Can Singapore become Asia's Silicon Valley?
The FT's Mercedes Ruehl looks at how far the city has come in attracting money and talent to its start-up sector and how far it has to go before it can be considered a world-leading centre of tech innovation
Produced by Tom Griggs. Additional footage by Getty and Reuters
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Singapore is known for skyscrapers and hawker food. But now it's building a reputation for something else, venture capital. The city is using its financial clout to position itself at the heart of southeast Asia's technology sector, attracting funds, incentivising start-ups, and partnering with global tech investors.
There are signs of success, such as e-commerce and gaming platform Sea Group. But there are also doubts that the city has capacity to provide an exit for start-up investors. Can a small city-state, however international its outlook, really become a titan in the tech world?
Singapore is wealthy, thanks to its position as an entrepot between east and west, and its reputation as a reliable place to do business. But controls on freedom of expression and a reputation for conformity don't make it an obvious base for a start-up. However, about a decade ago the government started investing in the sector with grants and government sponsored tech incubators. Now Singapore has more than 270 VC funds and more than 4,000 tech start-ups employing close to 22,000 people. The city's reputation as a start-up hub has improved, particularly in terms of funding, but crucial elements, such as talent and knowledge, lag other markets.
The city's biggest draw is its proximity to the fast-growing economies of southeast Asia. Chinese groups in particular have used this to their advantage.
Chinese companies have already organically expanded to southwest Asia because we're very similarly in terms of culture, use cases, language, and way of doing business.
Southeast Asia's tech boom has similar characteristics to China in the early 2000s.
The first half of the move for consumer investing is already gone in China, and now we are seeing the first half or maybe, you know, it happening in southeast Asia.
But Singapore's biggest draw, its proximity to countries like Indonesia, is also its biggest flaw, most tech companies based there making money outside the city. At a time of rising nationalism, having companies that derive most of their profits elsewhere is a political risk.
Singapore's highest profile start-up, ride-hailing app Grab, originated in Malaysia. And it has just opened a second headquarters in Jakarta, to demonstrate the importance of its largest market. In fact, most of southeast Asia's unicorns, start-ups with a valuation of more than $1bn, are from Indonesia.
We think that the ecosystem has been plagued by very deep benchmarks of being a unicorn. Away from those measures, like valuations and being labelled with animalistic names, I think the important thing is to have the stamina to run a long race. We see that the companies that are looking for are those that maintain themselves is a growing concern.
Most start-ups today in Singapore are consumer focused and based on relatively simple technology. Companies focused on deep tech, which pushes the boundaries of existing technology, are only just starting to emerge.
R&D always the focus of those who are rich, capable, and have bundles of funds. But today, deep tech requires a lot of people to come together at one. So I would say that deep tech developments will come out of Singapore someday, but it will not be so soon.
A big hurdle has been the Singapore stock exchange which has failed to attract big-tech names from the region and suffers with low liquidity and valuation. What's more, unlike in Silicon Valley or other fundraising hubs, Singapore has not yet seen a significant number of successful exits through public listings or large-scale sale acquisitions, which are a crucial part of the lifecycle of both a start-up and a VC fund.
Singapore has used its advantages to attract money and talent to its start-up sector. But until investors see a reliable avenue to cash out and win big, the city's plan to become Asia's silicon valley remains a work in progress.