Singapore the big sucker for foreign startups?

Singapore the big sucker for foreign startups?

Summary: Is Singapore foolish to give out local money to foreign startups which may end up taking their Singapore-funded innovation back to their home country?

SHARE:

At the Echelon Ignite conference in Sydney this week, Singapore was hailed as the easiest place in the world to set up a company, even if there weren't any Singaporeans in the startup. 

Innov8 CEO Edgar Hardless noted how it would take minimal effort and just three to four days for anyone to establish a company here. "I've seen lots of Singapore startups, but with no Singaporeans in them. So lots of companies with Australians, Americans, Spanish people all setting up their companies in Singapore as their base of operations. "He also noted the readily-available assistance dished out to help entrepreneurs.

Another speaker, Catapult Ventures CEO Vinod Nair, pointed to the various schemes and grants startups in Singapore can apply to obtain funds. For instance, he said the government would subsidize 60 percent or 70 percent of the cost of laptops startups purchase.

"It's like the Great Singapore Sale all year around," Nair said, referring to the country's annual shopping fiesta where many retailers and malls nationwide offer discounts and sales promotions, usually over a two-month period starting June. 

sporemadethumb620x465

As a Singaporean, I'm not sure whether that necessarily bodes well for my country. Should I really applaud a startup community riddled with "Singapore startups with no Singaporeans"?

Why is my government taking taxpayers' money to fund startups devoid of any local talent, and that will likely use the funds to develop a technology they may end up taking back to their home country? 

This brings me back to a dinner conversation couple of years back when I posed the same questions to a senior executive from a government agency, one of several which offered startup funds. I put it plainly: "Aren't we being stupid, giving out all this local money to foreign startups which will take their Singapore-funded innovation back to their home country?"

He smiled, and said one of the government's key objectives here was to generate buzz and create a hub bustling with startup activities. lt would help grow an ecosystem with positive spillover effects on the local economy and business community, so whether these "foreign" startups end up labeling their innovation "Singapore-made" wouldn't necessarily matter. Presumably then, it would also spur Singaporeans themselves to take that plunge toward entrepreneurship

The government's efforts appear to have paid off. The city-state was ranked the world's 17th most influential startup ecosystem in Startup Ecosystem Report 2012, which said Singapore had the potential to become Asia's central hub--bringing together the markets of China, India, Indonesia, and Malaysia. The Little Red Dot was ranked 8th in the funding index, which measured the activity and comprehensiveness of risk capital in the startup ecosystem.

So, does it matter if foreigners make up the bulk of startups in Singapore? I'm inclined to say not really.

The points raised by the government offiicial over dinner are completely valid. It looks at the bigger picture. Funds the government is seemingly foolishly giving out, should instead be deemed necessary investment to cultivate a working ecosystem that may in future produce a made-in-Singapore killer app that will take the world by storm. 

However, I think there needs to be guidelines to ensure we not only develop, but also retain innovation, so the local ecosystem can better benefit from the country's efforts to be the next Silicon Valley. For instance, before it hands out funds to a startup, the government can stipulate the company files its patents in Singapore. The startup can also be encouraged to work with local schools and research labs, so some of that innovation can be passed on and further developed locally as well as help spin off other innovations. 

Startups that are unwilling to meet these conditions are free to then look for funding assistance elsewhere or in another country. This give-and-take approach would help ensure Singapore attracts only startups with genuine vested interest in setting up shop here.

In a previous blog, I'd discussed whether Singapore would take pride in innovation created here but by a foreign talent such as Facebook co-founder Eduardo Saverin. I still believe the original roots of an individual don't matter as much as the environment in which the startup was able to thrive and succeed. I'm pretty sure Silicon Valley now  isn't all American either. 

Ultimately, for the millions the Singapore government throws into funding startups, if just one--that one lone ranger from the many hundreds--develops a killer app that will put the country on the tech innovation map, it'll be totally worth it. 

Topics: Start-Ups, Government Asia, Singapore

About

Eileen Yu began covering the IT industry when Asynchronous Transfer Mode was still hip and e-commerce was the new buzzword. Currently a freelance blogger and content specialist based in Singapore, she has over 16 years of industry experience with various publications including ZDNet, IDG, and Singapore Press Holdings.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

8 comments
Log in or register to join the discussion
  • My opinion

    1) Our govt does not like lone-rangers. It prefers collectivism over individualism. But guess what? It is actually individualism that has allowed foreign competitors outside our country to do way better than us. These people also have research and development incorporated in most of their years of education by their parents and their institutions.

    "Notch" is the best example here, whom did Minecraft alone, made 250 million in 2012 alone. And that's not counting the years from 2008-2011. Remember the British teen who did Summly and sold the app to Yahoo for 17 million? Also, there is a whole lot of them out there doing just as well with projects raising 500k to 1 million on Kickstarter.

    2) It does not make any sense to work with schools and research labs. The sole reason being revenue sharing being mandatory and I do not think it will benefit the startup which ends up being the loser. The startup should instead do their own research and development, and keep everything for themselves. Furthermore, why bother to do a tech startup if they cannot do their own R&D?

    3) I like the suggestion where the company should file its patents first before getting any funding. But at the moment, our govt has some agencies giving funding to tech startups (local and foreign), NOT being based on innovation, R&D, nor patents. And that is what I dislike as it does not synergize with the tax agency and the PIC.

    Imagine this, a funding grant of 50k here will require a minimum of 3 local employees, and yet it trades innovation for content. Whereas on Kickstarter, it is possible for US/UK residents to launch a lone-ranger project based on innovation, raising between 250k to 500k. What does it tell you about the sad state of our industry?
    Edwin Zeng
  • Where are the Singaporean developers?

    In more than 3 years of almost constant hiring I have seen hundreds of CVs, but not one of a singapore born! So my question is, where are they?
    Even when we had to hire a technical manager we saw only a handful of locals, but none of them had the technical competence to fill the job.

    For the rest of the local imported software work force, I'm sorry to say that but the level is pitiful, 99% of those who passed the CV screening wouldn't qualify for a college level. And they have jobs in singapore, most of those I interviewed worked in banks...

    So don't blame foreign company, specially start-ups who would require A player R&D engineers, if they import their workforce from their home country.

    The only reason for singapore to be a tech-hub is because of low tax and safe environment, and most of all for opening the Chinese and Asian market. Then you need mandarin speaking as well as english, which makes singapore an attractive place.
    tsiancheng
  • Context and clarifications on the comments made in the article

    Hi Eileen,

    I am Mohan, CEO of e27 and organizer of the Echelon Ignite event in Sydney. I would like to clarify 2 points made in the article.

    1) Vinod Nair's comment was made in reference to the Productivity and Innovation Credit (http://www.iras.gov.sg/irashome/picredit.aspx). In order to qualify for this scheme, the company must have employed and made CPF contributions for at least 3 employees who are Singaporeans or PRs in the last month of the relevant FY. Furthermore, this is a tax deductible and not a grant.

    Your articled incorrectly referenced the Technology Enterprise Commercialization Scheme (TECS) which is a separate grant and only applicable to startup based on strong technology Intellectual Property and a scalable business model.

    2) To put more context to Edgar Hardless's quote, his comments were made in reference to Singapore being a melting pot and hub for startups around the world to be based in Singapore.

    Hope that clarifies the comments made and adds more context to the article.
    Mohan Belani
    • About the ecosystem

      hi Mohan,

      I wasn't actually referencing it but had provided the hyperlink as background reading (for anyone who wants to know more) about other efforts by the Singapore government to help startups here. But, since it can be misinterpreted as a direct reference as you have here, I've removed the hyperlink :)

      I've had several discussions with industry contacts and friends about similar issues regarding funds and grants handed out from the Singapore government--of which I've talked about here. I had hoped to spur further discussions with my blog and also highlight my own views about it.

      As I mentioned in my blog, and in my previous posts, I think we should look past the origins of a startup and look instead at its impact on the local ecosystem and community.


      Regards,
      Eileen Yu
      Senior editor, ZDNet Asia
      eileen.yu
  • Quotes used were out of context

    Hi Eileen,

    Firstly you spelt my name wrong. It's Vinod Nair.

    Secondly, I think you may have gotten the facts wrong. The scheme I was referring to for laptops is PIC which is administered by IRAS. http://www.iras.gov.sg/irashome/picredit.aspx

    Thirdly, as an entrepreneur myself. I don't think Singapore is a "sucker", the startup ecosystem is actually thriving now. It's actually a place that foreigners would seriously consider setting up their company and thats great! We can't build our own "silicon valley" if we're only relying on singaporean talent, just like how Silicon Valley is not...
    relac1
    • Arrgh, typo, my bad!

      Hey Vinod,

      Sorry about getting your name wrong...that's what happens when you're rushing stuff out in between meetings! I've corrected it so it should show up right now.

      As I discussed in my blog, I too agree it's about the impact government-assist grants and funds (not specific to just the PIC you referred to) have on the entire ecosystem and the spillover effects. And we should look past the origins of the startups and look instead at how they're helping the local ecosystem thrive. Whether they're foreign or local shouldn't matter, their contributions to the industry is what should matter.

      Regards,
      Eileen Yu
      Senior editor, ZDNet Asia
      eileen.yu
  • event

    It inclines toward cooperation over independence. At the same time prepare to have your mind blown. It is really independence that has permitted outside contenders outside our nation to improve path than us. These individuals likewise have research and improvement joined in a large portion of their years of instruction by their folks and their organizations.

    Also that is not checking the years from 2008-2011. Recollect the British adolescent who completed Summly and sold the application to Yahoo for 17 million? Likewise, there is a ton of them out there doing similarly also with tasks raising 500k to 1 million on Kickstarter.

    2) It doesn't bode well for work with schools and exploration labs. The sole excuse for why being income offering being compulsory and I don't suppose it will profit the startup which winds up being the failure. The startup might as well rather do their own examination and improvement, and continue everything for themselves. Moreover, why try to do a tech startup in the event that they can't do their own R&d?

    3) I like the recommendation where the organization may as well index its patents first preceding getting any financing. Anyway at the minute, our govt has a few offices offering financing to tech startups (neighborhood and outside), Not being dependent upon advancement, R&d, nor patents. Also that is the thing that I detest as it doesn't synergize with the charge office and the Pic.

    Envision this, a subsidizing give of 50k here will require at least 3 neighborhood representatives, then again it exchanges advancement for substance. While on Kickstarter, it is conceivable for Us/uk occupants to start a solitary officer extend dependent upon advancement, raising between 250k to 500k.

    http://businessthinkdifferent.com
    AndrewAMorrow
  • Business Opportunity

    Chantel moves me a great deal in term of juggling between vocation and taking exceptional mind of our crew. She shows us how to accomplish what we need in our existence and above all equalize in each parts of life. She will control us how to accomplish incredible bring about health-identified business and likewise how to spur our downlines and even our youngsters. She is our accurate pioneer. I am glad to the point that she is with us.
    http://www.womenbusinessopportunity.com
    zavaladavid412