The Singapore Venture Capital and Private Equity Association (SVCA) recently reported that Indonesia and Malaysia have seen a growing number of venture capital deals in the the first quarter of 2015.
While much of the increasing investor interest is rooted in the rising middle class, analysts have also noted that Singapore’s economic infrastructure and support network for startup ventures will continue to differentiate it from its ASEAN peers
Several Singaporean government initiatives that are intended to spur innovation and entrepreneurship are MDA i.Jam and National Research Fund (NRF) Technology Incubation Scheme, which co-invests up to 85 per cent of the investment by a recommended incubator.
Apart from grants, the government has also built a conducive environment and ecosystem for entrepreneurs to grow and succeed. The creation of Block 71 is a tangible example. Block 71 acts as a physical infrastructure project aggregating communities of entrepreneurs, investors and startup support services to co-exist.
In many ways, it function as a connected college campus, which helps cluster the essential services and expertise, while allowing business ventures to be build up office space (rented out to them at discounted rates).
What makes clusters highly beneficial is that companies with similar or complementary interests, competencies, and needs congregate. This creates an entire value chain within that cluster – investors, entrepreneurs, suppliers, manufacturers, distributors, academic institutions, researchers, and workforce training.
Integrated into this are those entities and agencies who are providing the relevant support services to these companies and their personnel.
In effect, a large pool of capital – financial, knowledge and social – is developed and can be accessed and deployed for further expansion and growth in other sectors and segments.
Compared to Silicon Valley, the Singaporean government has played a relatively big role to instill entrepreneurship. Selacorp’s managing director David Selakovic commented: “The government in Singapore is so progressive and entrepreneurial, it really demonstrates enthusiasm and excitement in everything it is involved in, including startups. I’ve been a citizen here for over 15 years and have lived in various cities throughout my life; I think Singapore is the best run government in the world.”
The Alternative View
But a valid argument can be made that Singapore’s startup scene is somewhat overrated, with local mainstream media (e.g. The Straits Times) excelling at alternate interpretations of reality, claiming Singapore is better than it actually is in specific areas. Whether this is a quantum mechanical phenomenon or just propaganda, is arguable.
Despite its status as a financial services centre and high employment rates, the consistently positive things that the government-influenced mainstream media publishes, often hides the deficits of the city state, such as it small internal market and high business costs, driven by a property cartel in the city-state.
Singapore’s government, infrastructure, intellectual capital and reputation are enviable and world-class. Without these competitive advantages, the economy and market would not be as favourable.
As with similar situations in the past, government intervention has been necessary to launch the startup ecosystem in the city-state. Governments often have to compete for venture capital, something Singapore clearly understands. Its relatively corruption-free governance attracts investors and talent into the region.
The government has done this before, having built up the city-states biomedical science and offshore marine engineering sectors as innovation-driven industrial clusters. The biomedical sciences sector represents an emerging cluster that has yet to reach maturity and has a way to go, though indications are robustly positive.
Singapore was the world’s third most innovative country in biotechnology, behind the US and Denmark, according to Scientific American magazine’s annual Worldview ranking for 2012. The distinguishing factors? High government investment, political stability and predictable regulations.
Meanwhile, offshore marine engineering represents a sector that evolved from an earlier shipbuilding and repair industry-base. Currently, the two largest offshore structure builders for the oil & gas industry are headquartered in Singapore: Sembcorp Marine and Keppel Offshore & Marine. Both happen to be government-linked corporations.
As Selakovic notes: “One weakness of Singapore is that the local market is just too small. It’s a great testing ground to prove your startup model and raise funds due to the wide availability of venture capital funding here, but after you succeed at that the only way to grow is to expand to countries where you will find the demand.”