Singapore — encouraging the next wave of innovation

Startups have always been associated with Silicon Valley, what with juggernauts such as Sun, Apple, Google, Facebook and Twitter (to name a few) emerging from this hallowed region in Northern California. Increasingly as many pundits are predicting a global power shift to Asia, we are steadily witnessing the growth of young technology companies in countries such as Japan and China. With over 56% of world population — all potential consumers — living in Asia, there is a steady influx of western startups trying to cash in on this untapped market of rising economic powerhouses.

Singapore is shaping up to be the hub for Western startups coming to Asia. A tiny island nation of 5 million population, Singapore aims to be at the focal point of innovation in Asia. Recently ranked the world’s most competitive economy and consistently rated as the easiest country to do business in, Singapore is paving a path for entrepreneurs to explore businesses opportunities and investments in this region.

Through the lens of media and investors alike, the view of Asia is dominated by the two major markets in the continent, India and China. While there is no denying the fact that these countries provide more than a billion potential users and are untapped to a large extent, various issues such as government regulations, language, infrastructure and cultural barriers affect the setting up of companies in these countries. South East Asia, consisting of 13 countries and population in billions, also presents a huge opportunity and similar challenges.

Singapore uniquely positions itself as a country which provides convenience to the speed bumps encountered in other countries. “One can reach China, India, Indonesia, Australia, Japan and Taiwan in 7 hours or less,” says Rao Machiraju, CEO of ReQall, the maker of a voice-enabled personal productivity software tool. “Our chief marketing officer travels between India and Singapore and it has been excellent so far. We live on the Internet and that works very well out of Singapore.”  ReQall is a startup operating from Singapore but mainly targets markets outside Singapore.

“You’re in the same time zone as Asian customers,” adds Kevin West, co-founder of ZumoDrive, a Y Combinator-funded startup that provides cloud storage capabilities. ZumoDrive is based in the Valley, but has set up an operational base in Singapore to reach a wider base of potential customers. Being in the same time zone as Shanghai and Beijing and only two and a half hours ahead of India helps in providing rapid customer support, an important operational aspects of the business.

Historically, government agencies in Singapore have taken a proactive approach in attracting multinational corporations to set up base and provide employment and economic opportunities to its populace. They are now adopting the same approach towards foreign startups. This is evident from the numerous grants and schemes they have in place to provide seed funding to develop prototypes, encourage investors to set up incubators and help overseas startups to set up their R&D base in Singapore.

“Government agencies offer great deal of support,” says ReQall’s Machiraju. “They are prompt in responding to queries and are available via Skype to exchange ideas. Very impressive indeed. There are a variety of grants and funding available and the process is very straightforward. Information is available via the web for such grants. Getting talent from anywhere in the world to deploy in Singapore is relatively easy with the various business visa programs.”

Specifically, Singapore has the EntrePass for foreign entrepreneurs to set up their businesses here. While this pass has received some amount of negative criticism from the community due to some amount of bureaucratic snafu associated with it, it’s definitely a step in the right direction.

Hiring talented individuals is another key if not the most important problem for a startup. Singapore is home to some of the best technology universities such as the National University of Singapore (NUS) and the Nanyang Technological University (NTU). They constantly attract high-quality talent from India, China, Indonesia and Vietnam through various scholarships and grants.

With hordes of graduates from top universities in Singapore opting to work for financial institutions or multinational corporations, startups are left with limited choice. However, due to Singapore’s proximity to other southeast Asian countries and an easy visa process for employment, hiring is made much easier.

“It is slightly difficult to find right people here,” says ZumoDrive’s West. “But immigration in Singapore is great — very accepting of foreign talent. Hence, it’s a great hub to attract developers from the region. The best hires come from the people who find out about you and are interested in what you’re doing.”

Due to Singapore’s cosmopolitan and multi-cultural environment, it serves as an attractive proposition for foreigners to work here.

“Singapore being a multicultural country, it’s easy to get people who speak Mandarin, Bahasa and Malay,” says Craig Hewett, CMO of Wego.com, a travel metasearch startup based in Singapore. “It also helps that Singapore is a neutral country.”

In some ways, Singapore is similar to California. Like the Western American state, it’s a potpourri of different cultures, with a population fluent in English. With its stable political climate and low crime rates, it is of no surprise that Singapore is one of the safest and most secure regions in the world.

Amazon.com, Microsoft and Salesforce.com setting up bases in Singapore has also had a significant impact on the startups in this region. Low network latency and accessibility to cloud infrastructure makes it easier for startups to scale their applications. This was also one of the key reasons for ZumoDrive to set up their company here, according to West: “We are in [the] cloud computing space, a space that is hot here and government is actively trying to promote.”

While all these factors provide a conducive atmosphere for technology startups, there are challenges faced in the funding sector. According to Wego’s Hewett, “It’s hard to raise a Series A or a Series B funding in Singapore. Most investors currently find India and China to be the ‘hot’ markets and unless you are based in these countries, it will be hard to raise serious investment from VC’s.”

While famous firms like DFJ and Seqouia have dedicated fund allocated for Asian markets like China and India, they find it risky to fund startups based in other countries. This may prove to be a deterrent for some. But the Singapore government in its recent budget announced incentives for investors to set up investment arms here. For example, an eligible angel investor who commits a minimum of $100,000 of equity investment in a qualifying startup in a given year can claim a 50% tax deduction on his investment. The government also provides incentives to encourage foreign mentors to come and train local startups. This supported programs such as Founders Institute Singapore training new and seasoned entrepreneurs.

With monetary, cultural and infrastructural factors attracting innovative foreign startups to Singapore, it will spur the emergence of Singapore as a hub for startups to grow their business and engineering resources in this part of the world.

*e27 is a technology blog focused on startups and Web innovation in Asia. It is also the organizer of a leading pan-Asian startup and technology event, echelon 2010 (formerly known as unConference).