Where Should Investors Look To Find Winners in Singapore Startups?
Israel's experience provides the answers.
When I was a teenager, one of the pioneers of Singapore’s leadership told me that the Singapore government really isn’t that original. They’re risk averse and conservative. Most of the time Singapore is a second mover and a follower.
We wait for others to take the first mover risk when it comes to new technologies and ideas. We study the path others have taken and see what it leads to. And sometimes we end up with better results than the first mover…
The same is true for our startup ecosystem. What we have done, in terms of policies and steps taken, is quite close to Israel.
In the early days of developing our startup ecosystem, Singapore copied the Israeli government’s Yozma Initiative in the 1990’s – by offering to put money directly into the funds set up by VC’s who were willing to come here. Today, just like the Israelis, Singapore’s government continues to play a leadership and catalyst role by co-investing in startups through our sovereign funds and ministerial agencies.
However, since Singapore started their innovation and entrepreneurship policies about 10-15 years later than Israel, the results should lag as well. So to figure out the future of Singapore startups and where success might lie, the Israeli experience should be fairly instructive.
B2B companies and corporate buyouts
Singapore has always saw similarities with Israel and sought to learn from them. In fact, our initial batch of soldiers post-independence from the British (1965) was trained by the Israeli army.
Like Israel, we are a small, artificial nation – carved out of historical circumstances – without natural resources. So to survive, we needed to be smart, tactical, rely on a well-educated workforce and protect ourselves with a conscript army made up of our own citizens. Therefore it made sense to learn from them.
In 2022, Israel led the world in terms of the number of startups per capita. Singapore, on the other hand, became the country with the highest amount of VC funding per capita in 2023, almost three times more than 2nd place (U.S.) and 3rd place (Israel).
But this is on a per capita basis.
Being such small countries, it is unlikely Israel or Singapore will ever top the list in terms of the raw number of startups and total value of VC funds within the country, compared to large countries like the U.S., China and India.
This is also the reason why the average man on the street has only ever heard of Google, Facebook and Alibaba, but not any Israeli or Singapore startup companies.
Most of the really good Israeli startups over the past two decades were bought out by big corporations before they became household names. For example, Mellanox by NVIDIA in 2019 and Waze by Google in 2013.
Ultimately starting a company in a small country has huge disadvantages. You have a limited domestic market, especially for B2C companies. This means that to grow big and grow fast, you have to navigate foreign markets very early on, unlike companies that started off in countries like the U.S., China or India. Compared to companies who can feed off a big domestic market, the challenges to grow are greater and the company’s foundations, weaker.
So today in Singapore you see the local government running multiple schemes to encourage deep tech and piloting innovations that can meet the needs of regional countries and MNCs.
To find startups that will benefit from these schemes and the ones who are most likely to attract a corporate buyout eventually, investors should look at startups from initiatives such as the Singapore Deep-Tech Alliance, Open Innovation Platform, Sustainability Open Innovation Challenge and the Capitaland Sustainability X Challenge.
Startups that are selected for these initiatives receive not just money but also partnerships with big companies who are already in need of the solutions they provide. This ensures product-market fit and a ready customer for the startups.
And because these partner companies are often multinationals, the demand for these solutions is often global in nature and highly scalable.
Elite military geeks
Israel’s Unit 8200 is well known in the startup world. In fact, Crunchbase has a special page tracking founders who are alumni of this elite and secretive military intelligence unit.
Unit 8200 takes in the best and brightest of each cohort of youths that are conscripted into the Israeli army for mandatory service. These talents are often scouted years before from schools, and already prepped and tested by the time they are drafted.
You can read more about the unit and its history of pumping out successful startup founders in this article “Israel's Unit 8200, a Conveyor Belt of High-Tech Startups”. A lot of it boils down to its startup-like culture.
…the unit offers a “non-military-like” environment, where officers are expected to swim in difficult waters early on and face challenges head-on in an innovative way.
“There’s an entrepreneurial spirit and people are given a free hand to tackle issues and ideas.”
“What Singapore can learn from Israel’s cyber security playbook”, ComputerWeekly.com
In 2017, the Singapore government (whose army also imposes mandatory military service for all male citizens), decided to copy Israel’s Unit 8200 and started a cybersecurity unit within its army.
Singapore’s mandatory military service lasts two years. Most youths will be drafted prior to university. So given that the program started in August 2017, and that a college degree typically lasts 3-4 years, the first batch of conscripts who served in the unit would have graduated from university in 2022-23.
Whether the Singapore alumni of its elite cybersecurity unit will go on to have entrepreneurial dreams like their Israeli counterpart remains to be seen.
But given that being a startup founder is so popular among Singapore graduates these days, plus the intense government propaganda and abundant funding going into the local startup ecosystem, I would bet my money that many would give it a go.
So in the fields of A.I., big data, cybersecurity and internet related infrastructure, it would be interesting to see if Singapore’s cybersecurity unit can repeat the success of Unit 8200 in churning out high potential founders.