In the last eight years, Singapore has climbed to take the #12 position among leading global startup ecosystems in the world. What worked to its favor was its strategic advantage in terms of robust infrastructure availability, ease of doing business and technology adoption, and clear Government policies that focused on three core aspects; improving investments, creating more access to foreign markets and introducing streamlined processes to setup business
Singapore grabbed eyeballs in the global entrepreneurship ecosystem when it became the only other Asian region (apart from Bengaluru, India) to feature in Startup Genome’s Top 20 Startup Ecosystems in the world in 2015. In fact, while Singapore was a hub for startups since the late 1990s, it saw a tremendous boost in the ecosystem from 2012. This can be associated with two reasons; firstly, with the strategic, geographical and economic positioning it carries. And secondly, with the introduction of strategic, entrepreneurship-friendly schemes, grants and policies by the Government, to make Singapore the Silicon Valley hub of APAC.
Let’s look into each of these positioning in detail.
Tracing Singapore’s Growth Story
The island-city-State comes with a fair share of advantages, which make it a favorable hub for entrepreneurship. For one, Singapore is a multi-cultural, cosmopolitan society, with a significant smartphone and Internet penetration at 4.27 million and 4.47 million in 2017 respectively. The region also comes with a stable political climate, has access to foreign investments, offers ease of doing business and has a robust financial and technical infrastructure. In fact, even though the region’s ranking has fallen from the #10 position (in 2015) to #12 in Startup Genome’s Global Startup Ecosystem Rankings, based on an assessment of talent, funding and attraction of global startup ecosystems, Singapore has grabbed the #1 position on the talent front. This comes as a turning point because according to a TechInAsia 2016 research, among other shortcomings such as high cost of living and investment shortages past Series B stage, lack of technical talent seemed an apparent issue in the ecosystem even a couple of years ago.
In terms of Government support, the proposed schemes and grants focus on very specific aspects of growth; such as improving the investment ecosystem, facilitating access to overseas markets and bringing in streamlined processes to setup businesses. There are several Government supported funding bodies involved in the process, such as SPRING Startup Enterprise Development Scheme, the Early Stage Venture Fund Scheme, the Technology Incubation Scheme, and the Sector Specific Accelerator Program.
For example, the International Expansion Grant helps Singapore-based companies with an annual sales turnover of less than US $100 million accelerate international growth. Similarly, the FastTrack Environment & Water Technologies Incubator Scheme, for Singapore-based companies operating in this space, enables startups to commercialize environment and water technologies. In fact, in 2008, Singapore-based National Research Foundation, in a study, identified gaps in the local ecosystem and launched programs to address specific pain points through an initiative called the National Framework for Innovation and Enterprise (NFIE). Similarly, the University Innovation Fund aided Universities such as NUS (National University of Singapore), NTU (Nanyang Technological University) and SMU (Singapore Management University) with financial resources to accelerate entrepreneurship initiatives on campus.
Of course, of all the schemes and grants that have been introduced in the past few years, what stands out is Block71 (also known as Blk71), the Singapore Startup Hub rolled out in 2011 by NUS Enterprise, the Media Development Authority and SingTel Innov8. With its flagship program, Plug-In@Blk71, the hub was founded to bring startups in the digital media and info-communications space in one common place. While it began with 250 startups in 2011, the hub today hosts close to 700 startups.
Startup SG: The Game Changer
With the three core focus areas of growth remaining intact (as mentioned earlier), in March 2017, the Government decided to culminate the multiple support initiatives offered for startups under one umbrella initiative known as Startup SG. Some of the support initiatives of Startup SG include the Startup SG Founder, to support first-time entrepreneurs, the Startup SG Talent to support talent development for startups, and Startup SG Equity to incentivize equity co-investment for startups. For example, the Entrepass Workpass Scheme, meant for foreign entrepreneurs keen on starting a business in Singapore, will be broadened and enhanced in four ways; the existing entry and renewal criteria will be revised, the requirement of carrying a paid-up capital of at least S$50,000 in their start-ups will be removed, the evaluation criteria for global founders with established track record will be broadened and the validity of each EntrePass will be extended from one year to two years, after the first renewal in the second year. To keep the momentum going in creating and incubating quality, technical talent in the region, the Government plans to introduce programs that offer on-the-job training for localites, apart from giving them exposure to regional infrastructure projects. In fact, the Government schemes also intend to attract global talent through its grants and internships.
Impact on the Ecosystem
So, how have the regional advantages and Government initiatives impacted the ecosystem per se?
If we look at the numbers, between 2005 and 2013 alone, according to a report by BASH (Build Amazing Startups Here – a Singapore-based integrated startup space), the number of startups in Singapore has nearly doubled from 24,000 to 42,000, with close to one-fourth of them comprising tech startups. Fast-forward to 2016, and reports indicate that tech comprises a large chunk of the startup ecosystem in Singapore, with consumer digital taking 55 per cent of that share, followed by enterprise tech at 15 per cent and fintech at 10 per cent.
In terms of investments, the deal volume rose from 40 in 2011, to 117 in 2013 and 163 in 2015, and the deal value during this period rose from US $113 million in 2011 to US $1008 million in 2015. 2016 and 2017 paint a different picture though. While the deal volume in 2016 took a dip, at just 99 investments amounting to US $1190 million, 2017 saw a slight rise in deal volume, at 112 deals last year, with investments at US $1.2 billion. KPMG, which recorded latest data on investments in the ecosystem last year, predicts that although deal volume saw a marginal rise in 2017, it can be associated with investors wanting to pool in larger amounts in a handful of ventures.
When it comes to investments through funding stage, 2016 data indicates that 67 per cent of the funding comprised of seed stage, followed by 19 per cent of them raising a Series A, and 9 per cent a Series B. According to data from TechInAsia, the big three companies which grabbed the highest amounts of funding till 2017 are Grab (Series G of US $2.7 billion), Sea (Series E of US $1.4 billion) and Air Trunk (Undisclosed stage of US $307 million).
In terms of exits, according to the 2016 Singapore Startup Ecosystem Report by Oddup.com, Singapore has recorded 40 exits in the last 10 years, totaling US $530 million, with the two largest exits being the US $200 million acquisition of video streaming website, Viki, by Japan’s Rakuten and the US $66 million acquisition of Asian Food Channel by Scripps Networks Interactive, an international media company.
What Does the Future Look Like?
What comes as a welcome change for the ecosystem is the favorable policies introduced by the Government in Budget 2018. First among them is the Productivity Solutions Grant. In a move to help traditional businesses stay competitive and relevant, particularly on the digital technology front, the Government will provide SMEs with up to 70 per cent funding to adopt off-the-shelf technologies. Secondly, to enable a culture of co-development, the Government has proposed to develop a virtual crowdsourcing platform called the Open Innovation Platform, through which companies can be matched with ICT firms and research institutes to collaborate on developing solutions. Thirdly, it has tweaked the existing tax exemption schemes. The Startup Tax Exemption Scheme (SUTE) will exempt 75 per cent, instead of 100 per cent, on the first SG $100,000 of a startup’s chargeable income, and on the next SG $100,000, the startup can avail a 50 per cent exemption on chargeable income.
What the year will also see is an emergence of three trends in the ecosystem; one, native startups will become more aggressive in seeking corporate VC funding to fuel international expansions into China, Japan, Europe, UK and the US, among other markets. Two, there will be a rise in early-stage VC funds, and a parallel rise in late stage deals by investors, and three, the tech community will continue to attract the most investments in 2018.
7 Important Grants for Startups in Singapore
- ACE Startups
- Capability Development Grant (CDG)
- Early-Stage Venture Funding
- Productivity & Innovation Credit (PIC)
- Financial Sector Technology & Innovation (FSTI) Scheme
- Technology Enterprise Commercialization (TECS) Scheme
- ComCare Enterprise Fund
Leading VC Firms in Singapore
- B Capital Group
- Golden Gate Ventures
- Jungle Ventures
- 500 Startups
- Singtel Innov8
- Sequoia Capital
- Monk’s Hill Ventures
- Quest Ventures
- SREDA
- Wavemaker Partners
Top 10 Best Funded Startups 2017
(As published in TechInAsia)
- Grab
- Sea
- AirTrunk
- Viu
- HOOQ
- Trax Image Recognition
- TenX
- Sunseap
- KyberNetwork
- MyRepublic
