Frontier SG Tech: What’s Next?
This story is brought to you by Sean Ang, Pierrick Bouffaron, and Antonio Castro Neto. AM2 is a Singapore-based venture studio that creates and strengthens science-startup projects in the advanced materials and advanced manufacturing fields. Join an incredible community building the future 🔥🤖
The Singaporean tech media regularly echo that 30+ unicorns are nowadays headquartered locally. Many conclude hastily that the Singaporean startup ecosystem contributed to their birth and growth, nurturing these tech champions. The reality is more nuanced. One can barely count the unicorns that started operations in the Little Red Dot during early-stage rounds. Instead, most moved from overseas at a later stage, attracted by the appeal of a business-friendly Singapore.
What incentives attracted them to land here? Is it really to leverage the startup ecosystem? We doubt so. The main drivers can be attributed to Singapore’s reputation at large, including modern infrastructure, a transparent and efficient legal system, an educated talent pool, and overall corporate tax incentives. Leveraging those strengths to expand into SEA, tens of thousands of businesses have made Singapore their home over the last decade. This herd of SEA unicorns is no different.
It is timely to decouple the startup ecosystem from Singapore’s top regional business reputation and determine whether it can genuinely nurture early-stage startups at scale. But there is more. When it comes to deep technologies and science-driven ventures, supporting the emergence of future unicorns is a whole new ballgame for the country.
Let’s briefly unpack what we believe are the 3 key differentiators and the 3 critical challenges of the local frontier tech scene, followed by our 3 recommendations to grow collectively. With a distinctive mixture of scientific excellence and go-to-market constraints inherent to Singapore’s size, planning, and entrepreneurial culture, the local frontier tech playbook is still to be written.
1. Three key differentiators
Singapore’s recipe for frontier tech success has been an unrivaled combination of planning, speed, and government-supported incentives and innovation programs. These vital ingredients have been the catalyst for a dynamic ecosystem praised today in the rest of the world. In general tech, the number of startups has increased tremendously, quintupling between 2014 to 2023. Today, Singapore hosts over 500 investors and 200 accelerators and incubators. This powerhouse has resulted in a median Series A funding value far exceeding the global average.
A stellar international reputation
Singapore has been stealing the international spotlight regarding innovation and startup value creation for over a decade. Singapore’s goodwill regarding technology development and IP is a significant seller for companies, global talents, and investors. The Little Red Dot is a champion of the rankings. However, owing to talent, openness, and sustainability limitations, Singapore slipped from #1 in 2020 to #4 in the IMD World Competitiveness Yearbook 2023 (still in the top 5, kudos!).
A world-class R&D financing scheme
At the cornerstone of Singapore’s development in a knowledge-based, innovation-driven economy and society, the country sets a well-articulated national direction for R&D, funds strategic initiatives, and nurtures top research talent. A rich and diverse research ecosystem has been built up in a matter of 3 decades, including the research institutes of A*STAR, which focus on mission-oriented research for economic impact; research-intensive universities that concentrate on academic research to develop a base of fundamental knowledge; and hospitals that focus on translational and clinical research, as well as corporate labs. This ecosystem has attracted thousands of leading scientists over the years.
Innovation cycles and sandboxes
The rapid growth of innovation has forced governments worldwide to adapt and reconsider their economic policies and regulatory frameworks. Singapore stands out globally for its capacity to quickly assert and sprint-test new models. Mixing local and international methodologies, efficient public policy planning, and regulatory sandboxes to encourage businesses to adapt to technological developments and innovations quickly, the Little Red Dot is in a permanent state of evolution, adaptation, and growth. This led to many policies aiming to support the emergence, for example, of incubators, accelerators, startup studios, and frontier tech VCs.
2. Three critical challenges
Despite those successes, limits to talent, market access, and rising inflation have proved to be the cause of some stagnation, plateaus, and even closures of high-potential frontier-tech companies with high-value ideas.
Rising inflation and OPEX
Founders are aware of the somehow excessive cost of doing business in Singapore. This is a significant pain for early-stage startups, for which cash is king. Since 2022, the cost pressure has intensified. Anchored locally by necessity — you need Singapore-based labs, scientists, and IP to build a hardware product — they cannot morph as quickly as their general consumer tech counterparts into a cross-border organization to reduce the burden. Many frontier tech entrepreneurs naturally slow down their developments — thus losing competitiveness — or leave the country.
Limits to locally-based talents
Science founders still struggle to hire quickly and efficiently in Singapore due to the limited local talent population. The alternative of hiring foreign talent is equally bumpy due to tedious working visa application procedures — including skyrocketing minimum base salaries for foreigners— and the rising inflation that makes the Little Red Dot less attractive. Consequently, science founders tend to postpone their growth plans, especially with a slugging economy and a frozen private-equity market.
Foreign market access
The ability of a Singapore-based startup to break into a foreign market is rarely determined by the technology stack or their funds but rather by their ability to overcome cultural barriers. International collaboration and expansion bring a slew of hurdles to overcome, such as new regulations, unique social and business dynamics, and language. Science founders spend considerable time grappling with nuances of foreign business relations and market dynamics. In Singapore, there are a couple of cross-border programs, such as GIA. However, there remains a gap in generating outcomes that lead to tangible go-to-market development for startups.
3. Three recommendations from the trenches
To move to its next stage of maturity, the Singaporean frontier tech ecosystem is to leverage local ingredients of success and embrace a selective, collective approach to venture building.
A greater pooling of R&D&I capabilities
More research and innovation pooling initiatives could be a response to create international research excellence and Singapore-based companies’ relevance by ‘pooling’ specific areas of R&D that are seen to be of strategic importance to the country. A perceptible competition and segmentation between the local research powerhouses, from NTU and NUS to A*STAR, regularly cause friction in the local frontier tech ecosystem. Incentives to the leadership and staff within those institutions to facilitate access to laboratories, scientists, budgets, IP management, etc., would improve the number, quality, and maturation of the Singaporean technology stacks. Look at what the UK has orchestrated in here and here.
Open knowledge sharing
Singapore’s work culture is unique and deeply influenced by its historical, socio-cultural, and economic factors. Sharing expert know-how, the learnings of failed startup attempts, and the complexities of entrepreneurs’ journeys publicly and for free are still too rare in the ecosystem. Standardized entrepreneurial knowledge from the Bay Area is widespread on social media. But very few are willing or dare to share what made them seasoned entrepreneurs in Singapore. It is a pity. When people share their best practices, it brings a whole host of benefits that make the ecosystem players more efficient. This is particularly true for frontier tech.
Empower frontier tech investors and operations
The commercialization of frontier tech is a high-risk venture that requires massive investments. Unlike general tech, the associated long gestation period means returns can be slow to materialize. Singapore has one of the most advanced startup ecosystems in the region, but frontier tech investments are still few and far between. There is a noticeable lack of experienced people with industry and supply chain know-how who can commercialize the technology and frontier tech investors with the capacity to embrace the associated go-to-market. The city-state needs to build and attract over the coming decade a sophisticated frontier tech community.
With a unique economic development model — an open economy framework combined with a decisive state intervention — Singapore has demonstrated remarkable economic success. This development model needs to evolve in the years to come as the Little Red Dot aims to continue to prosper. With its highly developed costs, Singapore now needs to compete close to the frontier of the global knowledge economy, as opposed to the earlier, more straightforward task of technological catch-up. Economic growth and innovations in the global marketplace will increasingly come from entrepreneurial firms — including frontier tech ones — more than incumbent firms. Our collective capacity to support them locally will make the whole difference.
