Govt support key to mushrooming startups

Countries eyeing a flourishing startup landscape should invest generously and court foreign investors, Israeli venture capitalist tells Singapore audience.

SINGAPORE--Government support and close familiarity with its country's IT industry is key to creating a blossoming startup landscape, according to an Israeli venture capitalist.

Ehud Levy, Vertex Venture Capital managing partner, said government support in the form of grants and funding will help encourage more venture capital (VC) firms to come forth and invest in startups. Governments should also fund the surrounding infrastructure such as education and work to pair more startups with possible investors, including foreign VCs, he added.

Speaking Monday at the IDA Infocomm Industry Forum event, Levy raised the example of his home country Israel, which he likened to Singapore in that both countries have similar population sizes and have built knowledge-based economies due to the lack of natural resources. The event was organized by local ICT regulator, the Infocomm Development Authority.

Levy said Israel, which counts about 60 percent of startup funding coming from foreign investors, saw its IT sector export US$17.7 billion in 2007.

The Israeli government's incubator program, which awards startups four times the funding they put in, caused a spike in VC funding, where "the private sector continued what the government started" when the startups matured, he noted.

The country, which spends more than 4 percent of its GDP on defense, has seen this expertise spill over into IT, as well--many of the "top minds" which were selected for the country's defense research efforts have started up security-related IT startups, said Levy.

"Countries should construct their tech success behind their competencies," he added. Singapore as a shipping hub could see more IT flourishing around its logistics sector, Levy suggested.

Technological skill alone, however, is insufficient foundation for a startup, he said. The business acumen of the startups' founders must be cultivated, and VCs should come in to help them understand how to mitigate technological, market and management risk, he noted.

Startups should also look to go global quickly "or go bust", said Levy. "Startups should find investors that can provide added value. A foreign investor [will help] increase credibility in a foreign target market."

He also advised companies looking to expand overseas, to ensure one of their founders relocate to the target market to better address "cultural differences".

"Don't just hire locals...hire a general manager familiar with your [home country's] culture," said Levy.