Singapore Entrepreneurs

Yesterday, an article “Govt agencies need to change” (Gracia Chang, 10 Feb 2007, Today Online) talks about the fall in the startup rate last year. Actually, the report came from the press release of the Global Entrepreneurship Monitor (GEM) 2007. The actual report and data will be out in two weeks time. Hence, we write a short preliminary commentary to what has been announced last Friday in NUS by the GEM team, from NUS Entrepreneurship Centre.

Here are some excerpts from the Today article which we highlight important to our short discussion.

Agencies such as the Standards, Productivity and Innovation Board (Spring) Singapore, the Economic Development Board (EDB) and International Enterprise (IE) Singapore need to re-look their roles if Singapore wants to address the fall in level of entrepreneurial activity over the last year.

Action Community for Entrepreneurship (ACE) deputy chairman Inderjit Singh, (picture) said this at a seminar on Friday. His observation came after being “initially surprised” by the findings of the latest Global Entrepreneurship Monitor (GEM) study of 42 countries. It showed that Singapore’s Total Entrepreneurial Activity, essentially pre-existing and new start-ups less than three-and-a-half-years old, fell from 7.2 per cent in 2005 to 4.9 per cent last year.

While the results are not surprising as macro-economic studies generally indicate that early-stage entrepreneurship decreases during an economic boom, principal investigator of the GEM study in Singapore, Associate Professor Wong Poh Kam, wanted policy-makers to ride on two emerging trends that could spawn billion-dollar projects.

He highlighted that one out of five Singapore early-stage businesses employs the latest technology — technology only available since one year ago — compared to an average of one in 10 among the 22 Organisation for Economic Cooperation and Development countries and this ratio was similar for new start-ups with high employment growth potential, as defined by their intent to employ at least 20 people in five years.

Therefore, it is important for Singapore to focus on the niche areas of technology-driven start-ups that are “commercialise-able” and bringing high-growth potential start-ups overseas, said Associate Professor Wong who is also director of the National University of Singapore (NUS) Entrepreneurship Centre.

On its part, a new crucible under ACE is already being set up to facilitate the growth of technology-driven start-ups. This action team will be the fifth one along with others that focus on specific areas of entrepreneurship which include financing, regulation, internationalisation and culture. To create more overseas business opportunities for start-ups, Mr Singh suggested the transformation of Spring Singapore into a local enterprise champion that would assist start-ups with internationalisation right from the start……..

Citing the Start-Up Enterprise Survey conducted last year, he said that 67 per cent of start-ups had expressed a desire to enter overseas markets from day one. He said: “I think as the survey has shown and what I personally feel, we have made tremendous improvements both in terms of the Government support and as well as the access to capital … I think we now really need to add that last facilitation of technology, high-growth potential and foreign market process. I think that will complete the picture.” ……

For the naysayers, the drop in startup rate does not necessarily mean that entrepreneurship is on the decline in Singapore. There are a couple of factors which can be associated with this drop in rate (if you do not know, most of the countries including US also have a drop this year, and the phenomenon seems to be global. From the conference which we have attended, US has dropped from 12.8 to 10.4):

• The start of a booming phase in Singapore’s business cycle: In the years where the startup rate is high, the Singapore economy is not doing very well. With the return of a booming economy, the MNCs and medium enterprises are now opening up job opportunities. Given that some people who might failed in their business ventures, there is a chance that the drop is due to some of them moving back to the established market sector. Of course, given the risk adversity and fear of failure in our graduates’ mindset, it is likely that they will prefer to work on a stable job before considering the need to start a company.
• Go Global is required on the very first day: Despite the startup creation rate dropped, the number of technology enterprises in Singapore is increasing, if you do a segment analysis of the Singapore GEM data. One important feature is that GEM does not take into cross country integration of startups. For example, if we do a startup focussing on technology development in Singapore and put a sales division in China and US, we will not be able to know whether the company has expanded or have increased market share. However, the message is clear, for those people who want to go into technology entrepreneurship: whether you like it or not, on the first day you start your business, you need to go global, because our market is too small. With the technology market in our surroundings are slowly emerging, we have to move beyond regional to the dominant markets of US and UK.
• Government has reached marginal utility in helping entrepreneurs?: One interesting aspect is that the experts interviewed on our environment all agreed that the Singapore government has provided a strong support in facilitating infrastructure and some funding to the startups but that is the best that they can do and they are reaching marginal utility till they might be over-helping. We will provide some more details when the actual report comes out. It is now up to the entrepreneurs to start executing and pushing their business to the next level. Actually, from the ground, the lack of legal resources for the entrepreneurs has been cited to be one of the major reasons, but we are short of lawyers specializing in IP and even venture capital transcations.

Of course, some changes will be happening in the next few months, with the move of the chairman of A-STAR to SPRING. Hence, stay tuned and watch this space.

About GEM: The Global Entrepreneurship Monitor (GEM) is an international comparative research project that seeks to benchmark the level of entrepreneurial activities across countries. GEM was initiated in 1999 by leading scholars from Babson College and the London Business School , with strong support from the Kauffman Center for Entrepreneurial Leadership at the Ewing Marion Kauffman Foundation.

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