Singapore startups need to identify real business issues

Most early-stage founders still are unable to establish or articulate real-world business problems their startups want to solve, which can hinder their ability to attract investors, says StartupX CEO.

Early-stage founders in Singapore still are unable to identify real-world business problems their startups want to solve. This can hinder their ability to attract funds, especially in a region where investors typically are more cautious about digging into their pockets.

Asked about common mistakes Singapore startups make, StartupX's founder and CEO Durwin Ho noted that many lacked clarity about what their touted solution aimed to resolve. This problem was evident even amongst founders who were seasoned industry professionals, Ho said in an interview with ZDNet. 

Established in 2018, StartupX runs programmes that aimed to help startups find their footing, including hackathons, mentorship, and workshops. It focuses mostly on early-stage startups.

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If founders were unable to properly articulate business challenges their startups hoped to address as well as the types of enterprise customers that faced such challenges, it would be difficult for investors to be excited, he noted. 

"If you have a good enough problem, you don't even need a solution. People will work with you and investors will give you the funds because the problem [you identified] is real," he said. Pointing to the success of ride-sharing operators such as Grab, he added that these startups had identified a real pain-point, where the previous need to raise a hand to hail a cab was now resolved by hitting a button in an app. 

The ability to spot real-world business problems was essential, as investors in Asia typically were more cautious compared to their peers in Silicon Valley. In the US, even ideas scribbled on a napkin were sometimes enough to secure $10 million in funds, Ho said. 

"The money and landscape are different there, [where] the opportunities and ecosystem are mature and people want to take bets and risks," he said. "Here, investors are more conservative. Many venture capitalists also take government grants and, hence, have to be more cautious."

Because VCs built their funding pool from various grants, they needed to carry out multiple checks and ask for a startup's track record before digging into their pocket, he noted, adding that investment profiles of above $20 million were scarce in this region. It meant early startups and student-entrepreneurs faced a challenge securing funds since they would have no track record or an existing customer base to showcase in their pitch. 

This had driven several young founders to partner up with more seasoned professionals who had accumulated some years in industry experience. It put the startup in a better position during its funding round, Ho said. 

In fact, he noted that the profiles of early-stage startups in recent years comprised founders who were experienced, having worked in the corporate realm for a number of years, and who had accumulated domain expertise. Compared to previous years, these founders had the skillsets to do business development, sales, and communicate their startup's goals, he said.

Startups, though, still often made the mistake of not looking beyond the need to raise funds. "They're essentially not discerning [enough]," Ho said. "Founders [celebrate] raising $20 million as successful, but this isn't the endgame. If you can't [generate enough] returns, investors will be upset."

He also urged entrepreneurs to shake off their fear of failure, which he said continued to plague Singapore's startup scene. The city-state's strong focus on education made it intrinsically challenging for local entrepreneurs to risk the years they spent in school to go on the startup route. 

Those who did choose the latter journey, and managed to make their name in the startup scene, typically came from wealthy backgrounds or had good family support and, hence, had a safety net even if their startup failed, he said. 

And while mentorship could help guide these young companies, Ho said mentors should be individuals who were available to answer all questions, no matter how trivial they were or how often they were asked. This meant that more experienced and high-profile entrepreneurs might not be able to take on the responsibility or make the time, he noted.

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