Contributed by Daylon Soh
“As a tech founder who wants to start a startup in Singapore, what kind of company should I be building?”
I started with that question in mind after watching Tim Cook’s video on Fortune, “Why Apple still uses Chinese Manufacturers?”
Singapore is known internationally as a business-friendly city with a low tax environment. Despite Singapore claiming to be a hub for many things, my country of birth only has an unfair advantage in a few areas.
Assuming as an entrepreneur, you value optimising productivity per every dollar invested in manpower and value skilled labour, here are some observations to consider from a labour market perspective.
Observations
1) Singapore is a trade heavy economy that functions as a clearinghouse for regional market activities e.g. shipping. Skills that are related to commerce (e.g. import/export, distribution or money exchange) and professional business services (e.g. accounting or consulting) are in abundant supply.
2) Singapore continues to optimise its business infrastructure and has a lead in SEA markets with many MNCs basing their regional HQ here. Skills that are related to sales, business development and partnerships are in abundant supply. I’ll also add that infrastructure in a broad sense would include physical infrastructure (e.g. real estate) and governance (e.g. law) in which we have deep industry ecosystems and talent pool.
3) Singapore has been pushing for a knowledge service-based economy over a technical product-based economy for years. If we look at the composition of GDP contributors, from the Department of Statistics in Singapore, service industries contribute about two-fifths of the economy vs manufacturing which is one-fifth of the economy (2:1 ratio). I group service sectors like Business Services, Finance/Insurance and Wholesale and Retail Trade as their unit of value exchange is in offering a service. Skills that are in these trades such as retail/hospitality (e.g. F&B operations and tourism) are in abundant supply.
In summary, Singapore has some advantage in trade, infrastructure, and services with existing ecosystems and talent pool with the deep expertise. It would also be prudent to look at the internal consumption of these skills in the local market. F&B workers are clearly in high demand and low supply. Professional service workers are in lower demand and higher supply. As an entrepreneur, I would also consider how transferable are these skills in abundant supply are to your startup.
Types of companies where Singapore shines as a home base
It makes sense to start a few types of companies as a startup here that would easily have a $10+ million valuation with a smart and driven team in less than 5 years. Such a valuation would warrant an annual revenue of at least $1 to 2 million.
Starting a company outside of these sectors could mean your team will be swimming against the tide because you’re working against or without Power Law as an entrepreneur, very much like sailing the sea without tailwinds.
- B2B & B2C Trade Marketplaces: (especially those that involve areas that I mentioned and have untapped local latent demand e.g. retail discounts via ShopBack and second-hand goods via Carousell) Singapore would not have had a team that built Facebook but could potentially have had a team that built Alibaba.
- Financial and Professional Services: (it involves all areas I mentioned, I would avoid banking but go for insurance or a particular niche that the banks don’t care too much e.g. accounting/taxes) There are so much cost inefficiencies in these sectors right now on a global scale that it is ripe for disruption and new market entrants.
- Education/Training: (it involves all 3 areas if done well and Singapore has brand reputation of a world-class bilingual education system with emphasis on Math & Science) From early childhood education to adult learning, there are enough pockets to experiment with a diverse talent pool and parents/students are receptive enough to try new methods to get an edge.
- Companies that need political entrepreneurship (e.g. government contracts) to thrive. This is a double edge sword highly dependent on your business connections and family background. There are businesses that thrive not by merit of free market competition but by political connections (e.g. telecommunications where operating licenses are limited). I would avoid competing in markets where incumbents have built an economic moat based on political connections (e.g. a cryptocurrency exchange startup competing with a bank is a deathwish).
Types of companies where Singapore is a disadvantage as a home base
- Consumer Products: (China, Taiwan, South Korea or Japan would be better options nearby with larger domestic markets to support initial economies of scale in production)
- Deep Science/Tech/Engineering: (If China and Japan are problematic due to language barriers, Eastern Europe is a great alternative due to the amount of quality engineering talent) Building a startup in this field also requires patient capital.
- Business models that are not well understood (e.g. social networks and media)
I look at these disadvantaged sectors based on 2 criteria: Number of active early adopters per capita and deep skills as Tim Cook has pointed out in the video. It’s not impossible to build these companies but a global talent sourcing strategy is required.
The 2 lists above are not exhaustive.
Conclusion
Singapore has inherent advantages in certain sectors and certainly shouldn’t aspire to be a Silicon Valley, which has a different set of opportunity densities and power-law dynamics at play.
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About Daylon Soh
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