Singapore flag with a crowd

Singapore’s startup ecosystem is, undoubtedly, a fertile breeding ground for tech startups. The country’s strong financial, business, technological and educational infrastructure makes it an attractive destination for VCs to set up camp here.

According to a report by startup rating company Oddup, Singapore’s tech ecosystem is growing fast, producing unicorns such as Garena and other high-valuation startups such as Zalora and Redmart. In the last decade, around 40 Singapore-based startups were acquired for approximately US$530 million.

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But the small Republic of six million still can be improved in several aspects – number of IPOs, the absolute capacity for talents, late-stage funding, and regulatory processes.

1. Better support for public listings

Since 2010, only two tech companies have been listed on the SGX: iFAST Corporation Ltd and Yuuzoo Corporation Ltd.

The exchange trails behind Malaysia and Australia, which had 13 and 18 listings respectively during the same period. In fact, the trend for Singapore’s tech startups is to list on the ASX. These companies include Fatfish, Netcentric, 8common and Mig.me.

The report suggests that Singapore improve listing procedures for tech companies. For example, through the introduction of a dual-shareholder structure. This essentially splits shares into two classes, where shareholders of each class will have different voting rights while still retaining ownership of the company.

With the tech ecosystem blooming all over the region, it is vital that the Republic repositions itself as a startups’ listing hub for ASEAN countries, the report says, especially when ”the liquidity, facilities and investor attention are at higher levels” in Singapore.

2. Attracting talent

Despite the influx of quality Engineering and Computer Science graduates from reputable academic institutions into the job market every year, many founders are facing the problem of talent shortage.

Why? Competition from MNCs and other well-compensated public sectors.

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It seems that many graduates are still risk averse and prefer a steady gig. More than 70 percent of the 50,000 graduates every year prefer to work in MNCs, public service and overseas destinations over startups.

All is not lost, however. Singapore’s English-speaking environment makes it a hot destination for expats. And at least half of the founding teams from Singapore hail from top venture-backed companies in Silicon Valley.

3. More late-stage funding

There is no shortage of public funding for startups in Singapore. In fact, the government is proactively growing the sector by giving out grants through government-backed organisations and schemes such as the SPRING Startup Enterprise Development Scheme and the ACE Startups Grant, handing out pre-seed funding of US$50,000 to US$500,000.

That said, there is a lack of funding options in the later stages, specifically Series B and C. The report points out that the rise in VC activity in the country has led to more startup exit cases and acquisitions, but the sum of deals each year fluctuate significantly , making it difficult to chart a trend.

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For example, in 2013, the number of deals may have hit 70, which is half of the deals between 2007 to 2012, but the average sum of the deals amounted to only US$6 million, lower than 2008’s average of US$7 million.

4. Building a conducive regulatory environment

Generous government grants and a well-developed mobile and Internet infrastructure contribute significantly to a strong tech ecosystem, but the foundation is also made up of other building blocks.

The report suggests that government’s facilitation of international regulatory and approval processes can be improved. It also suggests that the republic work towards becoming a role model for the consumption of startup goods and services in Southeast Asia.

Due to the country’s small market, local startups also need to look outwards and position themselves to penetrate into foreign markets in the region as well as globally. The government needs to play an active role in helping startups to expand beyonds its nursing ground.

For the full report, click here.

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