a regional level at most and will have difficultly with overseas deal flow. The second reason is that there is a level of risk associated with investing abroad: unfamiliarity with the local governments, inability to monitor and help startups closely, et al. Government investment arms like GIC, which has assets of over US$100 billion, increasing their efforts 3x in 2014. Last year, they invested in Square, Flipkart, and FiscalNote. This activity will likely continue to encourage funds in the upcoming years, pointing to more attractive opportunities for seed funding from the government.

Culture

  • Because the startup scene is still early stage, there has yet to be a generation before Millennials who have the key entrepreneurial experience to influence startup culture. Instead, you see many young startups copying Silicon Valley culture with its open floor plans, foosball tables, and free lunches. I noticed that in ideal Silicon Valley startups, the culture is extremely strong and inspires its employees to do more, work harder, and drive the vision forward with full force. However, those without startup experience are less familiar with these workplace attitudes. For example, being a housewife is still a coveted profession here and some even believe in the old adage of the male breadwinner (only 58% of females are in the workforce, as compared to 78% of males). Younger people are more likely to have some knowledge of startup culture or experience working for a startup. Even so, the education system is largely merit-based and emphasizes rote learning. Kids are growing up adopting risk adversity — in this year’s SG50 video played at the National Day Parade, youth answered “What do you want to be when you grow up?” Many had admirable replies like “fireman” or “politician,” but not one single person said “entrepreneur.” For a stark contrast, 7 out of 10 American high school students want to start their own company (Gallup). Singapore’s exam-based education system ultimately shapes how entrepreneurship is viewed. Outside of its tight-knit startup circle, I have seen few locals who would even consider entrepreneurship as a viable career path. This ultimately affects the job landscape and a professional’s skills. More experienced folks usually come from traditional backgrounds and have less startup experience, simply because there were fewer startups to work for a decade ago. Thus, these employees with little startup experience are used to “work-life balance” and “9-to-5 jobs”, terms used sardonically in the Valley. In my experience, this mentality is a detriment to nimble startups who must continually innovate and play catch-up.

Local Solutions

  • If you’ve been following Tech in Asia or e27, it’s likely that you’ve heard of Carousell or GrabTaxi or Lazada. I’ve noticed that a lot of the successful startups in this region are primarily ones with a validated and “safe” product, i.e. e-commerce, delivery services, etc. It’s rare to hear of someone working in drones or space exploration or even artificial intelligence. Where’s all the disruption? I discovered that most of the innovation is concentrated in government entities, like A*STAR’s research institutes, which have big purses and cushy nets to fall back on. However, they are researchers and professionals with no startup background, and thus many technologies never make it out of the ivory tower. If they ever do, then they are pounded with many challenges like low adoption rates or no product-market fit. What might work well in Silicon Valley, like virtual reality headsets, may not be well received here. The market is simply too small for disruptive technology to scale. In addition, moonshot ideas are usually high-capital, high-risk, and the small risk appetite here may set up such a startup to face many challenges. It seems to me that people in the ASEAN region are more open to B2C (e-commerce, taxis, food delivery) businesses that solve local problems instead of new frontiers. It’s simply because the local and regional markets are not ready to adopt such technologies and there is a misalignment between a disruptive product and what the market desires.

Talent

  • I found it true that quality talent is difficult to come by in SEA. Developers are seen as the bottom of the pyramid here — the celebrity job in the US might be software engineering which rakes in 6 figures, but in Singapore, the most well-respected career path is public service, finance, or professional degrees (law, medicine). This mentality discourages students to choose engineering majors in school and if they do select a tech major, then the job market is bleak for them. First, there is an issue with retaining local talent because many will gravitate towards Silicon Valley where salaries are higher and developer evangelists are aplenty. Nitrous.io is an example of a tech startup that previously based itself in Singapore, and then moved to Silicon Valley for its higher density of talented developers. Second, local developers face competition with outsourced, cheap labor from India and China. Many startups here look to outsourced talent for their engineers, which I think is a huge mistake. It’s intuitive that a tech company’s core competency is the technology, so its engineering division should be in-house. Programmers shouldn’t be valued just only for writing code, but should be seen as contributors to the company’s future vision. Engineers are paid a third of what they’re paid in Silicon Valley, and this will hurt startups in the long run. Once the backbone of Singapore’s economy, engineering is seen as less glamorous through the eyes of Millennials. This isn’t a criticism, and it actually makes sense to me. Finance and economics are the reasons Singapore even got to the international limelight, so it’s understandable that there is such an intense focus on finance. In addition, government policies that drive growth in the financial industry allow quick transactions, attracting a bunch of expats to base businesses here if they aren’t yet enticed by MNCs (mostly banks or financial services corporations) offering hefty relocation packages.

Geography influences network.

  • Its excellent transport system overrides the ridiculous cost of getting a car here (costs 4x as a car in the US). You can bus from one side of the island to the next in an hour and a “jam” is considered laughable in this LA native’s mind. However, the geography influences who you meet, and thus this leads to easily meeting new people and tight networks. This enables new entrepreneurs to build the social capital they need to fit into the inner echelons. For example, I arrived knowing no one last July, but by the end of summer, I saw my network expand to over 300 direct connections. I wasn’t even working with a startup back then, so those were just interactions made at after-work events. There is really a huge opportunity to build the network you need to support entrepreneurial activities.

Social Circles

  • Singapore is tiny, and so are its social circles. You eventually run into the same people at startup events, or can easily get an intro to a high-ranking executive. I’ve found these “movers and shakers” to be extremely welcoming. In developed ecosystems like Silicon Valley, there tends to be a social hierarchy in which the top CEOs and VCs are difficult to access, probably due to a flood of requests for meetings and intros. However, in Singapore, there seems to be a lack of noise in the ecosystem, which has kept people open and responsive. It’s very likely that I have many 2nd-degree connections to the local unicorns, and can access the founders if I really wanted to. Once I name-drop in a conversation or mention a mutual network, it immediately gives me credibility since the receiving end would already have heard of the person. I think there’s a level of transparency in the system, and I find people to be quite genuine and trusting. Everyone wants to meet up (something about doing business face-to-face in Asian culture, perhaps) or show me around or demonstrate some sort of hospitality. This enables entrepreneurs to easily build a strong network of devoted mentors and advisers.

International

  • There were five full-time employees in the office at my startup, and thus five different nationalities. I appreciate that Singapore has such a diverse population and is the first country I’ve heard of that recognizes each major religion’s public holidays. Having a diverse team from the get-go may be useful when a startup is expanding regionally. No matter what nationality, I observed that there is some universal pride and respect for Singapore. I’m not suggesting that it’s populated with a bunch of chauvinists, but it seems like Singaporeans have more national pride whereas us Americans have a lot of individual pride. Maybe it’s the Asian collectivist culture or the heavy government invovlement, or the amazing feat of going from a third to first-world country in 50 years. Their trust and loyalty to one’s own country is actually quite admirable, whereas whenever patriotism comes up in America, it’s mostly associated with criticisms, tongue-in-cheek memes, or ridiculous #Murrica hashtags.

It’s difficult to see if an economies of scale model could work here, a la Walmart or Costco. Startups can reach a local maximum here, and perhaps if they’re really good, they can achieve a regional maximum. But what is the likelihood that a startup can scale internationally and reach a global impact? How do we improve the conditions for disruptive companies if there’s low adoption and no product-market fit? Because essentially in order to compete on a global scale, Singapore will need to push itself in new avenues and focus on future innovation. But who am I to dictate that what Singapore really needs is more “disruptive companies?” Maybe if the market’s not there, than it’s counterintuitive to push consumers to adopt what they don’t know they want. If Singapore doesn’t have the capabilities to replicate Silicon Valley, then maybe that shouldn’t be its true intention. Perhaps it ought to play to its strengths as a hub for startups by bringing in winning innovations and attracting overseas successes to come over, riding on already validated ideas. But how can Singapore renew itself then? As John W. Gardner wrote, “A society whose maturing consists simply of acquiring more firmly established ways of doing things is headed for the graveyard — even if it learns to do these things with greater and greater skill.” Is Singapore building its own gilded cage, and is that a good or bad thing to the startups of the future?

Thanks to all my Singaporean friends for proofreading this essay!

Sights in Singapore

To be back in Singapore feels foreign to me. As I meet old friends again, I have to discover them once more. For we are both very different people than one year ago. But similar to love, friendship is a choice, not an emotion, right? Perhaps I've grown more cynical, critical, and intense. I feel like this summer will be incredibly fun, filled, and fast-paced. Already three weeks in and I've already had a fantastic takeoff. Last summer was the runway, but this summer, I'll be airborne. I loitered around East Coast Park the other weekend and was instantly calmed by the peaceful waves crashing into the shore. Surprising to find such gems in the hustle and bustle.