Recent Thoughts on Global Entrepreneurship Monitor (GEM)

The NUS Entrepreneurship Centre has recently released the research findings for Singapore under the Global Entrepreneurship Monitor. The Global Entrepreneurship Monitor research program is an annual assessment of the national level of entrepreneurial activitiy. It started with 10 countries in the year 2000 and expanded to 39 countries by 2005. Here is a review of the GEM press conference.

The GEM research program is based on a synchronized assessment of the level of national entrepreneurial activity for all participating countries, involves exploration of the role of entrepreneurship in national economic growth. It provides a platform for global comparisons, national reports and special topic reports which are based on the annual data cycles. It also defines entrepreneurship as a complex phenomenon, that requires very rigourous definitions on how the study is conducted.

In the press conference, Professor Wong Poh Kam, the director of NUS Entrepreneurship Centre presented the key findings from his team on Singapore for the 2006 GEM report. In the report. I will like to highlight three key indicators which I hope to provide some idea on the current entrepreneurial scene in Singapore.

1. Cultural Change in the younger generation

We see an increase in 1.5% on Singaporean adults contributing to entrepreneurial activity in 2005. The current percentage stands at 7.2% of the population are making that contribution as compared to 5.7% in the previous year. It represents a high jump. Although the GEM does not make inferences with economic indicators coming from the Singaporean economy, I believe that you can draw some interesting points from the numbers.

Of course, during the meeting, I queried on the breakdown of that 7.2% of entrepreneurial activity and how it is seperated between the age groups of 18-35 and 35-60. I received the later figures later from the researchers (since I worked with them as well), and it revealed something interesting. The contribution is coming from the younger generation of students and it represented a substantial shift in thinking on the part of Singaporeans. The younger generation of Singaporeans, unlike people in my generation, are aware of the economic realities in Singapore. They are presented with more career choices, compare to people in my generation. There is a lesser contribution with people coming from the older age groups. It still reflects the risk adversity attitude in the older generation, who are still living in the mindset that the government should be responsible for their livelihood. Reading the recent forum letters in ST, I read about the ageism issue in older people having difficulty in finding employment. I believe that part of the government policy should be transiting these people into simple retail entrepreneurship.

2. The Investors funds are low

From the study, it is shown that friends, family and fools make up about 50% of the funds raised by entrepreneurs. According to Harold Fock, CFO of LiteSpeed, he showed that there is virtually no seed funding and series A funding for entrepreneurs in that area. Most of the investor capital are channelled outwards to other countries. One of the commentators, Richard Pigossi, a venture capitalist gave an example that Rockeby biomed is an example of a Singapore firm listed in Australia.

Of course, it remains a challenge to Singaporean entrepreneurs to learn the art of bootstrapping to tighten cashflows to ensure their companies to reach the stage where their companies can attract investment from the current capital industry. Personally, I am not an advocate of fundraising from venture capitalists in Singapore. It’s too quick to dilute your equity. There are cases of successful entrepreneurs who made their money through bootstrapping, for example Michael Dell of Dell Computers and George Quek, founder of BreadTalk.

3. The Government is not the problem

It basically agrees with my intuition on the problem of entrepreneurial activity in Singapore. It is not the government which is causing the problem. Actually, I always believe (and I have stated in various past entries), the role of the government is to provide infrastructure and tax benefits for entrepreneurs. In actual fact, the government regulation and tax issues are favourable to entrepreneurs compare to what I experienced in the UK. In the GEM findings, it is rated one of the best among all the countries involved.

As Mr Cheong Wai-chew, one of the commentators pointed out, there is an increasing danger of the government end up mollycoddling the Singaporeans towards entrepreneurs in giving too much goodies. If we agree that entrepreneurs are people who are good survivors and able to utilize their competitive advantage against difficult situations (even if it is cashflow issues), the government is doing the correct thing in not feeding too much subsidies towards the small-medium enterprises.

Update:
12th Feb 2006: The findings are featured in S’pore sees increased entrepreneurial activity but lags in cultural mindset: study by Jeana Wong, Channel NewsAsia dated 10 Feb 2006.

13th Feb 2006: The slides for the presentation are downloadable in the NUS Entrepreneurship Centre website for GEM. The URL is here.

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