Local start-ups to get helping hand from established firms

Govt to encourage investment, joint product development, test-bedding

Start-up ventures can expect more support from established Singapore businesses in the year ahead. -- ST GRAPHICS
Start-up ventures can expect more support from established Singapore businesses in the year ahead. -- ST GRAPHICS

START-UP ventures can expect more support from established Singapore businesses in the year ahead.

The Government will encourage local firms including small and medium-sized companies and multinational corporations to invest in these newcomers.

It will also urge them to test-bed their innovations and jointly develop products and solutions with them.

This will give start-ups funding and much needed customer references crucial to their overseas marketing efforts, said Mr Edwin Chow, executive director of Spring Singapore, a body which also funds start-ups.

Government agencies such as the Housing Board and the national water agency PUB have begun to support start-ups.

They have initiated calls for proposals to provide start-ups with test-bedding opportunities to give them insights into the needs of the users, Mr Chow said.

"Such co-innovation efforts are mutually beneficial for they provide larger companies with the chance to crowdsource for ideas and to develop more cost-effective solutions," said Mr Chow, who oversees the Innovation and Start-ups group as well as Spring Investments.

Venture capitalists (VCs) and entrepreneurs The Straits Times spoke to were mainly upbeat about the outlook for start-ups next year.

Expect more acquisitions, they said, up from about 10 start-ups sold this year. Acquisitions are a way start-up founders can reap financial rewards from the hard work involved in translating their dreams and ideas into reality.

Mr Roystan Tay, a co-founder of Zopim, an online customer support tool, expects larger deals arising from the acquisitions of mid-sized start-ups by regional and globally established firms. The sale of video streaming start-up Viki to Japanese e-commerce giant Rakuten in September for a reported US$200 million (S$254 million) was the biggest to date for Singapore.

Such acquisitions, coupled with the availability of seed funding for start-ups here, have led to talk that a tech bubble is brewing.

Entrepreneur and investor Ong Peng Tsin did not deny there was a bubble here but said it is in the seed stage of start-ups "partly due to the pump priming by the Government".

"This is not necessarily a bad thing as it is causing venture capital funds to be formed, necessary for the building of the start-up ecosystem," he said.

While the start-up landscape will continue to be vibrant, foreign talent will be a key issue.

Foreign talent is necessary because Singaporeans are averse to working for start-ups. Also, there is a lack of software developers.

Said Mr Ong: "Don't assume that talent is an across-the-board issue. I think we're talking about small numbers of technical talent and business experts, say about 1,000 a year, to help build the disruptive innovations in the computing sector. I suspect the the Government will make the right call."

Entrepreneur Dinesh Bhatia, co-founder of MyHero which helps traders monetise their investment expertise, advises start-ups to open subsidiary offices outside of Singapore as soon as possible.

"We're living in a global economy and we need to harness this sooner rather than later. If boutique fashion labels, akin to start-ups, can already work with factories and suppliers outside of their country of origin, so can start-ups," he said.

Then there is the issue of Block 71, located in the leafy Ayer Rajah Industrial Estate. Some start-ups there have enjoyed low rents through a scheme run by the Media Development Authority (MDA). Their initial three-year lease, which ends in February, has been extended by another six months. The MDA has not decided who should move out, but some will need to go.

The unhappiness is that after three years of building Block 71 into the heart of Singapore's start-up space, it is breaking up the ecosystem.

Mr Chak Kong Soon, managing partner of local venture capital firm Stream Global, said: "While it makes sense to make room for newer start-ups, keeping some experienced entrepreneurs in the block may be beneficial to the newer start-ups."

The MDA is still meeting different start-ups to understand their concerns and an outcome is not expected until next year.

Funding for growing start-ups that need more than $3 million to scale up their operations will still be difficult to come by.

Mr Bhatia feels few VCs have these sorts of funds. Besides, Singapore investors are more cautious and prefer private equity investments in companies that are more mature rather than at the early or growth stage where the risk of failure is higher.

Another emerging issue next year that will grab headlines is the challenge to local laws by disruptive innovations such as Uber where car owners share rides to town, affecting the taxi service.

Called the sharing economy, these services see consumers renting their assets such as homes and cars. They will come up against regulations designed to protect businesses and people's safety.

Look out for these exciting developments in the start-up landscape next year.


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