Singapore: In the Making of “Unicorns”

The Southeast Asian economy is famously known as one of the “Asian Dragons” for its ability to move up the production chain and modernize the nation in a lightning rate. Now, one of Singapore’s goals is to support the spirit of entrepreneurship that might carry the nation into the next stage of global economy.

The 2018 Index of Economic Freedom, a comprehensive analysis into the openness of the market and its correlation with progress, ranks Singapore second in the world, which tells a good story about the nation’s economic environment. However, the very conditions that make this market freedom possible also pose some prospective hindrances to a robust startup culture. In short, Singapore’s development is owed to the continual involvement of the government in directing investment within the country. Temasek Holdings, a government-owned investment fund, has assets in all major sections of the economy. Its subsidiaries range from Singapore Airlines to SingTel (the nation’s main telecommunication company) to asset management firms. While this strategy has indeed been effective in propelling Singapore into an industrialized state, it has monopolized many resources on an island with the size and population of New York City. However, this might not actually be the most pressing challenge to Singapore’s startup environment. With transparent legal framework and stable exchange rates, Singapore is a haven for foreign investment, attracting regional and global firms to establish their footings. This leaves little room for startups, which do not have much of the flexibility they otherwise might receive in India or China.

However, the numbers seem to disagree. Singapore’s Startup Ecosystem ranked 12th in the world in 2017, above all other Asian Dragons and any other Indian cities. And, not surprisingly, the Singaporean government can take some credit for this achievement. One of the highlights is Startup SG, an initiative to support entrepreneurs in two main ways. First, Startup SG provides the technical knowledge to set up a business. Second, and more importantly, the government directly brings foreign investment into these startups, as well as guiding them to the global market. While these techniques might not sound unique or revolutionary, the Singaporean government manages to capitalize on the compactness of the economy, which creates a high level of consistency in addressing these startups. It is through this proactivity of the government that the startup environment could turn both of their setbacks into clear advantages.

This does not mean, however, that the challenges facing Singapore end there. Everyone knows “unicorns” are rare occurrences, but Singapore is missing even the “gazelles” and “gorillas” (startup companies with substantial and sustainable profit growth) from its ecosystem. And this leads us to the crux of Singapore’s startup culture: attaining fiscal security for the company. Above all the concerns regarding investment and profits, the focal point of Singapore’s startup has rather been stability in its profit model. These startups, being backed heavily by government’s support, have little incentive to branch out to a business world already too crowded with competition. Thus, most of Singapore’s startups hold a unique function: to help streamline the general structure of the larger economy. For an already sophisticated economic environment, these startups serve as minute tools that ensure the market works in perfection. Once in a while, these tools became so intricate that it would become a masterpiece in itself, of which a ‘unicorn’ could be born.

So, where does this leave us? The startup culture and the glamour of ‘unicorns’ have been on the rise over the past decade, with companies that continue to change our lives everyday. Yet, these innovative enterprises are also the companies that will be hit first in an increasingly unpredictable and protectionist global economy. What can be taken away from the Singaporean perspective is that with enough government intervention, we can separate the startup world into its own sphere to complement the current system, a process that has helped Singapore to remain ever so competitive and prosperous.