When Singapore gained independence in 1965, its per capita GDP was 516 US dollars and it had no natural resources whatsoever. The numbers were definitely more positive in 2019: Although Singapore with a mere 0.2 percent of the land mass of Germany is the second smallest country in Asia, it recorded a per capita GDP of 58,830 US dollars. For comparison, the per capita GDP in Germany was 47,628 US dollars.
Germany and Singapore have maintained close relations for a very long time. Singapore is Germany’s main export trade partner in the Association of Southeast Asian Nations, ASEAN. Germany, in turn, is Singapore’s main trade partner in the European Union. Singapore’s status in the EU is so significant that it was the first ASEAN country to establish a free trade agreement with the EU, the EUSFTA. In short: The city-state at the heart of South East Asia is so influential that startups can’t afford to ignore it in their global expansion plans. Those who decide to expand to Singapore will be rewarded for their courage: An entrepreneurial environment with a business culture that Europeans easily understand makes it possible for companies, including startups, to grow quickly in the highly tech-oriented South East Asian region.
The ultimate full-service ecosystem makes startup hearts beat faster
As an entrepreneur and global citizen, I’ve (co)founded eight startups, lived in Europe and the US, and for more than 25 years, Asia has been my home of choice. Of all the Asian countries I’ve experienced, Singapore clearly stands out: With its high standard of living, extremely business friendly environment, efficient way of doing business and stable, supportive government, the island country provides a straightforward and practically perfect environment for innovation and entrepreneurship and gets startup hearts beating faster.
My personal assessment is also confirmed by official figures. For more than ten years, the “little red dot,” as Singapore is often called, has been classified by the World Bank as one of the three countries in the world where it’s easiest to do business. The IMD World Competitiveness Ranking 2020 named Singapore the most competitive economy in the world for the second time in a row. Founding a company takes less than one day and most matters can be conveniently completed online in English. The same process in Germany would take roughly two to three months.
This business-friendly and secure environment combined with a large and highly skilled talent pool also attracts tech giants like Google, Facebook and Twitter. That’s just one of the reasons why 80 of the 100 leading global tech companies have their Asian headquarters in Singapore. There are also 1,800 German companies located in the country, and in 2002, the Technical University of Munich (TUM) was the first German university to open an overseas campus in Singapore. Singapore continues to attract entrepreneurship, even in the middle of the COVID-19 pandemic. For example, companies such as Tencent, Zoom and Snap continued to invest in Singapore in 2020 and are scaling up their activities.
An active startup scene
The startup scene is active and lively. More than 3,800 tech startups are located in Singapore, including six of the twelve South East Asian unicorns: Grab, Sea Group, Lazada, Razer, Trax and Bigo. The reason for this concentration is the easy access to high-quality funding options. According to Startup Genome, Singapore is one of the world’s leading ecosystems in financing. More than 150 local and global accelerators and incubators are located in the country, which highlights how open Singapore is to startups.
Singapore’s government offers many different support programs for startups. At a very early stage of the COVID-19 pandemic, the country quickly provided additional help for the startup community. A supplementary budget from the government aims to help founders prepare for a recession while continuing to build and expand innovative companies. The measures include elements such as the improved “Startup SG Founder” program, which aims to motivate more native citizens to go into business.
To effectively promote innovation, the government makes it possible for companies to test products and concepts in a safe environment with a “sandbox approach.” Such an offer is available, for example, for testing innovative finance products and services. Companies can test their concepts in the “Fintech Regulatory Sandbox” of the local monetary authority in a secure, live environment for a limited time, and are safeguarded from entrepreneurial failure.
Singapore also welcomes international startups and makes it easy for founders from abroad to become part of their dynamic ecosystem. Foreign entrepreneurs who intend to start a company can apply for a special EntrePass visa, for example, to found a new company and run it for a year. The EntrePass can be renewed, provided that specific criteria are met, such as proof of business activities, at least 30 percent shareholding of the company and a set number of full-time employees.
Singapore, the gateway to Asia
Those who have never done business in Asia should start with Singapore as a kind of “Asia light.” Singapore is a cosmopolitan city with a business culture that Europeans quickly understand, is strategically located and can be reached easily thanks to its modern international airports. Its nearly 6 million residents represent a dynamic combination of different Asian cultures. Even though the market isn’t big, it still is the ideal starting point for expanding to further markets. With Singapore as their hub, startups gain access to the 650 million consumers throughout South East Asia who are young, digitally savvy and open to new technologies. Many countries in the region are also emerging markets that offer startups the opportunity to address concrete, existing problems with new and innovative solutions. This makes Singapore an ideal springboard for the region and the world, as it has 25 bilateral and regional free trade agreements with countries such as Australia, China, India, Japan, Korea, New Zealand and Sri Lanka.
The pandemic has particularly accelerated the trend to digitization in this region as well. By the end of 2020, there will be 310 million digital consumers in South East Asia – a number that initial estimations had forecast for 2025. Logistics and transportation, eCommerce and fintech form the backbone of the digital economy of South East Asia. These three key industries received the most funding in the first eight months of 2020. Looking ahead to 2021 and beyond, other rapidly growing industries have the potential to make a contribution to solving challenges in the region: agritech, healthtech, edtech, business solutions/enterprisetech and the production and sale of digital content.
Beyond South East Asia, the rise of Asia has become even more apparent this year. 30 percent of the best startup ecosystems are located in the region, compared with just 20 percent in 2012. From the eleven emerging ecosystems that made it onto the Startup Genome list, six are in the Asia-Pacific region.
For all these reasons, startups are well advised to choose Singapore as their pilot market and hub for expanding to Asia.
3 tips for entering the market in Singapore
An estimated 8,000 Germans live in Singapore. Anyone who would like to join them as a founder has several options for easily and quickly entering the market. Investment promotion agencies in Germany, such as Germany Trade & Invest or the Singapore Business Forum, and in Singapore, the Economic Development Board, AHK Singapur or Enterprise Singapore, ensure active communication in both directions. Moreover, there are three excellent programs for easy market entry:
- The free German Accelerator program helps German startups expand to South East Asia through Singapore. The program is funded by the German Federal Ministry for Economic Affairs and Energy and has already assisted 40 German startups in defining and planning their market entry strategy for South East Asia.
- Publicly advertised National Innovation Challenges give startups the opportunity to work directly with companies to solve concrete problems. Every challenge offers participants the opportunity to receive up to 2 million SGD (1.2 million EUR) in funding to develop and introduce the appropriate technologies.
- Singapore offers a multitude of events and opportunities for startups to showcase and make a name for themselves, such as at the Singapore x Europe Innovation Partnership Forum. The needs-based competition brings more than 20 leading Asian multinational companies, investors and co-innovation partners together to help European startups collaborate with potential customers in Singapore and Asia.
5 tips on business culture in Singapore
Singapore is multicultural and open-minded. Europeans quickly get their bearings. But a few tips can make things easier in the beginning:
- Punctuality is a virtue that is of great importance in Singapore.
- Well-kept, high-quality clothing and a confident demeanor help in daily business.
- Physical contact should be avoided. A light handshake suffices as a greeting.
- There are many topics for small talk. You can basically talk about anything, but politics should be excluded. Praising the outstanding infrastructure and excellent cuisine are a good way to start a conversation. Don’t be surprised, especially right at the beginning of a conversation, if personal questions are asked.
- Hierarchies and personal recommendations play an important role.