4 Reasons Why Singapore Is a Global Hot Spot for Entrepreneurship
Move over Silicon Valley, Singapore is ready for its closeup.
It ranks as the tenth hottest startup ecosystem worldwide, according to a report from research firm Compass. The city-state boasts about 3,600 startups in sectors as wide-ranging as e-commerce to social media to gaming.
A key benefit to starting up in Singapore is its strategic location and connectedness to foreign markets, with as many as 49 percent of its customers taking up residence outside the country. Investors are starting to take notice: Singapore ranks No. 9 in terms of venture capital funding in the Compass report, second only to Bangalore in the Asia Pacific region.
Yet, the country has consistently ranked No. 1 for its ease of doing business, according to the World Bank. (By contrast the U.S. ranked 7th in 2014 and 2013.) As confirmation, the Lion City is home to thousands of multinational corporations; Google, Uber and Facebook each have their Asia Pacific headquarters in the city, for example.
Here are four key reasons Singapore takes the crown as the leading startup hot spot in the Asia Pacific region:
1. Local government support
Small businesses tend to receive support from Singapore’s policy makers.
The local government launched a $1 billion “Technopreneurship Fund” back in 1999, through which about $2 million can go to any individual company. In 2013, the deputy prime minister announced an additional $50 million investment for local startups.
“Singapore’s government has been at the leading edge,” says Kuo-Yi Lim, a serial entrepreneur and venture capitalist, who co-founded the Singapore-based investment firm, Monk’s Hill Ventures. “It’s been the most active [in Southeast Asia] for the longest period of time.”
Founders in Singapore say they’re reaping the city’s benefits. “The startup ecosystem gets similar levels of attention from both the local government and ventures, attracting the third largest venture capital investments in the APAC region, after China and Japan,” says Tomas Laboutka, the CEO and co-founder of HotelQuickly, writing in the Compass report. “Singapore for many is the ‘easy’ gateway to Southeast Asia.”
Still, Lim cautions that expanding outside of Singapore–and into those neighboring locations–can be difficult from a federal perspective. “Rules may change, and it’s not clear what the rules might be, can be, or will become,” he warns.
2. Opportunities abound
Lim says he looks for companies that are solving a pain point for the local community.
GrabTaxi, for example–which first launched in Malaysia, and quickly expanded to Singapore–is a ride-hailing service which aims to reduce transportation headaches across the region. It has raised $680 million over five funding rounds, from high-profile investors like SoftBank and Tiger Global Management.
In 2014, Singapore’s road density exceeded Hong Kong’s, and was second only to urban centers London, New York and Tokyo, according to data from the Land Transport Authority. (Road density refers to the ratio of a city’s roadways compared to its total land mass.)
“From a Western, developed-country perspective, you wouldn’t appreciate the type of problems that exist on the ground,” Lim adds, speaking of Southeast Asia more generally. He cites limited access to education, logistics, and healthcare, which could serve as further industries to plumb.
As of 2012, 18 million children in the Asia Pacific region are still not receiving primary schooling, according to the 2014 “Statistical Yearbook for Asia and the Pacific.”
Edusnap is one new venture which aims to democratize access to education. Founder Anders Tan created the app, which connects tutors to students, after noting that less well-off Singaporeans tend to get shut out of the school system.
“To me, studying was costly and unfavorable for people who are not rich,” Tan told the media site Tech in Asia.
3. High mobile and internet penetration
Smartphone usage is on the rise in Singapore. In fact, the country’s mobile penetration is the highest of any nation globally, according to a 2014 report from Deloitte. Nine out of 10 respondents reported having access to a smartphone.
Collectively, Singapore and Malaysia generate about half of all e-commerce sales in Southeast Asia, despite accounting for just 8 percent of the population, according to data from Euromonitor.
Successful online ventures in Singapore like Zalora, a clothing retailer operated by Rocket Internet, are plentiful. There’s also Giosis, which operates the shopping platform Qoo110. It’s backed by eBay and received $82 million in venture funding in July of this year.
4. Widening venture community
Monk’s Hill is the latest, but certainly not the first, venture capital firm to focus on Singapore and its environs. Golden Gate Ventures and Jungle Ventures have also set sights on the Lion City.
Still, generally speaking, Lim sees investments as “very quick capital,” as opposed to strategic, long-term investments.
“The amount of smart money is relatively limited,” he says, meaning that while there are plenty of angel investors–investing in startups once or twice–there aren’t too many professional patient capital providers. Longer-term VC firms remain few and far between.