When Darius Cheung co-founded Singaporean mobile security start-up tenCube in 2005, the city-state was not yet the startup hub it is today, flush with venture capital or billion-dollar start-up companies with their eye trained on expansion throughout the Southeast Asia region.
But back then the government had already put in place schemes and grants aimed at laying the foundations for Singapore to evolve into the regional innovation and startup hub it is today, from encouraging private capital inflows to providing the necessary infrastructure for startups to flourish.
Thanks to a government co-financing scheme that matched private capital investment in start-ups dollar-for-dollar up to a maximum of SGD 300,000 (USD 215,000), Cheung and his two co-founders managed to raise a total of SGD 600,000 to get tenCube off the ground.
“The Singapore government’s role was very important in pushing this forward … they helped to ensure that the soil was fertile [for start-ups to grow],” Cheung said in an interview.
Five years after tenCube was founded, McAfee acquired the company in an SGD 25 million deal, making tenCube one of the first Singaporean technology startups to successfully secure an exit. Cheung went on to found 99.co, a map-based property search engine targeted at Southeast Asia.
Over the last decade, Singapore has fashioned itself into a startup hub in the Southeast Asian region, with technology unicorns like Grab headquartered in the country. The local startup scene also boasts up-and-comers such as mobile classifieds ads firm Carousell as well as cash rebate platform Shopback, both of which were founded by locals.
Apart from cultivating the local startup scene, Singapore has also become a magnet for foreign technology firms, hosting regional headquarters and engineering hubs for many of the world’s multinational tech giants.
British electronics company Dyson – best known for its vacuum cleaners and bladeless fans – said earlier this year that it would be moving its headquarters to Singapore, where it will also manufacture its first electric vehicles. US payments firm Stripe last September announced that it would set up an engineering hub in Singapore, and Shanghai-based Yitu Technology is one of several Chinese AI companies that also have research and development centers in the country.
Technology giants Facebook, Google, LinkedIn, and Microsoft all have their regional headquarters in Singapore.
For a small country with no natural resources and a population of just 5.6 million, how did Singapore transform itself into a hotbed for technology and innovation? The secret formula, as it turns out, is not so secret after all.
Stripped down to its elements, it comes down to creating what S. Iswaran, Singapore’s minister for communications and information, calls “enabling conditions”, such as policies that are friendly to businesses, a coordinated approach between universities and academia with private companies to provide a trained work-force, and a high quality of life to attract globally-mobile entrepreneurs and top-grade talent who can call anywhere home.
“With the future economy, the focus was on how to position our economy and businesses for the next wave of opportunities and growth, and also to be prepared for the kinds of disruptions that are coming our way,” Iswaran, who up until 2018 was the minister for trade and industry in Singapore, said in an interview with the Post.
“It is not necessarily a bad thing to have a plan, a vision of how and where you want to go … but what you don’t want is a plan that is sclerotic, that is ossified, so how you formulate the plan is important.”
The country is helped by its reputation for being an oasis of stability in the region, with strong legal protections for intellectual property, continuity of government policies and a highly-educated local workforce. The country was ranked 14th in the 2019 Global Startup Ecosystem Ranking, prepared by Startup Genome, below Beijing and Shanghai but ahead of Hong Kong and other Southeast Asia markets. Silicon Valley tops the rankings.
Singapore’s status as a financial center has also made it easy to attract venture capital looking to invest in South and Southeast Asia, while investments over the years in technologies such as biomedical engineering and precision technology also made it a base for high-end manufacturing, capable of developing Dyson’s electric cars, for instance.
Key to the nation’s strategy is the government’s ability to plan for and adjust its policies to best position itself for the next wave of technology. While it initially focused on shifting to a knowledge-based economy driven by innovation and research and development in the early 2000s, Singapore has once again shifted its strategy to focus on deep technology – otherwise known as technologies that, when developed, will result in fundamental breakthroughs in science and engineering that will have a profound impact on industries and lives.
Singapore’s government, led by Prime Minister Lee Hsien Loong, has in recent years identified four technology sectors that Singapore needs to build – namely data science and artificial intelligence (AI), cybersecurity, the Internet of Things (IoT), and future communications infrastructure such as 5G mobile networks.
As part of Singapore’s move into deep technology, the government has slated SGD 19 billion as investment capital to build the country into a global R&D hub, and in 2016 set up SGInnovate, a government-owned firm aimed at nurturing deep tech start-ups in the country.
In March, an additional SGD 500 million was set aside to expand investments in technologies including artificial intelligence, national supercomputing, and robotics programs, as well as cell therapy and food technology.
Although it has an abundance of capital, Singapore has faced talent shortages, especially with a small population compared to major economies like the US and China. Attracting foreign talent is one solution but Singapore has also put in place schemes to groom locals with the skills needed for its technological goals.
One example of this is Singapore’s national AI program, aptly named AI Singapore. Set up within the National University of Singapore, the aim was to bring private companies and research-based institutions together to help build an AI ecosystem.
AI Singapore approached this originally with a program called “100 Experiments”, aimed at solving problems with AI in different industries. But Laurence Liew, director of AI Singapore, noticed one big problem: there simply was not enough local talent in Singapore for something like AI.
“To execute 100 experiments, I needed not just researchers but also engineers,” said Liew. “We tried to hire and we couldn’t really hire … we had a small team, but we got a lot of [foreign applications] and it was not sustainable because we needed more [local talent].”
From there, the AI Apprenticeship program was born. Following two months of coursework in AI, qualified apprentices are then able to work for seven months on a project that allows them to put their skills to good use in the real world.
Universities have also played a role in helping to nurture future entrepreneurs – the NUS Overseas Colleges (NOC) program, for example, immerses university students in start-up hubs around the world with the hope of cultivating a mindset of innovation and entrepreneurship.
Since the program’s inception in 2001, alumni have gone on to start well-known Singapore-based startups such as Carousell, Shopback, PatSnap, and Zopim. A recent survey also found that a third of NOC alumni have attempted to start their own companies.
There is also a deep pool of private capital willing to back startups. Early venture capital funds were attracted to Singapore thanks to the government’s matching and co-financing schemes, and that pool of capital is now also well-placed to invest in the multibillion-dollar Southeast Asia market.
“The Singapore government directs its plans at achieving a particular outcome, and once that outcome has been achieved with the help of the private sector, they look at the next new area to invest in,” said Vishal Harnal, a Singapore-based general partner at 500 Startups, a venture fund specializing in seed investments.
“It’s getting the iron triangle of government, private capital and corporates to come to Singapore and invest, and with the Singapore government, interactions [with industry players and investors] are never just lip service,” he said. “The ability and the onus for the government to listen and act is very strong, innovation is a priority for the country.”
The Singapore government also takes intellectual property initiatives seriously, launching several to ensure that innovation flows are protected in and out of the region, making it an attractive place for companies to do R&D, according to Tan Yinglan, founding managing partner at venture capital firm Insignia Ventures in Singapore.
“Singapore has taken a proactive stance to support innovation and demonstrated to the region the benefits of government support when it comes to that,” said Tan. “With Singapore leading the rest of Southeast Asia, it was an obvious choice to set up Insignia here and explore how innovation has developed in other regions.”
Ultimately, Singapore hopes for a virtuous circle whereby a successful culture of innovation results in the proliferation of more technology companies, as talent “flows” between both large and small technology firms, according to Kiren Kumar, assistant managing director at Singapore’s Economic Development Board (EDB).
“You need the big companies like Google [in Singapore] to … draw the talent, and then that talent eventually helps train [other] talent, which then circulates,” said Kumar, who weeks after the interview was appointed to head the Digital Industry Singapore office, a new coordinating office set up to act as a “first stop” for companies seeking help in matters related to the sector.
To be sure, Singapore is not the only country that has put in place policies to spur innovation and technology. Many governments have policies to expand funding or access to capital for startups and global talent schemes. But although Singapore may lack the sheer size of markets such as Indonesia and mainland China, it has a good track record of execution.
“Singapore will never have the same kind of demography, or geography [as larger countries], but if you’re operating in Southeast Asia, which is a fairly heterogeneous market, opportunities are big,” said Kumar, who added that success is mainly about creating the right mind-set and culture.
“You can’t do it alone – you cannot be an individual innovation star, there’s no such thing,” said Kumar. “Nobody learns innovation in school.”
Cheung, who successfully started and sold his startup tenCube nearly a decade ago, agrees.
“Look at China – many of the successful companies today were started by Baidu, Alibaba and Tencent alumni,” he said.
“So the people who work at local start-ups like Shopback today, will be starting their own companies a few years later,” Cheung said. “It just multiplies, and these are the people who will matter.”
This article first appeared on the South China Morning Post.