Singapore Startup FAQ

This post originally appeared on the Pollenizer blog and on sgentrepreneurs.

I’ve met with dozens of folks over the past months who are interested in the Singapore startup scene. The questions they asked were often similar, so I thought I would take a crack at writing up my standard responses. For the record, this post is not meant to replace a good coffee chat, just to make those chats even more productive and interesting.

ORIENTATION

Q: How can I learn more about the scene from the internet?
A: There are three main blogs that cover the Singapore scene:

  • e27 – Strong coverage across SEA plus tidbits from across Asia Pac. Highest volume of articles.
  • Tech In Asia – Broad Asian perspective with good drill down on SEA and some good analysis.
  • SGE.io– Lowest volume but strong on analysis and research pieces.

John Russell of the Next Web also weighs in semi-regularly on the SEA scene, and there are a few entrepreneurs and investors who blog semi-regularly:

This list is not exhaustive i.e. I’ve probably forgotten some other folks who share regularly. For online discussions, the JFDI Open Frog list is a good place to start.

Q: How can I learn more about the scene at events?
A: If it’s startup events you want, then you’ve come to the right place. There’s something on almost every night, from user groups to speaker series, and most nights you’ll have choices. As many have noted, attending startup events can be a distraction from actually building a startup. That said, they can also be great opportunities for learning, networking and just feeling the buzz. So put your Startup Weekend t-shirt on and get on out there.

I won’t attempt at a comprehensive event index here. Just join The List and see what’s on that week. I will pimp my own events, namely Lean Startup Circle, which features talks from lean startup practitioners, and blinkBL_NK, which has nothing to do with startups but which a lot of startup people attend.

Q: How can I learn more by connecting with individuals?
A: The coffee chat is alive and well in Singapore. It’s a small town and people are generally happy you’re here and interested to get involved. Here are some great ways to get a coffee chat (with me anyway):

  1. Say you are connected to a VC looking to do deals in the region
  2. Say you are interested in angel investing
  3. Say you are from Silicon Valley and have some sort of track record or meaningful affiliation
  4. Don’t say anything special but do your research and make a clear pitch and targeted ask

I won’t attempt an index of people who you can hit up for coffee because finding those people is the fun part. I will link to this idiosyncratically awesome list of cool people and groups prepared by Michael Cheng of Mig33, which is as good a place as any to start. If you’re planning a coffee meeting, I highly recommend Meng’s 3rd Wave coffee map.

FUND RAISING

Q: How can I raise money in Singapore?
A: OK, so no one actually asks the question that way, but I am faking it to list two great resources that describe the funding scene:

Q: How can I raise 50K to 250K with a cool idea/prototype/MVP?
A: This is a real question and a popular one. Happily this pre-seed round is a sweet spot for Singapore thanks largely to government programs. Here’s a few relevant options:

  • iJAM – 50K + potential for 200K follow on via iJAM Reload. Mix of grants and equity investment. Requires some local ownership. This program has its issues (see Jeff Paine’s open letter to the IDMPO), but it’s a ready source of funds and it’s not massively dilutive. Plus some of the incubators add real value, so it’s worth considering if you have at least one local team member.
  • Spring Proof of Concept – Part of the Spring Technology Enterprise Commercialisation Scheme (TECS). Up to 250K as a grant and hence non-dilutive. Requires some local ownership. I don’t know much about this program beyonds that it is definitely active and that you probably have to do a lot of annoying bookkeeping to get your money.
  • JFDI –  Classic 3 month accelerator program. 25K in cash and a bunch of mentorship and training. They take equity between 6% and 20% depending on how they value your company. More info on deal structure here. This is not a great way to raise tons of cash, but it’s a great program to give your project intense focus and momentum.

Other pre-seed options include the time honored trio of friends and family, bootstrapping or a single angel investor. I make some comments below on the angel scene in Singapore. There are also some consultancies like Neo that will take a mix of equity and fees if they like your project.

Q: How can I raise 500K to 1M with a product, customers and perhaps revenue?
A: Again this is a sweet spot for Singapore thanks to the government. Here’s a few relevant links:

  • Spring Proof of Value – A continuation of the aforementioned TECS scheme. Same structure as proof of concept but in this case it’s for companies that are further along and the amount can be up to 500K. Same upside of non-dilutive money and downside of bureaucracy and paper work. 
  • NRF/TIS – The single most important government funding scheme in Singapore. 589K SGD dollars, 89K of which comes from an incubator (i.e., an early stage VC) and 500K of which comes from the government. The incubator has a call option on the government money, exercisable within two years at a low interest rate if the startup becomes valuable. And yes that’s a sweet deal for the incubator. Angel investors or other funds can join NRF rounds on top of the 589K but without any government leverage so NRF rounds can go as high as $1M or more. See here for a list of incubators 

The NRF/TIS program is the dominant mode for raising seed rounds in Singapore. It’s not unheard of to raise a seed round in other ways, e.g., e27 raised via a consortium, but it is unusual. If you are at the seed stage, you should be looking to NRF funds, both because they are doing most of the deals and because they should give entrepreneur friendly terms since they are investing other people’s money. On other hand, if you can raise a seed round without resorting to the NRF then you should do that since government money comes with strings attached in the form of bureaucracy and some specific deal terms, none of which are fatal but all of which are nice to avoid if you have the option.

Q: How is the angel community in Singapore?
A: The short answer is that it is quite good given the overall maturity of the market, and certainly the strongest in Southeast Asia by a wide mark, though also nowhere near more developed ecosystems. Here’s the three categories of angels you can meet:

  • Exited angels – The biggest challenge for the Singapore angel community is that there are not a ton of exited entrepreneurs pouring money back into the ecosystem, because there have not been that many exits. There are some people, however, who fit this profile and are doing regular deals, e.g. Toivo Annus of Skype (not Singaporean but makes a lot of deals here) and Nic Lim from the Catcha Group. The supply of these angels has been negatively impacted by the NRF/TIS program, as some have put their money into NRF funds to get the leverage e.g. Jayesh Parekh who invests via Jungle Ventures.
  • New school angels – This is my name for  people who are young, are connected to the tech scene in some way and have money to invest, e.g., John Tan or Ben Ball. It’s a small group but does seem to be growing as the scene becomes more mature and gets more visbility.
  • Old school angels – This is my name for the BANSEA folks, who are typically mid- to late-career corporate types, often with a finance background. BANSEA does organize some good events, but to be honest I don’t see their members doing a ton of deals right now.

Outside these groups there are oodles of high net worth people in Singapore who don’t really qualify as angels but who will occasionally throw 100K or more down on their friend’s project. As in all things, it’s who you know that counts, so in between all those pitching events you might consider spending a few evenings making friends at Pangaea.

Q: Is there really a Series A crunch?
A: First of all, it’s funny how often I hear this question from people who have not even launched their product. Some cart-before-the-horse thinking there. In any case, the short answer is yes, there is a gap between NRF incubators and the later stage VCs like JAFCO, Intel, Vickers, and Vertex, with only a few funds actively making Series A type investments e.g. Walden and DMP. In other words, just as in the US, there is a Singapore Series A crunch caused by an explosion in pre-seed and seed funding without a similar growth in Series A funding.

At the same time, there are not yet many Singaporean companies who meet Series A requirements of strong growth, a repeatable mode, a big upside and a team capable of handling the money. Companies who do meet that standard have raised recently, e.g. Luxola and Chope, and my guess is that Japanese and Korean investors would love to make more investments if they could find good deals. I also hear rumblings of European and American money heading this way. So unlike in the US, I think there is more potential for growth in Series A as money flows into Southeast Asia, and the bigger question for this market is whether the fast-track approach to ecosystem growth via government-backed seed funding can produce a bunch of Series A fundable companies.

Q: Is Singapore a good place to exit? 
A: The short answer is no, though there has been some recent good news, and some past successes. There’s a few issues that make exiting from Singapore challenging, namely the lack of local trade acquirers and the challenge of jumping from Singapore into other markets (read: USA) where trade acquisitions are more frequent. But like the Series A question, I think this is also an issue of a young ecosystem that hasn’t produced tons of exit-ready companies. And I do believe this will change in the coming years. For a full list of Singapore exits, check out the SGE.IO list of acquisitions and exits.

STARTUP OPERATIONS

Q: I need cheap work space. Where should I look?
A: Singapore is a haven for co-working. SGE.io has produced a great co working map which lists most of your main options. If you’re working from home, I recommend taking a half time desk at one of the co-working spaces. It’s usually good value and then you can have a place to go but also flexibility to be at coffee shops or in your pajamas. If you want a full time spot for your company, Blk 71 rents are hard to beat at less than $2 psf vs. $5+ psf for a shop house, but you will spend a lot of time at Fusionopolis, which is not a good thing. It puzzles me that more startups don’t seek out funky industrial spaces like Inverted Edge (warehouse in Lavender) or Edencr8 (warehouse on Lower Delta Road). High ceilings and exposed brick are all the rage in New York and San Fran, so maybe that trend will trickle down in the coming years.

Q: I need to hire developers. Where should I look?
A: My advice – stop looking in Singapore. You cannot compete with the banks, most developers do not grok the value of equity and options, and in general it’s a small talent pool. Instead of searching where the light is brightest, buy yourself a plane ticket to Bandung, Cebu, Ho Chi Minh City, Jakarta or Manila (all direct flights BTW). Show up cold and do interviews or better yet run a hackathon or give a talk or somehow contribute to the local community. Grab the young freelancers or poach from the major outsourcing companies. Employ good devs remotely or pay them enough to qualify for an EP and get them to Singapore. Southeast Asia is massive and relatively easy to navigate. US companies are outsourcing in these markets but they can only do this via firms b/c the logistics of direct hiring is too difficult. You do not have this limitation. So leverage your competitive advantage! And after you’ve finished your recruiting trip, take a nice beach weekend in Boracay or Bali.

GETTING INVOLVED

Q: I’m a developer and want to work for a startup. How do things look?
A: You’re in luck. Thanks to all that seed money, everyone and their cousin is hiring developers to flesh out their MVP. Wages are not great, but also not terrible. Range is 4K/month for junior devs up to 7K/month for senior devs, with the high end of that range reserved for companies that have strong financing. There are very few architect or engineering manager jobs because most of the startups are too small to need that sort of engineering firepower and too poor to pay for it.

Q: I’m a business, maketing or product person who wants to work for a startup. How are my chances?
A: Sorry, not so good for you. The startups here are small. If they are solid, then they have a founding team that owns product and business. If they are not solid, there might be a space for you, but you might not want it. There are a few startups that have scaled to the point that they do need to bring on product, marketing, biz dev and analytics talent. These are companies like Property Guru, Bubble Motion, Viki, Mig33 and Reebonz. They do exist, and they do hire, but there are just not that many of them, and far fewer than there are talented internet people who in markets like Silicon Valley or NYC might end up working at startups. All that said, it just takes one job to keep you happy, so by all means have a look around.

Q: Where can I find out about good jobs?
A: As noted above, the concept of a good startup job in Singapore is a dubious one unless you’re a developer. A better term might be “poorly paid gig with high glory factor and a tiny chance of meaningful upside”.  But if you insist, then you might start by checking out Startupjobs.asia. Better yet, if you have the risk tolerance then go get some of that seed money and be your own boss!

Q: I’m an investor from Europe/America/N. Asia. Where should I put my money?
A: One of my favorites! Irresistibly fun to advise people how to spend their cash. If you want to invest in Singapore, here’s my thoughts:

  • Pre-Seed – there is still space for more angel investors to do 100K pre-seed rounds for promising teams because iJAM and Spring are slow and the angel community is not large enough to get to everyone yet.
  • Seed – Do not waste your time, because the NRF/TIS incubators have it locked and will give more entrepreneur friendly terms than you can afford to because they are investing the government’s money. Find a way to work with an NRF/TIS fund or stay away.
  • Series A – Yes, please! As noted above, this is a big gap right now. A Series A fund with 15M or more to spend can have a good crack at the NRF/TIS companies and anyone else who is scaling well.

So yes there are opportunities to invest in Singapore, but I believe the bigger opportunity is outside of Singapore, i.e., in Bangkok, Jakarta, Manila and HCMC, where the funding scene is weaker at every stage and the market size and growth rates are faster. The downside of these markets – besides the pollution, traffic and lack of transparent business practices – is that the startups are also less mature. But I think this will change, and in general an angel investor or venture capitalist can have a bigger impact both in terms of financing and mentorship. The valuations will also be much more attractive. If you do go this route, having a trusted local partner or advisor is highly recommended.

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