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Singapore is on the rise and has become a great but expensive hotbed for startups

Written by Varsha Saraogi on Wednesday, 16 January 2019. Posted in Global

Evolving from being a manufacturing base to a tech hub, Singapore is perfect for startups prepared to pay extra to get the maximum benefit

Singapore is on the rise and has become a great but expensive hotbed for startups

There’s no recipe to recreate Silicon Valley’s confluence of tech genius, insane investment level and unparalleled talent which produced giants like Google and Apple. But business bosses eager to find the next hotbed of innovation can — and should — search for the rare ingredients that combined attract generations of tech visionaries and VCs to San Francisco’s Bay Area. For scores of businesses around the world, that search now leads to Singapore.

One of the entrepreneurs finding his way to the Asian city is Ng Jing Shen, co-founder and CEO of Paktor, the dating app for people in Asia, having launched the business there in 2013. “Singapore was and still remains the perfect testbed for us because of its world-class infrastructure and educated population which is why, until today, we do all our product testing in Singapore before we roll out to other markets,” Shen says. Its vast multi-ethnic population is an incentive for businesses who are looking to expand to other south-eastern countries but it’s imperative for every product to be tailored according to the local use, which Shen was particularly aware of. “Dating is extremely culturally sensitive, especially in Asia where we have a mix of so many different cultures that differ in sometimes dramatic and subtle ways,” he says. “We had to understand instinctively that not all Asian countries are the same.” 

Shen says every potential business looking to expand or launch in the south-east Asian country must be prepared to “think global but act local.” Indeed, he speaks with experience after he had his fair share of obstacles to overcome. Shen had to both understand the dating apps market and find new ways to enthrall users who relied on competitors like Tinder and Coffee Meets Bagel. And with the help of his research along with support from Singapore’s government, the Paktor app today has over 25 million users and the startup has secured more than $52m in series A and B funding rounds.

Shen is hardly alone. Indeed, Singapore continues to be an ideal launchpad for startups and was ranked second just after the US in the World Economic Forum’s 2018 global competitiveness report. The rankings were based on many factors including human capital, agility, resilience, openness and innovation. Moreover, Singapore’s exceptional infrastructure is one of the main reasons the entrepreneurial culture is thriving. And in Paktor’s case, the startup tasted success not only due to its high demand but mainly because Shen and his co-founder chose Singapore over other neighbouring countries and capitalised on those factors. 

And it isn’t limited to startups. Big businesses also establish their APAC – or Asia-Pacific – headquarters in the Lion City. The list includes tech giants like Facebook, Microsoft and Google. These big players didn’t stop there. Looking at the immense talent available, Facebook teamed up with Singapore’s Infocomm Media Development Authority to launch Startup Station Singapore, its first data innovation startup programme in Asia, in October 2018 which will prepare fledgling startups for flight. Additionally, James Dyson, founder of Dyson, the British household appliances company, unveiled a plan in 2018 to build an electric car plant in Singapore, benefitting from the city’s exceptional supply chains, access to markets and the availability of expertise. 

The region has come a long way to be on the list for these titans of industry. Indeed, the island wasn’t always seen as an advantageous land for commerce. Being a former British colony and then being captured by the Japanese after the Second World War made Singapore’s journey to industrialisation and economic stability sluggish at best. But the transformation took place after it got its first elected prime minister, Lee Kuan Yew, who is also touted as the country’s founding father. “He realised Singapore’s port made it easy to connect with neighbouring countries for import and export,” says Angeline Lodhia, general manager of Inskin Media Asia, the advertising technology business. Indeed, his foreign policies ensured strategic relationships with western countries as well as other Asian ones. And with his vision, Singapore’s per capita income in 2017 went up to $57,714 compared to $427 in 1960, according to the World Bank. This is proof Kuan Yew’s governance made Singapore an economically powerful city despite it being smaller in size than its neighbours. “Essentially, he made it easier for businesses to come here and set up shop compared to other countries,” Lodhia adds. “For instance, in Dubai, [the government] is very protective about their land and property and in Malaysia you can’t buy a property unless you’re partnering with a Malaysian company for work. Even in China you can’t just open a business – you have to partner with a local one [which] then takes a margin and you’re going to have to work harder for your dollars.” 

Since its independence, not only has Singapore become the go-to place for trade, export and import but it’s also a global tech hub. From adtech to fintech, the Lion City is leading in south-east Asia and progressing at a quick pace. However, the transition from being a manufacturing base to a tech hub took some time. “The [Singapore] economy moved its focus of activity and upped the value chain exponentially after independence and the tech phase really came in through the ‘8os [and] ‘90s,” says Henry Goodwin, venture partner based in Singapore for Octopus Ventures, the global VC firm. “We already had the advantage of a strong financial services sector, shipping sector, big ports and it has maintained a reputation for a strong infrastructure – not only in terms of the public convenience but also in terms of institutions, law and business.” And now the city has a raft of startups coming up in the digital sector. Clearly for Singapore, innovation is integral and the island city gives it maximum attention. In fact, it ranked third in the Bloomberg innovation index for its R&D spending among other factors, up three positions from 2017 and even beat the tech mecca of Silicon Valley. “Deep tech, artificial intelligence [and]  machine learning are becoming the focus,” Goodwin adds. “For startups, I think there’s been a sort of recurrent theme coming through around financial services and fintech. And so those within the brackets of a cyber flavour as well as healthtech has definitely been another area ripe for innovation.” 

Today, with Kuan Yew’s efforts coupled with exceptional business acumen, Singapore has become a startup paradise. In fact, in the last few years, it’s climbed in the top ten list of leading global startup ecosystems, according to Startup Genome’s rankings. “With a growing number of new startups setting their base here and existing startups graduating to become household names, this ecosystem will only get stronger,” says Prajit Nanu, CEO and co-founder of InstaReM, the digital remittance provider. “Singapore will be a melting pot for regional startups with global ambitions and global startups looking to expand into the Asia-Pacific.” 

While startups are innovating and utilising tech, a major factor in their progress is the immense support the government offers. From aid in funding to getting grants, entrepreneurs are given the resources needed to make their startup a success story. “The driving force [has been] the Singapore government’s clear policies and open mind when it came to adopting technology,” Nanu says. “This has led to more positives such as an ease of conducting business [and] the simple process of acquiring licences has helped attract foreign investment.” And most startup owners are aware of the incentives they get if they leverage that support. In a study carried out by NUS Enterprise, the National University of Singapore’s business and entrepreneurship centre, it was reported startups are increasingly relying on government support. A total of 69% relied on government schemes, an increase from 19% in 2010. 

Indeed, in line with its strong commitment to foster entrepreneurship, the Singapore government has launched Startup SG this year to support startups in various areas such as branding, funding and talent attraction during their various stages of growth. Additionally, fintech startups are supported greatly by the government and Singapore’s central bank and governing body the Monetary Authority of Singapore (MAS), which was the one Nanu capitalised on when scaling up. “In 2016, MAS laid out a roadmap that would help transform the country into a smart financial centre where innovation and technology would be pervasive,” Nanu continues. “Leveraging its regulatory role, the MAS has fostered a conducive and supportive environment for innovation by private sector players and the establishment and growth of fintech startups and next-generation disruptors.”

An efficient startup ecosystem is one that has all components in abundance. Along with government support, catalysts such as accelerators, incubators and co-working spaces are crucial. Interestingly, Singapore has a thriving business environment in place and the reason is because of the amount of accelerators and incubators that it has to offer – including Startup SG, Entrepreneur First and Startupbootcamp FinTech to name a few. This gives founders an additional opportunity to network with like-minded entrepreneurs. “That’s one area that’s definitely accelerated a lot over the last five years or so,” Goodwin says. Additionally, the space-starved island is encouraging more co-working spaces for startups and there are already around 100-120, according to the Singapore Business Review. “There are a range of prime office spaces but they come at a premium here,” he adds. “And with co-working spaces in Singapore – there’s a whole load. WeWork in and all around the region are great solutions on that front.”

Consequently, Singaporean startups are also climbing up the ladder in VC investments. In 2018 Grab, the ride-hailing company headquartered in Singapore, received an investment of $2.7bn in a series H round, of which $1bn was invested by Toyota. Taking into account only this investment, Singapore beat its own record of $1.2bn in 2017 according to an annual report by KPMG. In fact, Grab and Uber announced in March 2018 that the former had acquired the latter’s operations for Southeast Asia. No further proof is needed to see how the island city is luring more investors and VCs due to its exceptional startup calibre. What has worked so well in its favour is the nation’s strategic advantage in terms of infrastructure availability, ease of doing business and technology adoption, as well as clear government policies that look to encourage entrepreneurialism amongst its workforce.

And many chieftains would agree. For instance, Nanu secured $20m in a series C funding round in December 2018 and believes launching in Singapore made all the difference for the success of his startup. “You can kickstart your business in Singapore, make use of the great facilities and services that the country offers and turn all the ingredients into a winning formula,” he says. “Starting up in Singapore gives us an edge in the other eastern and western markets. It really is the perfect base.”

While the startup community spawned in Singapore is well-catered to in terms of funding and support, there are a few mountains they must scale. One of the pitfalls plaguing many businesses is the high cost of living and infrastructure. “Employees expect higher salaries and the office rents are relatively higher,” says Nanu. “To keep our overheads manageable, we get most of our operations and back-end work done in India which is not as expensive as Singapore.” Indeed, the city-state has been dubbed the world’s most expensive city to live in for the fifth year running in the Economist Intelligence Unit’s Worldwide Cost of Living 2018 survey. 

However, while these statistics suggest the high costs to be an obstacle, not all agree it’s unjustifiable. Moreover, it’s not exceptionally dissimilar to the likes of London or New York. “I think here in Singapore it’s more expensive but with that you’re getting all these benefits which if you read out – you know it’s worth it and makes working here more efficient,” Lodhia says, adding that the systemised transport system is a major factor in attracting expats from across the globe. “I’ve never been anywhere in the world where you can be at your desk within 45 minutes,” she adds. “The efficiency of Singapore for international business where people can come in and go out fast instead of wasting hours in commuting comes at a price. And I think the fact that Singapore has become an international hub for Asia [means] people have realised those costs are justified.” 

While finances are a major concern, sourcing talent can be tricky. It may not seem like it at a first glance. After all, the city is home to the top two universities in Asia – The National University of Singapore and Nanyang Technological University. Singapore is also the home to management institutes such as Singapore Management Institute and INSEAD. However, even with these, the talent is there, it’s just not always easy to find or attract. And Lodhia experienced the struggle first hand when she was hiring. “Everyone laughed and said ‘Oh my God, good luck finding somebody when recruiting,” she recalls. “When you enter Singapore as an international company, you need a person who is locally knowledgeable but also internationally trained to tackle concerns and deal with clients. And it was very hard to find talented digital advertising people.” 

Another essential lesson many entrepreneurs learnt was being generous with resources when researching about the city-state. Not just in the business community for potential deals but also in its local culture. Since Singapore is a gateway to other south-east countries, owners cannot use the same strategies when expanding. “South east Asia consists of not just Singapore but Malaysia, Indonesia, Vietnam and Thailand and trust me, they’re worlds apart from each other,” Lodhia says. “From language and etiquette to attitude and culture and even values – what one market finds attractive, the other will not. For instance, you need to make sure your staff are capable and creative enough to be able to have conversations in Thailand if you’re venturing there.” While it’s common for companies who are licenced in Europe to get instant access to 28 markets, in Asia, company leaders have to go to each country to get a separate licence as each of them have their own procedures, as laid out by Ernst and Young. And Lodhia had to even tailor her business plans when she planned to expand the business in South east Asia. “We were very naive and a lot of companies really do think one size fits all,” she says. “Thinking ‘we’re going to enter Singapore and within six months we’ll be taking revenue out of Malaysia and Indonesia and it’s not going to be very hard’ is far from true. It doesn’t work like that.” 

However, even with its fair share of challenges, it’s easy to see why businesses are booming in the Lion City. And Singapore is surely going to go from strength to strength. Unicorns such as Grab, e-commerce company Lazada and technology services provider SEA are proving you can make it work starting in Singapore and then use it as a platform to venture to other markets around the world. “Singapore’s got the infrastructure, the support services, an open minded business-first government and the talent,” Nanu concludes. “What more could you ask for?” 

About the Author

Varsha Saraogi

Varsha Saraogi

As feature writer and a recent MA Journalism graduate, Varsha has joined the Elite team to fuel her passion. Along with being immersed in the money making sector and ranting about women’s rights, she will be hunting for news about everything business related. And burying her head in economic magazines. Follow her on twitter at @msvarshasaraogi for her mundane musings.

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