Startup Hubs Around the World: Singapore
Asia draws visitors from around the world. In today’s thriving marketplace, the Asian sector has re-invented itself as a pivotal player in the race to the top of the start-up hub environment. Singapore is leading the way in their corner of the world as the number one Asian start-up city and is gaining an increasing foothold into the market of biomedical science. Relatively simple start-up procedures, a thriving incubator community and friendly governmental policies all converge into what business experts have begun to call Asia’s Silicon Valley.
What sets the comparatively small Singapore apart from its larger counterparts? According to leaders in the Singapore business community, Singapore has no real desire to earn the Silicon Valley comparison. Silicon Valley is a unique environment that thrives because of the elements that make up the community. In Singapore, the idea of creating a place that will partner with companies and governments in a global outreach is the primary focus. Instead of trying to outwit the competition, they’d prefer to be a part of the larger efforts to improve the world. Indeed, if a company wants to establish themselves in the Asian marketplace, they will find it difficult to do without going through Singapore.
In this article about Singapore, we look at six essential elements of a potential start-up location that must be considered: 1) location, 2) tax incentives, 3) legal incentives, 4) availability of investors, 5) local resources and workforce, and 6) specialization.
While many people may be familiar with Singapore, few could pinpoint it on a world map. Mistakenly, many people assume that the city is a part of China. Located in Southeast Asia, Singapore is a sovereign city-state that made up of one main island (Singapore Island) and a collection of approximately 60 additional, smaller islands. Strategically positioned on the point of Malaysia, it sits perfectly situated between China, Indonesia, and India.
Within range of just a short plane ride, there are approximately 500 million people. It has been estimated that half of the world’s population is accessible from Singapore in less than six hours. For any company that wants to establish a presence in the Asian marketplace, Singapore is the gateway. The push for the wealthy, young (early 20’s) demographic of consumers is growing and in that corner of the world Singapore offers the easiest and most convenient way to reach this rising market.
The economy in Singapore is booming. As one of the world’s busiest ports, it has a trade dependent economy and has a large manufacturing sector. It boasts the largest collection of millionaires: there is a millionaire in one out of six households. With a population nearing 500,000, almost 40 percent of the residents are foreign transplants which brings a global perspective to the nation. In addition, the close proximity to other countries makes it easy for young entrepreneurs to make the move to the up and coming marketplace of Singapore.
The combination of the location and the diverse population creates an environment that is ripe for the entrepreneurial culture that has driven Singapore to become one of the world’s leading start-up hubs.
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2. TAX INCENTIVES
Extremely attractive tax rates for companies and start-ups in Singapore make this city-state one of the world’s friendliest countries to start a business. An easy to understand and business friendly graduated tax plan draws start-up companies from all over the world. For the first three years, companies with income of under $100,000 pay no taxes. After that, they pay 8.5% for income up to $300,000. Continuing after the third year, the company pays 8.5% tax on income up to $300,000 and a flat 17% for income larger than that.
In addition, Singapore is considered one of the most popular tax havens with a low tax rate for personal income, as well as tax exemptions for capital gains and foreign income. The Finance and Treasury Department of Singapore is working to leverage Singapore as a leading base for corporations who wish to implement growth strategies and target the Asian market. By offering corporate tax rates which are reduced on fees, interest and gains and dividends, the government is encouraging both entrepreneurial spirit and investment opportunities.
Through cash grants, start-up seed investors, equity investors and business incubators the investor has multiple opportunities to benefit from their investment into the start-up market. There are multiple tax incentives for both the start-up and the investor, adding to the premise that developing a start-up in Singapore is one of the easiest methods of job creation available in the market today.
3. LEGAL INCENTIVES
Singapore may be one of the world’s easiest countries to begin a start-up. Incorporating a business in Singapore is open to both foreigners and citizens, and is typically completed within several days. In addition, the costs of incorporation are low – foreigners can expect to pay no more than $800, a majority of the costs mainly due to the requirement of using an incorporation service. There are no residency visas required. In fact, residence in Singapore isn’t even a requirement. Should the entrepreneur wish to live in Singapore, there are Entrepreneur Passes and Employment Passes available to make that possible.
One of the few requirements for incorporating in Singapore is the necessity of a bank account in the country. Banking is equally as welcoming to start-ups – several banks don’t require a physical presence in Singapore to open an account, although the rates may be a bit higher.
Additionally attractive to the tech market is Singapore’s strong stance on IP rights protection. The strong framework to protect the rights of entrepreneurs who are doing business in Singapore has led to the country’s ranking as one of the best in the world. This safe environment is one of the leading reasons why over 30 biomedical science companies have made Singapore their home, and is why more tech companies are likely to be drawn to the Asian nation.
4. AVAILABILITY OF INVESTORS
High interest in the tech market of Singapore, combined with the immense wealth of the country has a large number of potential investors allocated within the country.
Joyful Frog Digital Incubator is one of the largest accelerators in Singapore, with a 60% success rate for investments in start-ups. Through their programs, start-ups are given intensive mentorship for the first 100 days of funding and they average $520,000 in funding raised per group. They are uniquely positioned to help propel Singapore into the future with a heavy focus on tech companies.
The Spring SEEDS (Startup Enterprise Development Scheme) program is a unique program funded in part by the government. Eligible new companies must have $40,000 in capital, along with a corporate investor of $400,000. The government of Singapore will then match that investment (up to $800,000) in exchange for shares in the new company.
The BANSEA (Business Angel Network Southeast Asia) organization is dedicated to introducing start-ups to angel groups. High investments of up to $1,000,000 are typical of the angel groups, and the investors of BANSEA have high expectations for their returns on investments. Within eight years, the BANSEA group expects to have recouped at least ten times their initial investment.
Strong governmental support and interest in the start-up markets of Singapore help to generate not only funds but interest in the tech industry of the country. By encouraging others to invest, as well as by investing millions of dollars into the entrepreneur market, the government is leading by example and is setting the standard for innovation. Not content to wait for others to invest, the government is making entrepreneurship in Singapore extremely attractive and competitive – ensuring that they will remain a strong force in the business world.
5. AVAILABILITY OF LOCAL RESOURCES AND WORKFORCE
Drawn by the temperate climate, Singapore residents can be assured that almost every day will be like the one before, at least weather-wise. The weather remains hot and rainy year-round. There are no extreme temperatures, and the nation has one of the best air quality conditions in Asia. Typhoons, earthquakes and tsunamis are non–existent in Singapore, thanks to the country’s distance from fault lines in the earth.
Highly educated citizens make up the local workforce in Singapore, making it one of its most valuable resources. Consistently ranked among the top five nations in the world for math and science, the Singapore citizen has several higher education institutions to choose from that will continue to grow the available market. A continued push towards research, innovation and design needs to be instituted to encourage collaboration between organizations. Expanding the polytechnics fields will require more focus on design, experimenting and building.
There are several labs already in place that are geared towards encouraging entrepreneurs to work together to generate start-ups. One lab boasts of several floors that are each geared towards different aspects of the tech market. Different elements of design are all brought together in one location, which will encourage the general public to use the tools available, as well as establish a central hub for innovative thinking and creative work. With graphic design, tech shops and a sandbox type environment where designers can create, test, play and replicate their technology ideas, the tech market in Singapore is brimming with potential.
In the last several years, Singapore has drawn start-ups from Australia, New Zealand, and India. The addition of foreign start-ups who move to the Asian city for the attractive start-up climate has generated additional interest in the tech industry of the country. While there has not been a ‘big exit’ of a company, recent acquisitions have indicated that one is just around the corner. The millions of dollars that have poured into the start-up ecosystem are helping to draw not only local entrepreneurs, but overseas investors.
Singapore is on track to build a pipeline of tech start-ups that have a global scale. With a strategic partnership between the IIPL (Infocomm Investments Pte Ltd) and JFDI (Joyful Frog Digital Incubator), Singapore is actively working to launch 500 tech industry start-ups in the next five years. This partnership has the potential to discover, introduce, fund and mentor start-ups in the highly competitive tech market with the express purpose of launching global companies that can solidify Singapore’s position as a leader in start-up hubs. By maximizing the power of the IIPL (the Infocomm Development Authority’s investment arm) with the established community of start-ups associated with the JFDI, the success rate of this venture may revolutionize the way that start-ups are created.
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Some of the innovative Singapore start-ups to keep an eye on
CreoPop. This highly futuristic company has designed a pen that draws in solids. Using light-sensitive ink that hardens when it comes in contact with UV rays, the pen will offer magnetic ink, electrically charged ink and color-changing ink that will adapt to temperature. Safe for children, this creative company could revolutionize arts and craft time.
Darma. Designed to give office workers a better seat, Darma is a seat cushion that is hard wired with sensors to regulate your posture and your comfort. With sensors that will notify you when you’ve been sitting for too long or if your posture is out of balance, the Darma seat cushion will help remind users to meditate and relax – even while working.
GoFresh. Working to perfect the home delivery grocery service, GoFresh is developing their company to provide healthy, fresh products such as produce and meat products to the busy customer who wants to shop from home. With guaranteed freshness, overnight delivery and reminder calls, they are working to become a heavyweight in the grocery industry. Currently focused primarily on Singapore markets, they are looking to offer global services in the next few years.
ClearbridgeBiomedics. One of the first non-marker biomedic marker systems is making headlines by being the first commercially available processes to isolate as well as retrieve cancer cells in a patient’s blood.
Collegify. An online platform designed to help students get into the college of their dreams, Collegify offers personalized, college readiness help through mentoring, test prep and application assistance to help students get into the top universities of the world.
With such a huge push towards tech industries, Singapore is positioning itself to be a powerhouse in the tech market. The two largest industries in Singapore’s start-up marketplace right now are biomedical science and technology – a trend that doesn’t seem to be slowing down.