Business
Singapore as a Startup Hub and a Paradise for Investors
By Guest Post  •  February 1, 2016
Hey readers, I’d like to ask you something. Do you know which country was ranked number one in the “2015 Ease of Doing Business” index? It was Singapore. The country is financially vibrant and has everything (including human resource, flexible regulations, and a low-tax system) to attract investors. There’s hardly any surprise that capital from all parts of the world is flowing into this global city of SouthEast Asia. Startups and Investors In Singapore, opportunities are aplenty for startups and investors. In this article, we’ll discuss the growth opportunities and funding prospect for startups, and touch base the investment opportunities for domestic and overseas investors. Let’s start with what frightens the majority of startup companies: Arranging money It’s a challenge that nine out of ten startups face. Those in Singapore are no exception. Many of them are facing monetary constraints. Luckily however, the government is pro-business. There are various government sponsored schemes to arrange seed stage funding for Singaporean startups. Support programs include equity and debt financing schemes, tax relief schemes, enterprise incubation schemes, etc. Government subsidiaries are actively investing in growth-oriented startup firms. Third party investors are welcome to chip in on such initiatives. While there’s no dearth of venture capital firms and state-funded agencies, they all want to incentivize innovative products, meaning if your product lacks originality and uniqueness, securing early stage funding is difficult for you. Is your product worth? This question leaves many startuppers speechless. Not all of them are confident that their products are worth investing and better in quality than other products. How can they be confident? I recommend them to consider the takeaways from the Product Hunt Singapore Meetup. The meetup was focused mostly on tech startups, but the information gleaned from the speeches by guest speakers have overarching implications. For example, the first speaker advised neophytes in mobile app development to collect feedback from five random people on an application’s performance. Startups, which don't operate in the tech niche can also apply this strategy. All they need to do is let random people test their products and receive feedback from them. An equally effective strategy discussed in the meetup was exploring the weak areas of the product by deliberately letting it fail. Manage your product We haven’t digressed from the meetup’s key points yet. The third speaker was Bjorn Lee, currently the senior product manager at Zendesk. He said managing the product is as important as developing it. Product management is easy when you build a network with other entrepreneurs, operating in the same niche or related niches. You get new ideas, your outlook towards the product becomes holistic, and you comprehend its cross-niche potential. A practical example helps you understand it better. Your product is a credit card, and you build a network with online data security experts, who, at your behest, identify the card’s vulnerabilities to data thieves. Take help of the Incubator Development Program, which provides entrepreneurs with experienced mentors, incubator managers, and necessary equipment. Your employees will also receive training. Top trends The current business landscape in Singapore favors information technology and pharmaceutical startups. Companies like Diabetes Studio and Ring MD were a huge success because they catered to consumers in those niches. Investing in water technology sector is a commercially viable idea. The government administered Fast-Tech scheme offers startups up to 85% technology and financial support alongside mentorship and assistance, which means initial bootstrapping is all that startups in this environment-friendly and renewable energy generating sector need. Overseas companies Singapore is a hot destination for Indian VC firms. They even advise budding Indian entrepreneurs to open a subsidiary here for the ease of doing business. The country’s flexible FDI norms have lured top Indian companies like Flipkart to register in Singapore. Investors from other Asian countries such as Malaysia, Indonesia and Thailand are also flying to Singapore because of its enterprise-friendly tax system. For corporate profit up to $200000, the tax rate is slightly more than 8%. And for capital gains tax, there’s none in Singapore, whereas it is 6% in Philippines and 15% in India. STI and FDI inflow The stock market of a country is an innuendo of its financial performance. The STI is stable compared to Indian and Chinese stock markets, both of which are volatile. A fellow writer Wilson Ong articulated the reasons behind Singapore’s stocks being lucrative. One reason is zero currency risk. Aside from that, the exchange rate in Singapore is higher than almost all Asian countries, especially India and China, despite both countries having mounting export volumes. As I am writing this article, 1 US dollar equals to 1.44 Singapore dollar. And despite the FDI inflow spree, the exchange rate has been stable. For startups, it’s a golden opportunity because if they can play to the gallery and impress the hordes of foreign investors, especially after securing the 1st round of domestic VC funding, money will kept being poured on them. Portfolio investors It was 2001 when the direct investment outflow outweighed the inflow. As the portfolio investment outflow has been consistently higher, the year 2001 saw the country facing a financial crisis (short term, though). But the economy quickly recovered and 2006 onwards, portfolio investment in bond and equity contributed to the resurgence of capital inflow. Since then, experts have been admonishing the financial decision makers about the risk of capital being allocated to counter-productive segments, resulting in inflation and a loss of the competitive advantage. Startups might play a role in convincing the investors. Price volatility, liquidity and capital risk are almost non-existent in Singapore. Some portfolio investors may still hesitate. But if they get the assurance from startups that their products are of high quality, then their willingness to invest may replace the skepticism. What do you think of the article? Would you like to set up a startup in Singapore? Or do you have plans to invest? Let us know in the comment section below.
Tina Roth is the Founder and Editor of the ProFinanceBlog – a personal finance blog for money management and ling a frugal life. When she is not blogging you can find her busy with her kids. If you are an independent or freelance writer/blogger willing to provide original content that is related to finance and investing in Singapore,  feel free to contact me and I’ll contact you for a further discussion.
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3 Comments

3 responses to “Singapore as a Startup Hub and a Paradise for Investors”

  1. Tacomob says:

    It is true that the government is pro-business. The start-up scene however is still very conservative..

    I recently was trying to help a friend to raise funds for his promising startup via http://www.InvestmentNetwork.sg
    His product and business model even got strong support from government agencies. And they are really skeptics before you convince them and they finally acknowledge your product.

    Nevertheless the responses from potential investors were very lackluster..
    It appears to me that many people still prefer to dabble in questionable far-away Chinese penny stocks listed on the SGX instead of local startups where they would have the opportunity to actually get to know the management team.

    • Derek Lim says:

      Hi Tacomob,

      Online crowd funding is still new and it takes time for it to mature. I talked to a old time angel investor and he does not trust it and prefers to meet and talk to the business owner directly.

      I think our culture also plays a important part. – we are naturally more conservative and skeptical as compared to the our western counterpart. But we have something in common – when it comes to quick and fast returns, we jump at the first opportunity.

      Can I have the link to your friend’s product?

      FYI. There is also a coding error on the website https://www.investmentnetwork.sg/business-proposal/industry-internet-ecommerce-apps-7
      You may want to feedback to the site admin.

  2. Hi Andy,

    You are so true. The government is playing a pivotal role for start-ups.

    Thanks for your comment.

    Regards,
    Tina

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