When Covid restrictions plunged people into isolation last year, Karmen Tang found her own community. The former corporate finance professional with a self-proclaimed “creative itch” noticed her interest in startups blossom when she moved to Singapore from the UK.
While some baked sourdough and banana bread during lockdown, Tang focused her energy on people’s business appetites and their hunger for building new enterprises. She was surprised at the number of people who shared her enthusiasm. Informal conversations turned to interviews that became her podcast, another startup story.
“I just love the conceptualisation of startups, the idea of getting your hands dirty and building something from scratch,” Tang said. “I found it really inspiring to hear founders’ stories at that time and the passion escalated.”
While global economies struggled through the Covid-19 pandemic, entrepeneurship in Singapore thrived. Nearly 103,600 new businesses were formed during the past 18 months, significantly outnumbering the 73,000 companies that closed. Entrepreneurs cite the maturity of the venture capitalist (VC) investor market, the ease of company registration and support from government agencies as key reasons the Red Dot stands out as a place to launch their business brainchild.
Private investors hungrily hunt the next Singaporean ‘unicorns’ – a term for privately owned companies with a value of more than $1 billion – to boost the country’s economic power and international reputation.
But while nurturing a hub for fast-growth, high-value innovation, Singapore should make sure that more traditional small businesses are not overlooked.
“The term ‘startup’ [is] most commonly the image of a high-risk, high-growth, venture-funded technology firm,” said Tang. “[But] the vast majority of startups did not originate in Silicon Valley and do not end up with billion dollar IPOs.”
For many entrepreneurs, the ultimate startup dream is to achieve mythical creature status. Unicorns can help boost economies’ global prestige and are key targets for government and private investors’ funding.
In 2021, 19 startups in the region crossed the $1 billion (SGD 1.5 billion) valuation threshold, bringing the Southeast Asian unicorn total to 35. Of these, the lion’s share is in the Lion City: Singapore boasts 15 of these 35 unicorns.
Joseph Khong, assistant director and head of engagement and communications at Action Community for Entrepreneurship (ACE), a trade association representing more than 1,300 of Singapore’s startups, described their ambition to “build as many unicorns as possible and… champion enterprise in Singapore.”
These startup success stories are an important part of Singapore’s national identity. E-commerce marketplace Carousell is a proudly cited example. Valued at $1.1 billion, the company with a presence in more than ten countries was founded by Singaporeans Quek Siu Rui, Lucas Ngoo and Marcus Tan.
“Our own Singaporean students… made it on the global stage,” Khong said. “We talk about national identity… all the unicorns that have made it in overseas markets, it brings a sense of pride.”
Government agencies such as Enterprise Singapore are providing support, mentoring and networking opportunities for startups and rising entrepreneurs. ACE collaborates with Enterprise Singapore, which also recently expanded its Global Innovation Alliance network. The initiative facilitates market access for startups and small businesses, including a new partnership with Moscow, Russia, and planned inclusion of a further 25 cities over the next five years.
“[With Enterprise Singapore] every other day, you have these awesome opportunities, they have grants that are available,” said Nida Sahar, a tech entrepreneur who launched her Cloud application distribution platform Nife last year, with support from the government agency.
Despite this institutional assistance, competition is fierce and failure rates are high. Even in Singapore, around 30% of new businesses are projected to fail within the first three years.
“A lot of startups, most of them, don’t usually survive for very long,” Khong admitted, citing three main hurdles: funding, talent and market access. He described the issue as a chicken and egg scenario. “If you don’t have funding, you cannot scale and where you don’t have the talent, then you also cannot secure the right funding because investors won’t really trust you.”
Some feel Singapore’s focus on fast-growth, high-glamour unicorns can come at the expense of other businesses.
“In the last ten years, Singapore has really embarked very strongly on attracting unicorns,” said Ang Yuit, vice president of the Association of Small & Medium Enterprises (ASME). “Over the last six months we are seeing a lot of well-funded unicorns [and] unicorns-to-be competing for talent with SMEs.”
The not-for-profit association was established to develop and protect Singapore’s small and medium enterprises, defined as a business with fewer than 200 workers and annual sales turnover of less than $73.17 million (SGD 100 million).
Around 99% of Singapore’s businesses are SMEs accounting for 72% of the country’s employment. They also are more vulnerable to volatile economic conditions due to limited resources and weaker access to financing.
“The growth trajectory [of an early stage startup] is very different to a typical SME,” Ang said. “The SME is funded more organically… whatever resources they can find. And they don’t have VC or seed money.”
[We need] a healthy tussle between risk taking and accountability
Government support also differs between the two business types. Ang notes that startups have a wealth of available infrastructure. Aspiring entrepreneurs have access to more than 400 incubators and accelerators, including BLOCK71, a tech startup ecosystem builder backed by various businesses, government agencies, and the National University of Singapore. They may also acquire venture capital from government linked organisations such as investment holding company, Temasek.
For SMEs support comes mostly through direct funding, routed through trade organisations such as ASME. While this may seem simple, it’s not always straightforward. “Most SME grants require demonstration of business revenues and profits and certain numbers of years in operation,” Ang explained.
He notes that since new finance minister Lawrence Wong’s appointment, more funds are being set aside to support SMEs. However, with more money comes more stringent audits, and a more risk-averse approach from the trade associations distributing them.
“What will happen is that we end up betting on [what we think is] a sure winner,” Ang said. “[We need] a healthy tussle between risk taking and accountability.”
Around 20 – 30% of the SMEs ASME encounters are from the F&B sector, according to Ang. Hit hard by the pandemic, these small businesses are also often at the brunt of high-rental contracts that are heavily favourable towards tenants: allowing termination of lease at short notice. While F&B workers have received some government support during Covid-19 through initiatives such as the Job Support Scheme, with low short-term revenue and growth prospects, their businesses remain at risk and their failure rate is high.
Ang thinks of Singapore’s bustling Tanjong Pagar and Chinatown neighbourhoods, renowned for its independent shops and cafés.
“Every few months, a guy closes,” he described.
A cohesive and collaborative approach could benefit all business types. For Khong, the difficulties he sees young startup founders face in building networks and market access can be helped by multinational corporates (MNCs) or even local SMEs “providing the right advice, the right guidance,” or forming partnerships by adopting their solutions.
Ang also expressed that there are beneficial ways to work together. ASME is looking into expanding into the startup space.
“An SME can always reinvent itself with a mindset shift, to be more startup-like,” he suggested. “And very often startup[s] identify a business opportunity, or a market segment that many of the SMEs already did. But they don’t look at it from that perspective… so we see a synergy possibility.”
Tang has turned her podcast into her own entrepreneurial venture, offering business coaching and consultancy to startup founders. She also recently took up a new position as chief of staff and head of communications at another startup, Alchemy Pay, a hybrid payment platform between cryptocurrency (digital financial transactions) and fiat currency (government-backed tender).
For her, the different missions of “small business founders whose aspirations tend to be smaller and more local from the start,” and “high growth, innovative and externally funded start-ups who begin with a strong aspiration to grow,” means that there should be scope for both to bring different strengths to Singapore’s economy.
“Both types play an important part in every city’s business ecosystem,” Tang said enthusiastically. “[And] there is still so much more space, potential and new creative ideas to be played out. I feel like we’re just scratching the surface.”