Excerpts from this piece appear on the Business Times article on “Singapore’s appeal to tech investors grows with global shift to remote work” Highlights The roots of Singapore’s tech ecosystem are its talent development and the proactive role the government played in attracting investors. Even today, these same elements will be crucial in moving the […]

It's time to level up

How Singapore can take its tech ecosystem to the next level

Excerpts from this piece appear on the Business Times article on “Singapore’s appeal to tech investors grows with global shift to remote work

Highlights

  1. The roots of Singapore’s tech ecosystem are its talent development and the proactive role the government played in attracting investors. Even today, these same elements will be crucial in moving the city-state’s tech ecosystem forward.
  2. The decentralization of the workplace is advantageous for Singapore, given how the inherent nature of its economy has fostered the growth of “regional/global-from-day-one” companies.  
  3. The accumulation of venture capital firms in the CBD is not entirely necessary given the regional nature of many of these firms, but this can have long-term benefits for Singapore as a tech hub especially as more travel returns post-pandemic. 
  4. There’s a new wave of family offices and HNWI from China especially settling in Singapore and this gives the country an opportunity to be a platform for the tech talent building companies and the capital looking to invest in these companies. 

For several years now, Singapore’s tech ecosystem has constantly drawn parallels to Silicon Valley, with the accumulation of investors from venture capital firms to family offices and HNWIs seeking to invest in tech startups, the city-state being an attractive place for domicile setup (headquarters), and the mass of tech and venture building talent settling in the country. 

In this video by Financial Times, Yinglan and other regional VCs opine about some of the hurdles and opportunities facing Singapore evolution as a tech hub for Asia.

But as the world has been changed by the pandemic, with the talent becoming more distributed and capital shifting flows from mature to emerging markets (also worth pointing out that Singapore will be hosting this year’s annual WEF summit traditionally in Davos), there are new opportunities to redefine what Singapore means as a tech hub in Southeast Asia and the greater Asia Pacific region. And this redefinition in a pandemic-ridden world will mean thinking beyond the conventional dynamic of the other Silicon Valley’s of the world where all the capital and talent simply populates a road in the Central Business District. 

Going back to its roots as a magnet for talent and capital

It’s all about being early

While there are long-term benefits to the accumulation of VCs in the CBD, it is more an effect than a factor or cause behind the success of Singapore’s tech ecosystem. There are two major intentional moves that Singapore made to draw VCs into the city-state. 

First was having skin in the game and co-investing with potential VCs more than a decade ago through the likes of NRF. The second was to invest heavily into tech and R&D talent building and fostering a space for founders to build companies, through programs like NOC that eventually led to the “NOC mafia” of founders. These two things combined with Singapore’s regulatory safety and ease of doing business relative to other ASEAN nations — especially in the early 2000s — made it an attractive destination for investors interested not just in Singapore but also in the region. And Singapore continues to build on those two things today, with the investments being made through SWFs and homegrown VCs attracting global co-investors, and visas attracting top-tier talent to take on leadership positions in tech companies. 

Compared to Silicon Valley and Sand Hill Road, Singapore’s evolution as a tech ecosystem was more government-driven and could be compared more closely to Israel especially early on. But as more VCs set up shop in the country, we can see more organic growth in terms of becoming a place where startups can set up and find funding. 

Decentralization of the Workplace

What does being global mean these days?

The decentralization of teams and the workplace through remote work is bringing in an interesting shift in the flow of tech talent globally, where talent no longer needs to be located physically in a certain place to work for a certain company. Software engineers can work for companies halfway across the world, and we’ve seen how our portfolio companies leveraged on this shift, hiring from countries beyond the region to get the best possible talent. This also widens the playing field for local talent to look for career opportunities. As I mentioned earlier as well, this extends to VCs too where firms are looking for local talent in say Indonesia or Vietnam who has an on-the-ground perspective of the landscape in specific markets. We’ve been hiring more actively outside of Singapore over the past year, and have a team that is spread across the different countries in the region. 

Singapore’s tech ecosystem is already in a good position in terms of mindset to take advantage of this, with many startups already thinking regionally from day one. Many of the top-performing Singapore companies in our portfolio have risen quickly to the occasion to capture blue ocean markets in the Asia Pacific like Carro over the past five years in the auto industry, Janio in cross-border ASEAN logistics, and more recently Intellect in Asia’s mental health care industry. It is already intuitive to then expand the net for talent with the option for remote work. That said, it is one thing to hire and another to retain and manage, and certain cultural practices and operations have to be in place to make sure that remote work is a win-win for the employer and employee. With this decentralization COVID has introduced, the key for Singapore is to double down on this mindset. 

VCs a key catalyst for the collision of tech and capital

The competition is growing

The pandemic’s impact on how VCs do work has certainly reduced the need to be located in a particular area to find deals and close them. We’ve experienced this shift firsthand with many of our new deals over the past year completely done online. With VC firms in Singapore looking regionally to begin with, the location within the city-state does not matter as much. And even before the pandemic, VC firms in Singapore have already been setting up local offices or teams in specific countries across the region, and this became more important as flights within Southeast Asia came to a standstill a year ago. 

Even then, there are still long-term advantages to being located in a CBD, or in an area with other VCs and tech companies, especially as business travel resumes more widely. Venture capital will always be a business built on trust and reputation. To a certain extent building that trust and reputation involves in-person and informal interactions, which are much more likely for a VC located in an area where all the capital and talent congregates. 

As the saying goes, “birds of a feather flock together,” and this applies to having a physical destination for tech talent and capital in Singapore. With an increasing long-term interest in Southeast Asia, this physical location becomes a magnet for global tech companies and investors to set up shop, and this magnet will only increase in its pull with a greater mass of talent and capital. In the last few months, we’ve seen Bytedance and Facebook become our neighbors on Shenton Way. Then there are also network effect benefits with a brand built around this destination, just as how the brand of Silicon Valley has brought together tech talent and capital in a way that no other location has in the past few decades. 

Singapore’s new wave of family offices 

It’s an easy call

In recent years, the city-state has not only become a destination, but also a gateway for the wealthy to access the fast-emerging markets of the global south. This is especially the case for a relatively new generation of rich Chinese families and tech billionaires seeking greener pastures from which to manage and invest their wealth — wealth that was largely built over the course of China’s internet and tech boom over the past two decades.   

Interestingly enough, this exodus is not so much made up of Chinese venture capitalists or venture capital firms, whom one would think would be leading the charge in a region where venture-backed tech companies are getting mega-rounds and going highly valued in the public markets. The wealth exodus has been led largely by Chinese families with various ties to China’s internet and tech boom. 

Given how much of this wealth was created (building tech companies) and the nature of the region’s growth (again, tech companies) it comes to no surprise that this capital is also looking for similarly tech-focused or venture-backed business targets. There’s a massive opportunity for Singapore, just as it had with venture capital firms in the 2010s, to become a hyperactive platform for these family offices and HNWIs to connect with VC firms and asset managers to support their wealth management. 

 

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