Silicon Valley in San Francisco, California is regarded as the technological epicentre of the world or even the mecca of start-ups. Also known as The Valley, it is a melting pot of the latest technological innovations, social media, venture capital and tech start-ups. The San Jose Metropolitan Area alone (where the Silicon Valley is located) has the third highest gross domestic product (GDP) per capita in the world.
Singapore is currently building an ecosystem of its own to develop the country as the biggest hub for start-ups in the world. Many already regard the island state as the “Silicon Valley of Asia”.
While Singapore is not exactly home to ground breaking technological innovations or behemoth social media companies like Facebook, the tech start-up scene in the country is flourishing. Currently, Singapore has over 2,400 tech start-ups and the tech start-up industry there is estimated to be worth over US$11 billion.
Singapore is also home to two unicorns– a unicorn is a start-up valued at over US$1 billion – Grab and Sea. Grab needs no introduction. With Uber ceasing operations in Southeast Asia, Grab has established itself as the premier ride-hailing company in the region. Currently, Grab is estimated to be valued at US$10 billion. Meanwhile, Sea, a gaming and e-commerce start-up, became the first Southeast Asian tech company to be listed on the New York Stock Exchange in 2017. Their rise to prominence is also boosted by the growing influence of gaming in the region.
With more tech start-ups setting up shop in the city-state, Singapore has access to top quality talent. According to Startup Genome’s Global Startup Ecosystem report, Singapore has overtaken the Silicon Valley in terms of start-up talents.
So, how did Singapore establish itself as one of the biggest tech start-up hubs in the world?
Firstly, Singapore has always had a solid reputation for its ease in doing business. While the environment may be extremely competitive, the government there has always encouraged entrepreneurship and competition. As a result, there are few barriers to starting and conducting business on the island. According to the World Bank's “Doing Business” 2018 rankings, Singapore is ranked second in the world behind New Zealand. The report also shows that Singapore is ranked sixth out of 190 countries for ease of starting a business.
Singapore is also seen as a strategic location for tech start-ups that intend to expand their reach throughout Southeast Asia. Despite its small market size, Singapore can serve as a gateway to more than 600 million people across Southeast Asia, the third largest market in the world. Regional start-ups like online fashion retailer Zalora are mostly based in Singapore. Even e-commerce giant Amazon decided to launch Amazon Prime in Singapore first before expanding its service to other countries in the region.
Source: Various sources
Singapore’s government is also extremely supportive of the start-up ecosystem in the country by providing grants, funding and even accrediting various incubators for start-ups. Last year, the government there established Startup SG, an umbrella body of different start-up-related grants and support schemes. Among them include Startup SG Founder which provides mentorship and capital grants to first time entrepreneurs. Under this platform, Enterprise Singapore will match SGD3 (US$2.20) for every SGD1 (US$0.73) raised by a qualified entrepreneur.
However, the government’s plan to fund local start-ups could backfire. According to the Financial Times last year, government funding for start-ups has led to many “zombie” businesses popping up on the island. This means that there are start-ups merely existing off government funds and small sales while only employing a handful of people, thus not providing much economic benefit to the country.
If Singapore truly wants to thrive like Silicon Valley, it needs to let start-up companies compete on an even playing field, where only true innovators can survive. It could also be a lot more stringent with the terms and conditions when giving out grants and funding. The money being spent on “zombie” start-ups is substantial and could instead be used to fund public services that would benefit Singaporeans more as a whole.