Ron Snir, the Head of the Israeli Economic Mission to Singapore, is frank on her views of Singapore and its evolving venture ecosystem and points out that it is not fair to compare the startup scenes across both countries, considering the massive head-start that Israel enjoys.
The numbers signify the difference between the ecosystem of both countries: “For each dollar that the Israeli government spends, $10 are being contributed by foreign investors. So when you look at Singapore, that makes a great difference because not many foreign investors been here putting their money into startups. They’ve invested in headquarters and manufacturing infrastructure, but not startup ventures,” she said in an interaction with this portal.
According to her, the difference between both nations was in the cultural DNA: “An average Israeli and an average Singaporean have different dreams and aspirations. The Singaporean’s dream is perhaps to work in a financial institution or a civil service job, which is definitely the opposite of the average Israel youth dream,” she said while adding that there were lessons both countries could take from each other.
In her role, Snir facilitates trade and investment opportunities for Israeli companies in Singapore and the wider Southeast Asian region. Snir provides business development services, as well as marketing and strategic consulting to Israeli companies interested in successfully penetrating and operating in Southeast Asian markets. In addition, she extends these services to Singaporean enterprises interested in seeking market opportunities through joint ventures (JVs) or other partnerships in Israel.
In an in-depth interview with DEALSTREETASIA, Snir discussed the systemic differences between Israel and Singapore, the problems facing its venture ecosystem, and the challenges that the city-state will face in the future.
Looking at this Singapore-Israeli relationship, it seems the growth of Singapore as an entrepreneurial hub has been inspired by Israeli innovation policy. In this context, what are the complementarities between the Singaporean and the Israeli ecosystem? What can the Singapore side learn more from the Israeli ecosystem, which has a very strong exit architecture M&A market?
I think comparing Israel and Singapore isn’t very fair because Israel is generally much more experienced in the startup scene. We started out with the Office of the Chief Scientist in 1971. I think Singapore only started something comparable with its grants from the NRF in the late 1990s and 2000s.
Israel has been supporting its startup ecosystem for a while and the government is pretty much acknowledged for its contribution. They’ve built an ecosystem of venture capitalists (VCs) and attracted international investors started in the 1990s. They also provide about $500 million a year of funding to companies. So, that’s a lot of money injected into the market.
Today, the numbers say that for each dollar that the Israeli government spends, $10 are being contributed by foreign investors. So when you look at Singapore, that makes a great difference because not many foreign investors been here putting their money into startups. They’ve invested in headquarters and manufacturing infrastructure, but not startup ventures.
The other thing is cultural DNA; an average Israeli and an average Singaporean have different dreams and aspirations. The Singaporean’s dream is perhaps to work in a financial institution or a civil service job, which is definitely the opposite of the average Israel youth dream.
But what can Singapore take from Israel? I would say that in terms of the government approach, there’s a need to be less risk-averse and open to more unstable workplaces. The security of workplaces in Singapore, whether in the public service or financial institutions, deprives Singapore youth of the chance to go out and try their own things. And besides, the whole education system in Singapore, starting from Kindergarten as pre-schools, should go through a radical change. So, this is what you should change.
What Israel needs to perhaps learn from Singapore is embrace more international and foreign startups, which we’re not very good at. 99% of the startup in Israel are of Israeli origin, by Israeli talent. And being open to the world from that perspective, as well as access to that talent pool, could make a difference in taking Israel to the next step.
In Israel, there is the Office of the Chief Scientist and its Singapore counterpart is the National Research Foundation (NRF). Some feedback from the startup community here in Singapore suggests the NRF is slow to deploy funds compares to Israel. What’s your take?
I’ve observed that and agree that it seems to be one of the key struggles of local startups. The government, which is trying to help startups, needs to be very flexible and quick to respond; it can’t take you 12 months to evaluate a startup.
And it can’t be that you just give 50 per cent of a project or grant without a downpayment because startups often need the money urgently.Secondly, the evaluators, as far as I’ve seen, all come from within SPRING Singapore and the NRF, which doesn’t make sense to me.
The Israeli government is always tendering every two to three years and enlisting different professionals with great experience, usually 50 years old and above – which also grants them a good opportunity to work – to evaluate the companies, which they can do within two weeks.
From the moment that you submit an application to the NRF to the moment that you receive an answer, it can take up to eight weeks. And while its a great achievement for the government that it’s able to work so hard, for the startups themselves many just can’t bear the wait. If the government wants to help, it should help in a way that the startups feel they’re not simply chasing government grants.
Secondly, the government itself must ensure it provides the funds for startup ventures when other investors aren’t willing to underwrite the risk. A lot of times, within NRF and SPRING, as well as the other grant schemes, they’re always checking the risk. The whole idea of venture capital, or startups, and building an ecosystem of innovation is about taking risks! Now, if the government is not willing to take the risks, who could?
That’s a big thing that I’ve noticed in my discussions with different VCs and government agencies They’re unwilling to even construe the principal of taking a risk and absorbing a risk. If you’re not willing to take a risk in deploying the funds and not getting them back, then obviously you can’t play the game as it should be played
Israeli startup traditionally exit via a trade sale to a larger enterprise. Looking at Singapore and Southeast Asia, what’re some of the key elements of the future exit architecture in the region?
Most of the startups in Singapore should market themselves as Southeast Asian startups rather than Singapore startups. Then they stand a chance to actually market themselves to MNCs and customers from mature markets like Japan, Australia, and even the US as regional firms operating in a market of about 650 million people.
This would change the attitude towards their presence and enhance their impact. Israeli companies aren’t looking at the Middle East or Israel but are global companies to begin with. Singaporean companies should take the same approach and be a Southeast Asian and global firm, rather than a Singapore business.
Most companies are looking at the local market and that shouldn’t interest you.Rather, it should be one of the markets you deal with in the region. Secondly, M&A transactions are generally what most of the entrepreneurs and the funds in the region prefer. It’s easy, it’s a smart movement. It’s the way that the world is going.
For a public listing, a lot of the listings that Israeli companies have done – never mind whether its inside or outside Israel – or outside of Israel, were not that successful. So it really depends on the maturity of the company and why they are going to list. Because sometimes, when the public doesn’t understand the company or the company is not revenue-based, like environmental technologies, hen it’s not a smart move to actually go and raise the capital and be stuck as a publicly listed firm with no real value to gain from public markets.
In Israel, there’s a venture fund called Vintage Investment Partners, which just closed a $215 million fund earlier this year. It’s their tenth fund and they operate a secondary market for startup investments; they provide a marketplace to investors, entrepreneurs, and other shareholders to trade stakes in companies that haven’t exited yet.
Shareholders can sell them to other investors or corporate and its also something that Singapore should develop. It’s something that I haven’t seen yet in Singapore.
Israeli SMEs (small and medium enterprises) have internationalised themselves. You’ve discussed how there’s a need to brand Singapore-based companies as Asian enterprises. Using Israeli enterprises as a basis, what key elements really enable the Israeli ventures to expand to internationalise themselves?
Israelis have a lot of chutzpah, so they have the nerves to go out. I think Singaporeans, in that sense, are a little bit too reserved. They’re not going out there and don’t have the pride of being a Singaporean startup. They might have pride in the “Little Red Dot” or Lee Kuan Yew’s legacy. But when it comes to startups, I think the Israelis have a lot of boldness.
There’s also the Jewish diaspora which is crucial for the development of Israeli enterprises. So, whether it’s the Jewish businessmen who provide funding, or whether the fact that they could be clients because – lets just say that in fintech, there’s probably a lot of bankers that are Jews who can make decisions within the cyber fintech digital space – so, it’s easier for them to speak to a Jew, I assume, than to others.
The second thing is that most of the Israelis have actually their roots in Europe or the US, so its very easy for them to relate to the extended family of cousins and other kin that remain there. And the connections that the Jewish businessmen have built for many generations has also made a difference.
Israel has this large diaspora community worldwide, and the Jews and Lebanese as often cited as the most successful entrepreneurial immigrant communities, a rather organic development. What’s your take on the emergence of a sort Singapore diaspora?
I wish they could thrive. I don’t see as many Singaporeans, or ex-Singaporeans, being based in other countries other than, let’s say, China, and maybe India. And Singaporeans do have a stake in Indonesia and Malaysia. But, other than that, I don’t see them using any influence. And again, it’s a people-to-people influence, rather than foreign policy or military influence. o
So, I don’t see that much influence from a Singaporean standpoint in other countries those I’ve mentioned. And again, there are lots of Singaporeans who migrate to the US, UK or Germany, but do they really support and stay in touch with those who stay behind? And have they come up with great ideas? I’m not sure about that.
With Israelis, there are good ties and very good communications between different Israelis worldwide, as well as between Israelis and different Jewish organisations. I’ll give an example – but I’m not sure Singapore even has a basis has a comparison – but there are 14 million Jews globally and about 5.5 to 6 million in Israel, with the rest scattered globally.
Those remain quite affluent and they want to support the Israeli state. How do they do that? They used to do it by actually donating money to different kinds of Jewish organisations. Today, the young generation of these families don’t want to do that but see themselves as delegates of their family to invest in startups.
So, they invest in technology instead of just contributing or donating to the country. By doing that, they take a great pool of capital and seed it into those enterprises seeking funding. Why? Because they are Israelis.
Can I see something comparable in the Singapore context? I’m uncertain because I’m unsure of the ties binding Singapore with its diaspora being as strong as Jews and Israel. That’s why I think this is a great advantage of Israel and Israelis. I don’t think even the Israelis understand how great an advantage it is.
If you compare the technical profiles of entrepreneurs in Israel to Singapore, very often you have individuals with a great depth of technical experience and exposure and generally educated to a postgraduate level, with a masters degree at a minimum in a STEM (science, technology, engineering & mathematics) field. In Singapore, you’ve generally got a fresh graduate with a bachelor’s degree. How can Singapore replicate or emulate the Israeli setup? What’s the key difference?
First of all, you have to make sure that the wages of those who come out and work in STEM fields are comparable to those going into the financial services or government sector. This must change because it can’t be that in Israel, 80 per cent of engineering school graduates goes on to become engineers, while in Singapore it’s the opposite, which is a huge problem.
Firstly, it’s spending a lot of money on education that’s actually not being deployed or utilised after graduation and secondly, Singapore is really lacking in the relevant manpower and talent to build new ventures. I don’t know what’s led to this situation of talented scientists, engineers and mathematicians going into the financial sector, but this needs to be somehow addressed.
In Israel, the situation is more equitable. For instance, a fresh engineering graduate with little experience but who shows competence and professionalism can make about $10,000 a month. In the financial sector in Israel, it’s maybe $6000, so there’s a huge difference.
Young people have debts and they want to start making money, so they go where they’re being paid reasonable wages. If Singapore doesn’t pay for those talents who’re interested in committing to pursuits in technology and science, then this won’t change. The problem in Singapore isn’t perhaps a lack of people studying STEM; the fact is that these are fresh graduates that don’t want to do it because they see a better opportunity somewhere else.
Another part of this is the government scholars, which is a fundamental problem in Singapore. The government takes all these scholars – the top 1 to 2 per cent – for their own human capital needs. And this eventually affects society because some of the best people are inside the government and being protected and retained with great salaries and benefits.
The other aspect of this is the multinational corporations (MNCs) like Facebook who often recruit STEM graduates and offer significant job security, as well as being perceived as good employers. In this context, the young talnt don’t have that opportunity to go and work for startups, for whom it isn’t viable to event pay half of what an MNC can.
And sometimes, the MNCs eventually don’t necessarily work with these young STEM graduates who’re deploted into marketing, tailoring the products to the market, customization and all of that. In Israel, there’s a fair number of students who don’t necessarily go to work for MNCs but work for startups, and this diversity of options is still lacking in Singapore.
The Trendlines Group, a medical and agricultural technology incubator from Israel, is listed on the SGX Catalist. With its move towards tech listings, is the Singapore bourse viable as a capital raising of public listings platform, or are more liquidi places like the Australian Securities Exchange (ASX) or Tokyo Stock Exchange (TSE) – which has made overtures to Israeli tech enterprises – more suitable for Israeli enterprises looking at an IPO?
It depends on the merits of the companies that are coming to Singapore. If the company has a great base in Southeast Asia, then it makes sense to raise capital and list in Singapore. But if the main markets are Australia or the US, then what’s the point of coming to Singapore?
There is capital in Singapore, but one of the things that you need to do in Singapore is to maintain your relationship with investors. And if you’re not based in Singapore and you don’t have a real agenda in Singapore and the region, then to just have a presence here in order to maintain and sustain these relationships is too cumbersome for Israeli companies.
They need to have real merits here, such as having an HQ in Singapore if they’re targeting Southeast Asia or the whole of Asia, and there are some companies who actually have that, but they also need to understand the Singaporean mindset, which isn’t easy for Israelis. If you have that, and it’s already been instilled in your company, then yeah, you should consider listing in SGX. But to do it just to raise money just because there’s funding here isn’t a wise choice.
As an external observer, what’s the future for startups in Singapore and its role as a regional business centre? You have the rest of the regional economies rising and I think Vietnam, Indonesia, Malaysia, Philippines, these are all growth frontier markets with a strong cost advantage over Singapore, while Singapore has a well-established business infrastructure. But, it’s also facing competition from other countries in the Indo-Asia Pacific.
Singapore is highly dependent and always has been on its neighbours The question is whether these neighbours, whether it’s Thailand, Myanmar or Vietnam, are going to improve and move forward. In the case of Indonesia, which I deal with, there are lots of things going on in Indonesia now, within the startup space. So they’re also moving forward.
What does Singapore need to do? Firstly, the government must advocate for entrepreneurs and allow more startups to come in, as well as facilitate the growth of more co-working spaces so that rentals won’t be that costly.
Earlier, I talked about grants and other funding options, which could be more accessible, in that they could be more generous and that there be less constraints on each and every grant. So, the grant doesn’t have to be only for Singaporeans or Singapore-based companies. And SPRING SEEDS, for instance, doesn’t have to be 70%-owned by Singaporeans.
They have to open the market if they want to call themselves an international base in the startup scene. They can’t do much with prioritising Singaporeans over foreigners because it doesn’t matter; Singapore doesn’t have a sufficient talent pool, whether its data scientists or biochemists, so you need this integration.
Additionally, I think they need to give more money to those companies that consist of mixed talent from India, the US, China and Singapore, and grant them more support. If they want Singapore to be an international hub or Southeast Asian centre for startups, they have to act as a hub and not a not just promote Singaporean enterprises, or have a Singapore CEO who’s connected to the right families, as you simply just reduce its effectiveness.
As a business destination and financial centre, what’s the road ahead for the city-state?
That’s a very challenging question because I think Singapore has a lot of challenges nowadays. And it’s not easy even to assess what to do, given what’s happening in core industries with all the changes. But Singapore should have more SMEs and mid-market firms with revenue of $500 million and greater than can stand alone and not be backed by the government. These should be private enterprises managed by competent Singaporean businessmen.
Not only that but they should aim to grow unicorns (i.e. firms with valuations of $1 billion+). They need to have at least ten to twenty real unicorns that are not the unicorns you and I know, which are Singapore Airlines, Singtel, SembCorp and all these other local players.
You need a new generation of SMEs developing and refining new technologies that can bring new products to the market and are well known to Singaporeans. I’m not sure how the government should do that but if you look at Israel, there’s a big difference between 2000 and 2017.
Then, there were a few major firms such as Teva, Checkpoint and a few others. Now, we have about 50 to 100 companies which are actually unicorns, and that’s not something I see in Singapore.
The next step for Singapore to be sustainable for its own people. Whether it’s a hub, whether the Economic Development Board (EDB) continues to bring in the MNCs and activities like that, the Singapore government has to decide the strategy. But, if Singapore wants to be strong from within then they have to build a capacity to develop and retain independent SMEs large enough to go their own way.