How Singapore can learn from Silicon Valley’s problems

How Singapore can learn from Silicon Valley’s problems

December 27, 2013

by John Fearon

In recent times, Singapore’s burgeoning startup scene has been constantly compared to Silicon Valley. There are plenty of similarities: the presence of clusters of game-changing startups, heavyweight tech corporations, and wealthy investors. While it is playing catch up, Singapore is in a great position to learn, grow and hopefully avoid the pitfalls of its more illustrious counterpart.Singapore is a prominent hub for startup activity around the world. As a predominantly English-speaking city-state, it is usually a springboard into the wider region of various languages and cultural barriers in Southeast Asia. With a stable, honest and pro-international business government, Singapore is theeasiest country in the world to setup a company.

It possesses excellent technology and infrastructure to grow tech businesses. The country has one of the highest internet and smartphone penetration populations in the world. With continuous plans by the government to improve the networks, the adoption of tech will not be hindered by lack of bandwidth.

The big players in tech are touching down and setting up shop. Bigwigs like Facebook, Google and Yahoo have been here for a while. The money is here with venture capitalists like Sequoia, incubators and accelerators like Pollenizer, funds and angels like Eduardo Saverin based around the island. Even the local large corporations are getting into the tech investment game like SingTel’s Innov8 fund.

Rent is inexpensive. Well, not everywhere – Singapore’s premiere location in the Central Business District is ranked eighth in the world. However, if you do not need to be a stone’s throw away from The Merlion, try demarcated startup areas like Blk71 or the co-working spaces around the island.

Dark clouds over Silicon Valley

One thing lacking in Singapore, of course, is the elusive billion-dollar startup. However, 2013 alone has seen numerous six-figure investments and even a 9-figure exit for Viki.

Yet, there has been nothing like the pedigree of success in Silicon Valley. Billion dollar companies and million dollar exits are signs of a healthy startup ecosystem. Just like the Paypal mafia that led to creation of Tesla Motors, LinkedIn, Yammer and more, great startup exits mean creating more jobs and transferring knowledge to the next batch of startuppers. Those who reach the finishing line don’t end there, they start again.

Silicon Valley’s success is not without its problems – there’s the issue of insufficient talent and high rent.

It lacks highly skilled American tech workers and has to import people. “Immigrants have founded 40 percent of companies in the tech sector that were financed by venture capital and went on to become public in the US, among them Yahoo, eBay, Intel, and Google,” writes Laszlo Bock, Google’s senior VP of People Operations, “In 2012, these companies employed roughly 560,000 workers and generated $63 billion in sales.”

With a quota system of only 65,000 H-1B visas per year in a country of 320 million, it is usually snapped up within days of its release. This low supply of internal and external talent is slowly stagnating the industry.

Having one of the largest concentrations of tech companies in the US in a 30-mile radius that is Silicon Valley means limited and expensive office space. Palo Alto hovers around at a five percent vacancy rate with approximately $70 per square foot yearly – and rising rapidly. Many startups are forced to pay a ransom to be closer to the action, where VCs and other startups are. This exertion on the limited funding a startup has can cause the fledging business to stress, contract and even fail.

Leveraging on Silicon Valley’s failures

These crises are significant opportunities for Singapore to learn from. To encourage more risk takers and visionaries to come to the island, the reasons for its current success should be built upon.

Singapore has an opportunity to attract the foreign entrepreneurs being rejected by the H-1B quota in the US. It is the best place in the world to set up a global startup, thanks in part to the Entrepreneur Pass, Singapore’s open business environment and moderate tax rate. By bringing in more startup founders, it will spice up the economy with new additives and seasoned entrepreneurs. Instead of the failed quota system of Silicon Valley, Singapore should continue giving visas to those with the right qualities, skills and experiences. For more basic roles, companies can outsource to regional development hubs in Vietnam, Cambodia and Philippines.

To help more people into the entrepreneurial scene, I believe in making more office space available just for startups. The Block 71 initiative by MDA to house tech companies is seeing the space being filled to the brim. With many startup offices in the area, it is easy for out-of-town investors, business partners, media and recruits to visit several companies in one trip. This is a step in the right direction and startups are looking forward to the expansion of the cluster.

Continual improvement on the talent and office spaces can be the catalyst that sees Singapore startups become billion-dollar corporations that spawn others.

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About Koon Boon Kee
Bamboo Innovator Institute is set up to establish the thought leadership of resilient value creators around the world. KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia. The Moat Report is developed together with our European partners The Manual of Ideas (www.manualofideas.com), the idea-oriented acclaimed monthly research publication for institutional and private investors. The MRA’s paid-subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities and savvy private individual investors. KB has presented his thought leadership as a keynote speaker in global investing conferences with speakers including famed serious investors Donald Yacktman, Howard Marks, Jean-Marie Eveillard etc. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, macroeconomic and industry trends in Singapore, HK and China. KB has been rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm since 2002. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Mirae Asset Global Investments, Korea’s largest mutual fund company. He holds a Masters in Finance and degrees in Accountancy and Business Management, summa cum laude, from the Singapore Management University (SMU). He had also taught accounting at the SMU. He had published cutting-edge empirical research in the Special Issue of Istanbul Stock Exchange 25th Year Anniversary of the Boğaziçi Journal, Review of Social and Economic Studies, as well as wrote articles about value investing and corporate governance in the media.

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