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Singapore has long been the No. 1 choice as the Asian headquarter for many tech companies, such as Facebook, Google and Netflix, which slowly builds up its brand as an ideal launchpad for business entering Asia.
When in Singapore, I had a few discussions with some business operators there about this ideality, particularly for tech business. In this article, I would like to sum up some valued points to understand better the island city-state.
For doing business
"In Singapore, the business environment tends to be relatively open. Usually B2C business is even easier, because there's not much regulation, especially in finance. If you are a fintech startup, the regulation is minimised, and control is also transparent."
Jeffrey Paine,
Founding Partner of Golden Gate Ventures
Singapore authority has always been making efforts to break down the barriers for anyone to do business in the city-state. According to the World Bank "Doing Business" ranking in 2018, Singapore ranked at the second place, indicating a more conducive regulatory environment of starting and operating a local firm, with the business-friendly policies as well as the completed IP protection.
Something more impactful for tech business, is that the Singapore government has been continuously encouraging multiple regulatory sandboxes to enable testing-out. Fintech is one of the verticals to be mostly benefited. Like what Jeffrey Paine, the founding of Singapore-based VC Golden Gate Ventures has explained: "In Singapore, the business environment tends to be relatively open. Usually B2C is even easier, because there's not much regulation, especially in finance. If you are a fintech startup, the regulation is minimised, and control is also transparent.”
Besides, the corporate tax incentives are for sure another advantage. Singapore is renowned for its double taxation agreements (DTAs), which prevent the double taxation on the same income of a taxpayer. And this will significantly reduce the original corporate tax rate of 17%. Relatedly, the minimised red tape also guarantees the implementation of the incentives, as all the registration and taxation must be done online, and the licensing regime is also streamlined step by step.
However, that's not the whole picture of the red dot. Singapore is obviously one of the most expensive cities in terms of cost of living globally, which applies to the office rental as well as cost in business operation. If we take WeWork private office rent for comparison, the cheapest possible price is 3000 CNY per month in Shanghai, which is approximately 567 SGD, However in Singapore, the currently cheapest available price at WeWork is 1200 SGD in North Bridge Road, which is almost the same as that of London 660 GBP.
Another concern that brought up very often by tech entrepreneurs in Singapore is the talent pool. Even though backed by some highly esteemed universities including the National University of Singapore and Nanyang Technological University, the talent pool seems still not big enough to meet the needs of the growing tech ecosystem. This problem hitches even more of startup-sized tech business, as the social and cultural tension is still existing for the educated young people to get into the high-risky area, like the startup business in the testing phase. Nevertheless, the good tendency is the change in the mindset towards entrepreneurship, especially within the young people, which could potentially increase the talent pool to a certain point.
As a test market
"Singapore is a very particular market and it has often proven to be challenging to scale the operations to the rest of the Asian market due to its fragmentation, culture differences, logistical and payment challenges."
Stephanie Crespin,
CEO of StyleTribute.com
From the market perspective, Singapore is a small but mature market for tech business, therefore it automatically fits in the beachhead strategy of many tech companies geographically when they are thinking of Asia. Dr. Bert Grobben, CEO of Budding Innovation suggested, Singapore is structured and organised enough to be able to create a solution, take it to market and test it, and then iterate and make adoptions. "If you want to test mobility solutions, it's easier to do here. If you want to test for example, certain types of food product, it was very diverse of all the different ethnic groups here. That's true for big corporates, and also true for startups."
While the paradox lies in, how much know-how generated in Singapore could be replicable to the other Asian markets. There is an interview recorded in Startup Guide Singapore, the CEO of StyleTribute.com Stephanie Crespin stated: “Singapore is a very particular market and it has often proven to be challenging to scale the operations to the rest of the Asian market due to its fragmentation, culture differences, logistical and payment challenges." This is in most of the cases true. For instance, the Thai netizens don’t necessarily have the same consuming power as Singapore netizens, thus you might need to have a different value proposition; and the Korean don't really have the similar user behaviour with Singaporean either, which might lead to a change of your marketing strategy as well.
On the other hand, we have to agree that certain level of localisation and strategy adaption is inevitable for any kinds of new market expansion. Singapore might still be a good beachhead market when coming to Asia, but you will need to be open enough to the fact that the difference between Singapore and the surroundings might be much bigger than, saying Germany and other European markets for example.
Aside from the beachhead strategy, there are also quite a lot of companies consider entering Asia through Singapore a soft-landing, due to the westernised business culture and mature tech development.
However, is going to Singapore really a soft-landing? Not necessarily. It quite depends on the industry you are getting into and the products or services you are providing. For example, in mobile payment, you could hardly penetrate the market quickly even though the market is small, and you might need to face the most fierce competition ever in Asia. But at the same time, you could also argue the other way round, as you need have even better USP, in another word, to be more competitive to stand out from others in the small market. That might lead you to better robustness and edge for the further-on expansion, which does make Singapore another way of a "good test market".
In centre of SEA
"Singapore is a hub that enables you to reach out to other places where you can find what you need to integrate in the best possible way. You're not just setting up in Singapore, but you can leverage well what the whole region has to offer."
Dr. Bert Grobben,
CEO of Budding Innovation
Geographically, Singapore enjoys the accessibility of many key cities in Southeast Asia, like Kuala Lumpur, Jakarta and Bangkok, which makes it a good base to cover the business in the entire region. The managing partner of Golden Gate Ventures, Jeffrey Paine is a frequent traveller. Flying to Jakarta on Monday and coming back to Singapore on Tuesday sounds like his typical weekly routine. "Actually quite a lot of people don't understand why to do it from Singapore, but when you try doing it from KL and Jakarta, you will fully understand that Singapore is very central,” Paine said.
What is more significant that this geographic advantage brings, is the closer ties that Singapore builds within the region. Today, many top tech events are held in Singapore addressing the Southeast Asian market, such as Echelon Asia, Slush Singapore and Innovfest Unbound, etc. And these ties also enable a better leverage of the resources beyond the city scale.
Dr. Bert Grobben, CEO of Budding Innovation gave this statement during the interview: "Singapore is a hub that enables you to reach out to other places where you can find what you need to integrate in the best possible way. You're not just setting up in Singapore, but you can leverage well what the region has to offer."
With regional network, what we can see from the business operation of many tech companies in Singapore, is that they seldom locate the whole team only in Singapore, but spread somewhere in the region. You could easily build up your developer team in Indonesia, data science team in Vietnam or customer service team in the Philippines, which could largely deduce the operation cost and make up for the talent shortage of Singapore alone, that we have mentioned earlier. At the same time, As many entrepreneurs expressed, branding as a Singaporean headquartered company indeed indicates the reliability during the business communication, effectively facilities the partnership building and sales generation.
You may have noticed that we are just talking about Southeast Asia, but does that hold the same when it comes to the entire Asia, including China or India? Then that might be a different story.
In general, given the stable business environment, structured market nature as well as the close connections in the region, Singapore could be considered as a cost-effective launchpad to expand your tech business to Asia, especially when you are targeting mainly the Southeast Asia region.
However in the end of this article, I would also suggest that where should be your entry point in Asia should always highly depend on where your in-demanded business resources are located, be it you major clients, industrial partners, talents with expertise, or even the acquisition opportunities.
Special thanks to the following interviewees who contributed insights to this article:
Dr. Bert Grobben, CEO of Budding Innovation Pte. Ltd. (a Singapore-headquartered horizontally integrated Venture Builder, focusing on technology commercialisation)；Mentor of Lean LaunchPad Singapore, German Accelerator Southeast Asia and Faster Capital
Jeffrey Paine, Founding Partner of Golden Gate Ventures (a Singapore-based early-stage venture capital firm investing across Southeast Asia); Singapore director of The Founder Institute (a global business incubator, entrepreneur training and startup launch program)
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This article was written by @Helen Han and edited by @Dido Pang.
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