REALITY CHECK FOR LOCAL START-UPS
I took part in a media interview earlier today as a follow-up to the live Budget 2016 forum held on national television last week. This time, I gave a more elaborated assessment of how the start-up environment is evolving in Singapore.
One of the key aspects that I shared was on the types of new external challenges that local start-ups could be facing – where if they don’t transform their business models or put enough into their commercialisation efforts, they may not survive. It is both a threat and an opportunity, depending on how you look at it. The good ol’ SWOT analysis might just do the trick in terms of making our Singapore start-ups aware of what lies ahead.
I would describe these external challenges as the 5 Waves of Change. These are five forces of change that will impact the way the Singaporean-owned start-ups compete and survive in the next 2 to 3 years.
THE FIRST WAVE
I have observed that our government agencies have been gradually attracting Venture Capitalists to set up base here in Singapore – with attractive infrastructure, tax incentives and programmes.
The idea was to use Singapore as a base to hunt for good deals in the region. After all, we are now the third best financial centre in the world, overtaking Hong Kong.
The Singapore government continues to build its momentum to cover its ground on attracting as much capital as possible – both from an FDI and capital markets perspective.
THE SECOND WAVE
This wave occurred when the Singapore government began building and strengthening an ecosystem of start-ups: tiering and methodically identifying all types of technologies that cut across different sectors/fields.
This is currently an ongoing process with tweaks carried out progressively to ensure relevance and effectiveness for those said sectors.
THE THIRD WAVE
This wave is about encouraging more local start-ups to be formed by giving incentives and implementing programmes. This entails a series of nationwide campaigns to create awareness, engagement and development of start-ups in technologies that are not overly complex or sophisticated. The idea is to nudge youths to start dabbling in tech with an emphasis on proof of concept (POC) projects.
What Singapore has been doing is basically to continue investing into a complete ecosystem where start-ups are able to “scatter and sprout” with diverse technologies that may or may not pass the proof of value yet.
THE FOURTH WAVE
The Singapore government has begun to embark on an aggressive campaign to attract foreign start-ups from USA, India, China, Israel and many other foreign countries to set up their bases here. Disruptive technologies are identified and invitations made to get them set up their operations in Singapore with attractive incentives.
The start-ups are matched with the VCs who had already established their presence in Singapore during the first wave via a three-step process: export technology into Singapore, attract investments into their companies and expand their operations regionally out of Singapore.
THE FIFTH WAVE
Now here is the most interesting part: the FIFTH WAVE – which I would call the Awakening Stage. This is where the local tech start-ups will either perish or begin to “wake-up” and reposition themselves to be relevant and impactful.
This is the stage, I believe, would be a critical test as to assess the extent to which our Singapore start-ups fare against the “foreign imports” in the home ground.
A possible and likely scenario is that in the near term, cutting-edge foreign technologies will outnumber and dominate the local start-up scene in Singapore. Several big success stories could turn out to be majority-owned by foreigners with brilliant technologies.
At this point, I feel that our current Singaporean start-ups possess neither the level of global innovation nor distribution channels that can compete with other foreign start-ups. We would be no match for them – not in a substantive manner for now, unless we do something radical about it.
The Singapore start-ups need to do something bigger and better. Something more substantially scalable and innovative.
What the local start-ups need to do is to start changing their business models today. They should urgently look into:
While I can fully understand the economic rationale and benefits that this may bring to our entrepreneurship system as a whole, one critical thing that needs to be done is that the local (Singaporean) start-ups should be made aware of what this means for their survival.
Singapore start-ups in their present form have a long way to go in terms of global competition and positioning. They should be educated and mentored more intensively on how to deal with global challenges and what they must do to survive the fifth wave.
This has to be done sooner than later.
I don’t think this is about protecting them but more of preparing and reminding them that they still have a long way to go when it comes to having the grit and perseverance as well as stamina (financial) to survive locally. This is especially so when these companies have to deal with the smartest foreign brains coming to town.
Embrace competition, folks. Swim with the forces, don’t drown but get your life buoys ready. It will be a rocking journey that needs grit, stamina and speed to survive this well.