Can Singapore Become Asia's Tech Start-Up Epicentre And Prime Unicorn-Breeding Ground?
Rebellion, risk taking, and disruption are the central tenets of entrepreneurialism. They’re also the polar opposite of what’s traditionally been taught in Singapore’s schools and reinforced in Singaporean society.
BY Christian Barker | Oct 13, 2016 | Money & Career
Rebellion. Risk taking. Disruption. Questioning the status quo. Thinking outside the box. Failing—repeatedly, proudly.
These are the central tenets of entrepreneurialism. They’re also the polar opposite of what’s traditionally been taught in Singapore’s schools and reinforced in Singaporean society.
Overcoming the fear-of-failure-play-it-safe-study-hard-and-get-a-good-stable-job mindset is one of the core challenges that Singapore faces in transforming into an innovative, entrepreneurial, high-tech economy. Gradually, though, we are getting there.
As Marcus Tan, one of the three founders of wildly successful marketplace app Carousell puts it, “I see more and more people taking risks in Singapore these days, looking at the way things are currently done and making a bet that there’s a better way to do things. You’ll make mistakes along the way, but that has to be positioned not as failure, just trying new things, prototyping, innovating.”
Still, local founders will often encounter resistance at the beginning of their start-up journeys. “The first time I told my parents what we planned to do, they gave that sceptical, cynical response, ‘Are you sure you want to do this?’ They were unhappy for sure, especially when you’ve spent quite a number of years studying—and you’re technically not doing anything related to what you studied,” Tan says. Nevertheless, the NUS business graduate-turned-aspiring designer managed to convince his folks to give him a year to pursue his start-up dreams, quit his stable biz-dev gig at Oracle in mid-2012, and with co-founders Quek Siu Rui and Lucas Ngoo, set about building Carousell.
Though his mum and dad were hesitant at first, the multi-generational Singaporean domestic unit did have its upside, and Tan says it was thanks to parental support that he and his partners were able to pour their all into the embryonic start-up. In the company’s first year-plus, pre-funding, surviving on zero salary, “it really helped that we lived with our parents, because of the costs—and you don’t have to worry about laundry and stuff like that, those details that take up time in life. We were able to just focus on testing and validating the idea, and that’s one of the things that helped us get to where we are today, having that support from our parents.”
“The first time I told my parents what we planned to do, they gave that sceptical, cynical response, ‘Are you sure you want to do this?’"
Belying its success, Carousell’s very model—connecting buyers and sellers of used goods—runs counter to the local cultural bias against second-hand. “It’s changing, though I still get that from my parents, that idea of not liking to take stuff from Aunty,” Tan laughs. “But mainly, people are getting used to the idea of buying something pre-loved—it’s just savvy, right?” (Investors appear to agree, with Carousell securing nearly USD7 million in funding to date from major players including Rakuten Ventures, Sequoia Capital, Golden Gate Ventures and 500 Startups.)
John Tan, an angel investor who provided seed capital for RedMart and Chope, among many others, credits Singapore’s leadership for fostering the local tech ecosystem. “What’s really pushing the start-up scene forward here is the government,” he says “We have a very progressive government putting their money where their mouth is. They’ve pumped a lot of funds into the ecosystem and that’s helped build Singapore into the start-up hub of Southeast Asia. That, and the fact that we are one of the least corrupt countries in the world. Most Southeast Asian start-ups, even if their primary business isn’t in Singapore—because Singapore is such a small market—they’d rather be incorporated here. The investors all want to live in Singapore; it’s one of the nicest cities in this part of the world to live in. So it’s a combination of all these factors. What’s missing probably is the engineering talent. Singapore needs to rethink its attitude towards engineers and engineering. Traditionally, the most sought-after white-collar professions are law, medicine and banking. Engineering, even though it’s white collar, has always been considered a level down. We need to change that mindset.”
Peng T Ong, eminent Singaporean engineer, entrepreneur and investor, argues that while there are cultural hurdles to overcome, Singapore’s main challenge is one of scale. “This is a tiny, tiny place,” he says. “There are only around 3.5 million Singaporeans on the planet. How do you generate enough bulk so that we matter?”
Living in the US after college, Ong built Match.com, founded pioneering content-management software company Interwoven (sold for USD775 million in 2009), and subsequently, upon his return to Asia, funded billion-dollar Chinese mobile gaming business FunPlus. Now running Singapore-based tech venture fund Monk’s Hill (named for the non-elite high school that Ong attended), which focuses on post-seed investments in Asean, Ong says that welcoming a few choice foreign talents—“the numbers are not huge; it’s the type of people you need, not the number”—is a key step that Singapore needs to take “if our goal is to build a tech innovation hub.”
There’s simply no other choice if that’s truly the game plan, he says. “The only choice is, do we want to be a tech innovation hub?” By way of example, he points to global tech mecca, Silicon Valley. There, Ong notes, “more than half the founders were born outside the US, and another chunk of them, their parents were born outside the US. The United States is a country of 350 million people. Even with that kind of bulk, the US still needs 50 percent of its innovators coming from outside. What about a city the size of Singapore—one percent the size of the US? How do we get enough innovators to create a bulk of innovation that matters, that creates enough value?”
Ong, who has advised the Singapore government in its efforts to develop a thriving tech ecosystem, says we’ll only achieve that goal “if we’re willing to make those very high-level decisions, consciously.” He believes the world will begin to take Singapore seriously as a tech hub, and the city will really start attracting heavy-hitting business builders and wealth creators, once a large number of multi-billion-dollar companies have sprung up here.
To date, Singapore has spawned just a handful of so-called unicorns—tech start-ups with valuations of more than a billion dollars. Gaming, e-commerce and payments company Garena leads the field; its USD3.75 billion valuation is Southeast Asia’s biggest. A majority stake in Singapore-headquartered e-commerce platform Lazada, the Amazon-esque marketplace created by Germany’s Rocket Internet in 2012, was acquired by Chinese behemoth Alibaba for USD1 billion in April of this year. Gaming hardware giant Razer, founded by Singaporean ex-lawyer Min-Liang Tan in 2005, won official “three comma” status in late 2014, with a funding round led by Intel valuing the company at a cool billion.
Though founded by Malaysians Anthony Tan and Tan Hooi Ling, e-hailing start-up Grab is headquartered in Singapore and made much of its initial mileage here. Chatting with Esquire at the e27 Echelon conference in June, Lim Kell Jay, Grab’s Singapore country head, said achieving unicorn status (the company is valued at USD1.8 billion) has had a powerful effect on the management team’s ambitions. “It has helped me to think 10 times, rather than 10 percent,” Lim says. He explains, “If you work in a more traditional company, if you can achieve 10 percent growth per year, that’s a good result. We’re pushing for 10 percent, 20 percent every month. Believing that you can actually do it, that’s a mindset change.”
While many companies’ billion-dollar valuations are based not upon revenue, but the blue-sky prognostications of investors, Lim believes Grab’s is backed by solid fundamentals. “What’s important is having to justify the valuations we get and to do that, we need to grow, deliver value,” he says. Lim cites the example of US health-tech start-up Theranos, the former USD9 billion unicorn that recently saw its value decimated, its much-hyped blood-testing tech now under federal investigation. “You need to build on a solid foundation. Fortunately for us, we are providing a real service to people. We’re helping to solve a problem, and as long as we keep doing that, we’ll be fine.”
Solving a real, visible (and, if you hope to go unicorn, large-scale) problem—as opposed to one that exists only in theory or in a founder’s imagination—is the major key to entrepreneurial success. Hugh Mason, co-founder and CEO of accelerator JFDI.Asia (the acronym officially stands for Jumping Frog Digital Innovation, but also means “Just [f-word omitted] Do It”), says entrepreneurs in this region can’t simply look at replicating ideas that have worked in the US. “Take the idea of a concierge laundry service, an Uber for laundry. Well, here in Asia, we have lots of affordable home help. Maybe we don’t need that,” he says.
Given the vast cultural, economic, geographical, regulatory and linguistic differences from nation to nation, the concept of a single market called “Asia” is “ridiculous, a colonial-era construct,” says Mason. One of the key challenges for entrepreneurs looking to cater to this fragmented collection of countries, he says, “is to find those ideas that are truly scalable, and sometimes that means working with things that aren’t very glamorous. I sat next to a guy on a panel discussion a few months ago, and he pointed out that there are 500 million Indians who just need toilets. They don’t need disruptive toilet technology. They just need to, uh, use the toilet.”
Given the vast cultural, economic, geographical, regulatory and linguistic differences from nation to nation, the concept of a single market called “Asia” is “ridiculous, a colonial-era construct.”
Mason is passionate about high-tech research and development—he built his first computer aged 12, was a producer on BBC TV’s futurist programme Tomorrow’s World in the early ’90s, and served for several years as an advisory board member at A*STAR (Singapore’s Agency for Science, Technology and Research). But sometimes, he says, creating great change doesn’t require a major scientific breakthrough—a tweak is all that’s needed. “It may be the case that the big market all around us, the billion people within a five-hour flying time of Singapore, most of the time just need business model innovation—the existing tech is perfectly okay; it just needs bolting together in new ways.”
"This is a tiny, tiny place. There are only 3.5 million Singaporeans on the planet. How do you generate enough bulk so that we matter?"
There’s enormous potential for start-ups that can deliver the basics of life to Southeast Asia’s underserved masses. Mason breaks it down: “If you exclude India and China, you still have 600 million people in Southeast Asia, 60 to 80 million of them are middle class and doing okay. They have air-conditioning, insurance, their kids have an education. But that still leaves 520 million people who don’t have those things. If we can address those needs—healthcare, logistics, education, whatever—then it could be transformational.”
Forget Uber for laundry, kids—think “Insurance for Indonesians”. And with a population of 250 million, Indonesia is the Promised Land for Southeast Asian start-ups. “If you win Indonesia, you win Southeast Asia,” says Willson Cuaca, Managing Partner at East Ventures, an early-stage investor who provided some of the initial funding for giant Indonesian online marketplace Tokopedia—now valued at more than a billion dollars—back in 2010. “Single market domination is very important. Wherever you are, Indonesia, Singapore, you have to win the local market, solve a local problem. After that, you can expand. You need to win your country, and pick the market that’s big enough to test your product—in this scenario, we think Indonesia is the right one.”
Insurance and toilets may not be glamorous fields, but in the words of Peng T Ong, “You’ve gotta ask yourself what you’re in a business for if you’re an investor or tech entrepreneur—to look sexy, or to make money and have some economic impact?” Besides which, as he points out, “I think a company worth billions of dollars just might be considered sexy by some.”
JFDI alumnus Cameron Priest, the 29-year-old New Zealander CEO and co-founder of TradeGecko, certainly feels that way. Though young, unlike a lot of millennials who expect to become the next Zuckerberg and have their start-up turn unicorn overnight, Priest is more patient, saying, “A billion-dollar valuation? That’s reaching USD150 million revenue and consistent growth, and that might take 18 years. The companies that do it in three years in Silicon Valley—that’s winning the lotto and being really smart at the same time.” He’s sanguine about the unglamorous nature of TradeGecko’s business. “There’s two ways to describe what we do,” he says. “You could say, ‘We build supply chain management software’—which is the most boring thing in the world. The flipside is we say that we want to enable global commerce. We want to enable any small business owner to kick arse at business. So there’s ways of looking at it, where it’s really interesting—we get to work with thousands of businesses, help them grow and achieve their goals. When we talk about our vision, we put it more like that—we power commerce.”
To Priest, like Ong, entrepreneurial success is inherently sexy, no matter the nature of the business. “For me, money has its own glamour,” he says, “and building a great team has its own glamour.” To wit, TradeGecko has secured nearly USD8 million in funding since its foundation in 2012, and now has more than 90 employees, mostly based at its Singapore headquarters. “Building an impactful company is really important to me. Helping businesses grow is really important to me. Making money—definitely important to me. Being on the cover of magazines? That’s not important to me… For me, it’s about making money, building a big business, building a scalable team, and then, hopefully, using those resources to go build other, bigger and more important businesses as well. I think TradeGecko is solving an important problem, and as an entrepreneur, there are other problems that I’d like to solve in the world. I feel like we have a clear path to success. We’re building something that millions of businesses need—that has its own sexiness. Impact’s more important than glamour.”
As Priest’s remark suggests, entrepreneurs love building things, and often move along to the next (ad)venture once they’ve shepherded a company through to the stage where it has hundreds or thousands of employees, and their job becomes more about managing people than creating.
John Fearon, the Singapore-based South African serial entrepreneur, follows a different approach, keeping his creative juices flowing by taking an interest in numerous businesses at once through his start-up studio, Sugar Ventures. Fearon has been described by blog TechInAsia as “Singapore’s most prolific entrepreneur”, and happily admits that he’s experienced a bunch of failures along the way. Most start-ups do fail, after all. The portfolio model of a venture builder like Sugar—which backs the development of several start-ups simultaneously and allows them to share resources while in the embryonic stage—spreads the risks and, some would argue, increases the odds of ultimate success.
Fearon says entrepreneurs shouldn’t be afraid of failing—but, at the same time, the best have a never-say-die attitude. “Every entrepreneur tells the same story: there was a time when the shit was going down, they were running out of cash, and at the last second, the last gasp, they pulled in the cash. Everyone has this story—Elon Musk, everyone—of running it right down to the wire. The reason they can now tell the story, with a smile, is because they didn’t give up,” he says. “It’s a journey that all entrepreneurs go through. I’ve never met anyone who had funding forever and it was always perfect. If you look at all the great guys, everyone had their tough moments, where they just had to find a way. If everyone has that story, it means you have to go through that if you want to be an entrepreneur. The great thing about the venture builder model is we don’t push our founders through that experience—they never run into that brick wall. But the angle to it is, we keep most of the equity. If you want to keep the equity, you have to be prepared to run into the brick wall; that’s the other side of the coin.”
To retain the lion’s share of your start-up, you’ll have to take risks and make sacrifices, bootstrap your way up like the Carousell boys. At some point, though, to take things to the next level, you’ll almost certainly need to seek fresh funding. And investors are going to be looking to see just how much skin you have in the game.
"A founder should really have to put their money where their mouth is."
Justin Hall, one of the principals at leading Singapore/San Francisco VC firm Golden Gate Ventures, says that to be a serious contender for funding, a founder “should really have put their money where their mouth is, in some way. If this is an amazing idea or product and you’ve quit your job, you’ve taken your savings and developed the product, done something with it, gone out to the market, gotten people to try to use it, pushed to get this thing out there—we’ll see that and think, okay, they’re taking this seriously.”
Hall says, “The most irritating pitch is where they just have an idea, and they’re asking for money. The thing that pisses me off the most about that is, if this is as profitable an idea as you say it is, you should be willing to put your own money in. If it’s such a done deal, if there’s such a huge upside, you don’t want my money! I’m going dilute your ownership. You should want to take everything! And if they don’t do that, if they’re not passionate enough to put their own time and money into building it, then you know that they don’t take it seriously, or they don’t truly believe it’s a good idea.”
It’s a big risk. Sure, you could end up riding a unicorn. More likely though, you’ll get your ass kicked by a lame donkey. Don’t worry; it’s not really failure. Just prototyping. Pivot. Ideate. Iterate. Disrupt. Just do it. And most importantly, “Think Different” no matter what they taught you in school.
From: Esquire Singapore's August 2016 issue.