Start-up capital of South-east Asia

Last week was a long one for Mr Epi Ludvik Nekaj, founder of Crowdsourcing Week.

Since last Monday, he had been fretting about the four-day Crowdsourcing Week conference held at the Singapore Management University from Tuesday to Friday which featured 36 foreign crowdsourcing experts.

"It's the first time I've held a conference in Singapore, it was at the university, a new venue that I've never seen or been to. And I worked with a new team of event organisers," the American said. He registered his company here last year.

It was the first global conference on crowdsourcing - a fast- growing way of finding many people online to do small tasks for small fees. Think of hiring students to sort your photos at 5 cents a piece. The fact that it was held in Singapore is testament to the Republic's fast-growing status as a place for savvy start-ups.

As he headed out for a drink with The Straits Times on Thursday after the main conference was over, he was already thinking of regional expansion plans in Hong Kong and Seoul.

The serial entrepreneur, who started a virtual advertising agency in New York and other businesses, chose Asia for his start-up instead of the United States because Asia has the world's fastest-growing Internet population.

He chose Singapore over Hong Kong because the Republic was seen as neutral and more pan- Asian, whereas the former British colony is seen as closely affiliated to China.

He has been to Singapore a few times and felt the tempo of its start-up buzz. Venture capitalists (VCs) are here with their money scouting for buys; there is plenty of talent and willing mentors; and a busy calendar of tech events.

If there were a Start-up Festival here, last week would qualify.

On Monday evening, Joyful Frog Digital Incubator (JFDI) Asia held a pitching session for its seven start-ups that had completed its 100-day boot camp.

This was followed by the start-up conference Echelon 2013 at Singapore Expo, and then Crowdsourcing Week 2013. On Friday night, there was Startup Grind, a networking session for investors and entrepreneurs.

Throw in monthly fireside chats with local and foreign tech gurus and entrepreneurs. Look at tech blogs such as TechInAsia. Add the dozen pitching events where start-ups pitch ideas to potential investors, and tech accelerators, or boot camps for start-ups to fine-tune their business ideas.

What you get is an entire ecosystem of people, money and events that has sprung up to support start-ups. It's no wonder Mr Nekaj placed his bets on Singapore.

Start-up boom town

Today, there are more than 5,000 start-ups which run businesses in anything from software, medical science and online services - and can include companies such as maid agencies, cafes and boutiques. Start-ups depend on innovations in information technology and other technologies to create new products and services to market.

Events such as Echelon have not only grown bigger, but are also more professionally organised.

This year Echelon moved to Singapore Expo from the NUS Cultural Centre where it was held in the last three years, so it can host almost double the number of exhibitors.

It had a souped-up conference programme led by foreign and local investors, entrepreneurs and business executives.

JFDI Asia's event, held in its new office at Block 71 in Ayer Rajah industrial estate - a block known in the sector as a mini Silicon Valley - attracted about 150 investors, including more than 60 foreign ones from 13 countries.

Foreign companies are eyeing Singapore as a market and as an Asian hub for its operations.

Malaysia's Creative Advances Technology will soon make its online travel app available here.

Smart Online Travel Assistant seeks to disrupt the travel fair industry by helping travellers find a suitable holiday package online without the inconvenience of pushing through crowded fairs.

Some local VCs are also bringing foreign start-ups from overseas here.

Mr Amit Anand, co-founder of local VC firm Jungle Ventures, is already in discussion with several Indian start-ups that want to move here. The relocation will happen this year, he added.

Springboard into region

The start-up scene is blooming and it's because of planting in good soil and assiduous nurturing.

Singapore's pro-business environment and sound legal system and intellectual property climate are good starting points for start-ups.

Government sweeteners have also helped. Last year, the Government invested more than $62 million in over 170 start-ups, about 10 per cent more than in 2011.

Many are tech start-ups providing e-commerce, security, mobile games and travel-related services.

The good infrastructure and corporate governance here also attract the investors and entrepreneurs like Mr Danny Oei, chairman of Merah Putih Incubator from Indonesia.

Singapore's position as a springboard into the region is another part of its appeal.

Some of Mr Oei's 11 Indonesian start-ups will be based in a new office here before the year end.

Their mandate: to expand into neighbouring countries. One of them is Indonesia's top tech blog, Daily Social, which just announced last week an investment from e27, a Singapore start-up blog.

English start-ups are also beginning to take notice. In April, English law firm Taylor Vinters, which works with tech start-ups, brought in a group interested in expanding to Asia.

Smaller VCs like Silicon Valley-based Fenox Venture Capital and legendary start-up incubator 500 Start-ups have opened offices here to invest in South-east Asian companies.

Executives from Japanese VCs have stepped up their activities this year. Global Brain sponsored JFDI and Echelon events last week.

Earlier this year, B Dash Ventures invested in tech blog e27.

The Tokyo Stock Exchange also supported the Echelon conference. Mr Yasuyuki Konuma, Tokyo Stock Exchange Inc's executive officer for new listings, was here last week to scout for new start-ups to list there.

Rejuvenate SMEs

But some will ask: Why bother to nurture the start-up sector in the first place? After all, they are not known to create many jobs. One entrepreneur and two programmers can bootstrap a software outfit. A lone technopreneur working with a pool of volunteers or part-timers can start a blog.

The 2012 survey of the interactive digital media sector found that in 2011, it created 4,500 jobs and contributed $647 million of value-add between 2008 and 2011, said research consultancy Deloitte which undertook the survey on behalf of the Media Development Authority.

Start-ups, however, contributed only a small portion of this: 20 per cent of new companies, 3 per cent of value-add and 6 per cent or 270 new jobs.

The greatest value of start-ups, however, is not in the direct number of jobs created.

Mr Teo Ser Luck, chairman of the Action Community for Entrepreneurs (ACE), says start-ups rejuvenate the small and medium-sized enterprises sector.

They replace the older ones which become larger companies. They also solve new problems and create new jobs.

"We can't do without them. They are like human cells, needed to replace older ones in order to fight or compete in new markets," he told The Straits Times.

So if start-ups have that booster effect on the economy, what is needed to help them grow?

First, funding of $2 million and above, or Series A, B and above funding.

There has been a shortfall in this area for years. Companies with good ideas can get a few hundred thousand dollars to fund their ideas.

But they face the "valley of death" when they are ready to commercialise their products and services - but lack the millions to do so.

With no funding, they would plunge into the valley and die, said Mr Chua Kee Lock, chief executive officer of Vertex Venture Management.

Large venture capital firms like Sequoia and Walden focus not on Singapore and South-east Asia, but on India and China where markets are huge.

Among the local VCs, Vertex and iGlobe Partners are among a handful with sizeable funds to do this.

The good news is that other VC firms have cottoned on to this gap and are now entering the market.

Two of them are Amasia Associates and Fenox Venture Capital.

Mr Teo, who is reviewing ACE activities, has said that start-ups may need help beyond year one.

ACE can consider offering assistance in years two, three and four, via Series A funding and other programmes.

The second ingredient for growth: talent. This may prove to be a bigger challenge.

Start-ups have to compete with the Government, banks and government-linked companies for limited engineering talent, even as the immigration flow tightens.

Promising start-ups facing a labour crunch may have to open offices in neighbouring cities where it would be cheaper to hire the talent they need.

Whatever challenges exist, the fact is that Singapore has come a long way in building up a start-up ecosystem.

Start-Up Genome, which curates start-up activity in major cities, last year placed Singapore 17th out of the top 20 start-up ecosystems in the world.

Silicon Valley is in pole position while the other Asian city that made the list is Bangalore, which came in at No. 19.

The report said Singapore has the potential to become the central start-up ecosystem of Asia, knitting together the huge markets of China, India, Indonesia and Malaysia.

This is starting to come true.

Start-ups create innovation in the economy and provide greater opportunities for jobs.

They help build the knowledge economy Singapore needs to better compete globally.

The fruits of Singapore's persistent efforts to build the start-up sector are just ripening. In time, the harvest will be richer.

chngkeg@sph.com.sg

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