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Tech startups blossoming in Singapore, but lack of funding a major obstacle
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A recent survey by the National Research Foundation has revealed that close to 5,000 new tech startups were registered in Singapore every year since 2006, or just under 10 percent of all new enterprises.
The proportion of tech enterprises below five years old has gone up as a result.
Also, the survey found that 61% of all new enterprises in Singapore survived beyond three years, comparable to the US (59%) and several European countries (60%).
These results were revealed by Singapore’s Deputy Prime Minister Teo Chee Hean in a speech on 13th October, at the annual Techventure conference held at the Marina Bay Sands. The event gathers entrepreneurs and investors from all over the world to discuss the latest trends in technology.
The Deputy PM also mentioned that startups in Singapore face the problem of being unable to secure funding for expansion. In my opinion, this could indicate that the growth of the venture capital and angel investing industry has not kept pace with the sheer increase in volume of new tech enterprises.
At a separate press conference later in the day, NRF CEO Francis Yeoh highlighted the lack of funding as the major reason why the government has stepped in with funding schemes of its own.
The NRF Technology Incubation Scheme (TIS) for instance, works with selected startup incubators in Singapore to provide funding to promising enterprises. Incubators have autonomy to decide who gets funding, with the government co-investing up to 85% of the total amount.
Mr Yeoh said that the scheme for incorporating the best of both worlds — the government contributes the money, while private sector investors decide who’s the hottest ticket in town.
The government would consider lessening their involvement in the startup ecosystem here when more private investors step in. He maintains, however, the government will always have a part to play.
“Our role should be to facilitate. We should not be performing the role of the venture capitalist,” he says.
Besides funding issues, another problem that startups are facing at the moment is securing top talent. Some entrepreneurs have complained that the arrival of global companies like Google and Facebook to Singapore means that small enterprises struggle to find top engineers.
While attracting foreign workers to the country is a solution to the talent crunch, the general population in Singapore have grown increasingly resistant to the idea, accusing them of stealing jobs and places at universities. The government, in turn, has responded by raising foreign worker levies, although critics see this as a blunt instrument that hurts enterprises unfairly.
It’s unclear at this moment how the government will balance political interests with business needs, although they are moving full-steam ahead when it comes to providing more capital.
The Deputy PM said in his speech that the government is in the midst of fine-tuning the details for a Co-Investment Programme, with S$500 million (US$390 million) in funding contributed equally by the private and public sector.
The fund will be managed by Heliconia Capital Management, a fully-owned subsidiary of Temasek Holdings, the government’s investment firm.
The aim of this fund is to catalyze the expansion of local SMEs as they enter foreign markets.
“I hope that Singapore-based enterprises will take advantage of this new initiative to push ahead with their next stage of growth,” he says.
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