Key Takeaways for Startups in Singapore in 2015
Singapore’s startup ecosystem is mature and vibrant. This is due to concentrated efforts by the Government to improve the support system, interest from venture capitalists and mentorship programs ran by educational institutions and companies to nurture and steer the startup scene to its present position. We explore the key themes that will direct the startup scene in 2015.
Leverage the improved access to funding
Singapore’s reputation for transparency and excellent corporate governance has successfully generated interest and attracted investors from all over the world, creating a wide pool of venture capitalists. Besides the existing funding avenues, the government has recognized the gaps that are challenging early stage companies. In this year’s budget the Government announced an increase in the co-investment cap for SPRING’s Startup Enterprise Development Scheme (Seeds) and Business Angel Scheme (BAS). This will essentially improve the access to funding.The venture debt risk-sharing program that is being piloted by the government is a groundbreaking effort to help small but high growth startups. This is a highly targeted funding scheme for startups that lack financially sound founders. Under the program, SPRING Singapore, along with select financial institutions will provide 50% risk shared venture financing. This is an effective alternative to traditional bank loans that calls for strong collaterals.
Observers believe that this enhanced access to funding will empower smaller startups and early stage startups to muster the financial resources needed to fuel their initial stage. Some pre-seed stage startups should essentially bootstrap to evolve into qualified candidates for funding but may still find help from other schemes such as the Action Community for Entrepreneurship (ACE) grant, which is given to young resident Singaporeans.
Think Beyond Ecommerce – Ecommerce is not the only stop
Most of the startups invariably plunge into the ecommerce segment. However, it will pay better to look beyond ecommerce. The success of some regional ecommerce startups has inspired several entrepreneurs to set-up ecommerce startups. But finding a lucrative niche will be challenging in the increasingly cluttered ecommerce space. Singapore is a highly digitalized country and the pace of Internet and smart device penetration in the region is astounding. There are new untapped opportunities evolving in the ageing and digitalized Singapore and neighboring economies.Beyond ecommerce, gaming, media, data analytics and entertainment, startups focusing on fashion, food, travel, and health are also gaining traction among investors. Startups that are successful in finding their niche, with sizeable commercial value, and caters to larger Asian market, are bound to succeed.
Entrepreneurs and innovators are urged to look beyond the consumer segments. The enterprise segment, especially in pharmaceutical, oil & gas and manufacturing, is still largely untapped. There are a whole lot of challenges in terms of cyber security, enterprise mobility, logistics, and resource management requiring solutions. Solving these would eventually open up opportunities in regional enterprise markets as well.
Singapore government’s Smart Nation initiative is an ideal test bedding opportunity for startups working in this direction. Smart Nation is an initiative to manage the challenges thrown by ageing population and increasing urban density – the two major issues faced by governments globally – through smart deployment of technology.
More startup space – capitalize the cluster
New startup spaces have been launched facilitating easy access to a nurturing ground for the startups by bringing accelerators, incubators, mentors and service providers all under one roof. The recently expanded, JTC LaunchPad at one-north, housing the Welcome Centre and BASH (Build Amazing Startups Here), will energize the startup scene further by bringing entrepreneurs, investors, mentors and professional facilitators closer in the cluster. The Welcome Center at LaunchPad is a one-stop professional services centre managed by ACE. BASH is an initiative driven by Infocomm Investments Pte Ltd (IIPL), the investment arm of Infocomm Development Authority of Singapore (IDA), to congregate the tech startup community. The LaunchPad will be further expanded by 2017 with three more blocks in the cluster.The intensive startup environment promotes collaboration and partnership among the young entrepreneurs who also immensely benefit from the mentors and coaches. Besides cost savings from shared facilities such as labs and workshops, the community network is helpful in building business traction and market access. These are essential for the long-term success of the startups.
With the recent launch of Block 71 in the US startup paradise – San Francisco, expansion, collaboration and deal making with US counterparts will now become easier for Singapore startups. JTC LaunchPad is affectionately nicknamed Block 71, the original block of startup space where many of the now successful local and foreign startups were born. With a vision to replicate the success and spirit offshore, the name has stuck on. This is an outcome of the concerted effort by InfoComm Investment (IIPL), NUS Enterprise and SingTel Innov8. Given the rising trend of US based venture capitalists and startups looking for opportunities and anchorage in Singapore and South East Asia, the new co-working space is a timely launch.
It is interesting to note that during the launch of Block 71 in San Francisco, IDA announced the extension of US$ 200 million fund to US tech startups, the fund was previously open to Singaporean startups only. Such funding measures and linkages are being established to attract tech startups that have an interest in expanding into Asia through Singapore. This will add to the vibrancy of the local startup ecosystem. Local startups and SMEs must capitalize on such links to internationalize.
Two of the three new schemes announced in the recent budget to help local companies internationalize would be helpful for the startups. The IE support scheme has been increased from 50% to 70% for all qualifying activities to internationalize. Double Tax Deduction provision has been enhanced to cover salaries of Singaporeans posted overseas therefore startups can claim tax deductions on qualifying expenses incurred in their internationalization efforts.
Focus on talent
Talent shortage is a major challenge for startups. They cannot match the large companies or the multi-nationals in terms of training or benefits. The scramble for talent often remains a thorn in the path of progress for startups. But the SkillsFuture scheme announced in 2015 Budget will enable the startups to tap on the enlarged talent pool, by drawing students from ITE and Polytechnics under the Earn and Learn program.Training new and young talent during their early stage will bring better payoffs in the later stage for the startups by building a strong and loyal talent pool alongside strong brand image. Startups must also focus on talent augmentation through grooming because poor talent management would often result in derailment of the venture. Therefore, startups should focus on talent building and leverage schemes such as the SkillsFuture.