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Two years ago, after graduation, I came back to Singapore to begin a career in startups (more about my reasons here).

Having been in the startup scene for two years , I argue the most ambitious people should think about building a defensible tech startup now. Not ‘at some point later’ or ‘perhaps with X more years of experience’, but now.

Admittedly, you should be sceptical: Too many startups die within the first year of operations, and there have only been thirteen tech IPOs since 2001 amongst Southeast Asian startups. Thirteen. In other words, most startups are unlikely to exit.

Despite the apparent difficulties, the smartest and most ambitious should be aware of opportunities that currently exist in our ecosystem and seize them.

Lots of funding , limited supply = Opportunity for talented teams

Ask anybody familiar with the tech scene, and they’ll tell you that there is no shortage of funding available for startups. The supply of funds today far exceeds the number of genuinely amazing teams and ideas in Southeast Asia.

While many talk about a Series B++ funding gap , the truth is, it merely reflects lower investor confidence in technology businesses versus traditional ones. However, if you have a great team with a good business idea, you have a high chance to raise a huge amount of money in the VC market to build a tremendously important company. Just ask Grab ($2Bn) or PropertyGuru ($129M) or SEA Ltd ($550M) to name a few.

The number of venture deals is on an upward trend. Source: Golden Gate Ventures

With so much capital available in the ecosystem , this makes the moonshot possibility of displacing an incumbent in an industry a lot more viable- Uber and Facebook being great examples of this point. Nonetheless, it would be difficult to predict what happens to the levels of funding available to startups beyond 2022 – the time to take action is now.

Also read: Startup funding in 2017: A different game?

Over the last 5 years tech companies have sprung up and displaced oil barons as the most valuable companies in the world Source: Visualcapitalist.com

Build the right kind startups

By this time , I hope you’re convinced that you should be building a startup. Yet, the idea you work on matters too. When you are thinking of starting a business, focus on building a business that can grow and endure. Too many startups focus on building ‘marketplace for X’ type consumer technology but B2C is fast becoming a very crowded space in Southeast Asia; consumer tech has peaked and while these kinds of startup projects are hard , they tend not to be defensible . Should you manage to achieve some form of success, you can expect to find another competitor in the market trying to replicate your business and going into a price war with you. Even if you manage to fight them off, Amazon is always going to be lurking around the corner.

Jeff Bezos, The King Source: the Onion

Only start companies with a potential to be a monopoly

Instead, when you’re thinking of building a startup, aim for monopoly ideas and try to avoid competition. As Peter Thiel would say, instead of focusing on being a first-mover, aim to be the last mover — Facebook was not the first social media platform, but the last. Google was also the last search engine.

One way to know you are potentially working on an idea that could become a monopoly is to focus on building scalable products that has a strong technology insight and is supported by a strong market. This requires founders to build products that lean heavily on each other’s edge , which could be something technical or some form of product or domain expertise. This allows you to build ideas that are differentiated and hard to replicate.

A Singapore ecosystem ready to embrace deep tech

As our ecosystem matures in Singapore, the investment community is becoming excited about funding more defensible technologies. One example of a defensible technology is deep tech. In this area, we are witnessing a growing number of successes from Singapore. Take, for instance ,  Denova Sciences which grows artificial human skin as an alternative to animal testing or Transcelestial , which is developing laser technology to transmit data with faster speed at significantly lower costs. These products tend to have founders with PhD backgrounds or who possess deep industrial knowledge. They also tend to focus on B2B solutions, a segment with a much higher willingness to pay and customer lifetime value.

Most notably, SPRING , the Singapore government agency, recently created a US$73M fund to invest in teams building deep technology. The launch of Europe’s largest company builder, Entrepreneur First (EF) , in Singapore is also significant because it is the first pre-seed investment programme which accepts and funds individuals based solely on their domain expertise and technical abilities, even before an idea has been formulated or a team formed.

The most famous company coming through the EF programme is a UK startup called Magic Pony Technology ( the real life Pied Piper ) , started by Master’s and PhD student Rob Bishop and Zehan Wang, who met through the EF programme. In just 18 months, Magic Pony got acquired by Twitter for US$15o million.

Such initiatives makes startups a less risky endeavour and entrepreneurship a more viable path for the most ambitious and technical people.

Also read: 9 applications that will greatly benefit from machine learning in 2017

The real cost of not founding a startup now

I speak to those who are full of ambition and skilled in a particular technical domain: I think there is a real opportunity cost to not founding a startup, and instead choosing to follow a traditional career path.

As Alice Bentinck points out, if you have been working on a PhD or are a domain expert in a certain field, the knowledge/skill you possess is very precious but it can decline in value quickly- if you wait to build a startup with those skills or domain expertise, your edge starts to erode. The same logic applies if you have already spotted an industry gap or a valuable problem you wish to solve — if you don’t do it , others will. Your real opportunity cost is your own startup not working on cutting edge technology which could potentially have global impact.

For anyone thinking of ideas that can have an impact on the world, try to identify an industrial gap and focus on your own or your cofounder’s edge. If you do not have a fully formed idea, or are still looking to form a strong team to build a defensible business, do also consider reading more about Entrepreneur First at www.joinef.com.


Featured Image Credit: 123RF Stock Photography