Singapore has plenty of wealth managers. It needs wealth creators. Here's how it can foster entrepreneurship.
Singapore has produced an abundance of "wealth managers" and not enough "wealth creators."
In terms of supporting infrastructure, Singaporeans certainly are not facing the same challenges as Indonesians, for instance.
So lamented Ngiam Tong Dow, former permanent secretary of the Singapore Ministry of Finance and the prime minister's Office of the Government of Singapore. This is despite almost universal acclaim for the supportive business environment in Singapore. The World Bank has rated Singapore first out of 183 economies in its "ease of doing business" rankings and fourth for "starting a business" -- anyone can get a business going in just three days.
But who is benefiting from this? According to a 2010 Gallup survey, 16% of Singapore residents who are not already business owners reported that they have thought about starting a business, compared with 40% in Hong Kong and in 33% in Taiwan. The number of people who have actually acted on such pipedreams is no doubt much smaller. Unless Singapore gets much better at understanding what drives entrepreneurs and how to identify and nurture those precious few who exist, Singaporeans may continue to create the ideal capitalist society but see most of the returns to capital flow to others.
Since Singapore's Economic Review Committee made its suite of recommendations in 2003, the country's shortfall in establishing "an entrepreneurial nation willing to take risks to create fresh businesses" has not been for want of trying. In 2011, 320 million SGD was pledged toward funding small and medium enterprises (SMEs) under the Technology Innovation Program (TIP) over five years. And in the fourth quarter of 2011, SPRING Singapore, a government agency that works to help Singapore enterprises grow, granted 129.2 million SGD in SME loans, and the 2012 budget announcement included additional funding under the Productivity and Innovation Credit scheme.
Is funding properly targeted?
A plethora of toolkits and development courses is available for budding entrepreneurs at a very affordable cost. Gallup data from 2010 also show that 89% of Singapore residents believe that Singapore is a good place to live for entrepreneurs forming new businesses, and 76% of respondents trust that their property and assets would be safe if they started a business in Singapore.
In terms of supporting infrastructure, Singaporeans certainly are not facing the same challenges as Indonesians, for instance. According to the World Bank, it takes 45 days on average to start a business in Indonesia, but Gallup data show that 39% of Indonesians have thought about starting a business. It seems that further returns on government investment in building an entrepreneurial nation would have to be found beyond accessibility of funding and training.
Perhaps one area to investigate is whether the funding that is provided is correctly targeted. In recent years, the concept of entrepreneurship in Singapore has become more closely associated with advances in technology and innovation. "Cloud-based computing," "leveraging social networks," and "crowdsourcing" are examples of innovations seen as rich sources to mine for game-changing business concepts. Consequently, much of the funding available is contingent on technology innovation -- indeed this is the major criterion for receiving funding under the TIP. Recently, the Action Community for Entrepreneurship (ACE), a national effort to foster Singapore into a creative and entrepreneurial nation, has based its funding decision-making criteria "on a more ethereal concept: 'differentiation.'"
Spending on research and development to generate innovation and achieving successful market differentiation are important. However, these concepts are of little value to startups unless they can create something a customer wants. The crucial element that connects innovation, technology, and differentiated products or services at one end to a customer who is willing and able to pay for it at the other is the entrepreneur, a rare breed who is able to develop and execute a successful business model.
For example, tenCube was started in 2005 by four university graduates with a simple idea: Develop a software solution for cell phone security. This software allows you to lock your phone remotely, track use of the device, back up data through an online platform, and remotely wipe out all data in the phone. This may not sound innovative now, but in 2005, only 4% of mobile users had mobile Internet access in Singapore compared with 76% in April 2012. The founders' vision of the growth of mobile security was what led them to believe that their product would be adopted by the mass market in the near future. In 2010, tenCube was acquired by McAfee for a reported U.S. $10 million. No amount of business plan templates, "How to Start a Business" classes, or "best practice" pollination would likely replicate a similar success.
Stifling societal pressure
Encouraging students to experiment with their own ideas in school even at the risk of failure would be a step forward.
In our experience, another common refrain about the lack of entrepreneurial ambition in Singapore is its unforgiving education system and pressure to perform in a conventional way. Parents jostle to enroll their children into a myriad of child education classes from as early as when they are six months old. And throughout their childhood and adolescence, students are constantly benchmarked against one another in a race to get into the best schools and internships. When graduates enter the workforce, there is immense pressure to live the "Singapore Dream," which is represented by an evolving alphabet soup of acronyms and that in essence points toward acquiring more money and status.
This degree of societal pressure may be stifling for potential entrepreneurs because of its emphasis on conformity for academic excellence, or so the argument goes. However, there is another piece to the puzzle. Encouraging students to experiment with their own ideas in school even at the risk of failure would be a step forward, but identifying and supporting the few successful experiments that emerge is another. Celebrating those successes would encourage more attempts -- and over time, spark a virtuous cycle of entrepreneurial energy.
Creating a nurturing environment for startups is different from identifying and supporting talented entrepreneurs. Singapore has done a great job building infrastructure and funding for the former, but it is the latter where Singapore should now focus its efforts. Gallup research into the characteristics of entrepreneurs shows that they are self-confident and profit oriented, with a strong desire to build something. Steve Jobs was not an inventor at Apple; it was Steve Wozniak's forte. What Jobs could do was imagine products that people would pay premium prices for, and his genius was in marketing them. Entrepreneurs also are determined and optimistic; they set clear goals and are decisive.
In his book The Coming Jobs War, Gallup Chairman and CEO Jim Clifton used the example of Wayne Huizenga, who did not stop at building one Fortune 500 company. He founded three such companies, none of which involved cutting-edge technology but grew into multibillion-dollar empires. Huizenga grew Waste Management, Inc.; Blockbuster; and AutoNation into three behemoths in the American economy. He did not possess the much-coveted Ivy League education, but he had the innate ability to start and grow ventures.
Funding in Singapore is currently given upon fulfilling the criteria of technology innovation and differentiation. But perhaps it would be more prudent to divert some funding toward identifying individuals like Huizenga who have that extraordinary spark that characterizes entrepreneurs, regardless of their educational backgrounds or whether or not they have a "game-changing" idea.
Success begets success
Singapore's journey has been in the right direction. The rise in incorporation figures is a rough proxy for an increase in economic energy. And when we analyze Gallup data more closely, we find that young people in Singapore are more likely than their elders to have thought about starting a business, with those in the age range 25 to 34 nearly three times as likely (29%) to have thought about becoming an entrepreneur than the older generation (10%). That figure is closer to those in Thailand (33%) and Malaysia (39%), but still a far cry from more entrepreneurial nations such as the U.S. (68%), Sweden (64%), Australia (61%), and New Zealand (68%).
A multitude of complexities is at play when betting on entrepreneurship, but in many cases, success begets success at the national level. For the next stage of Singapore's journey toward becoming an "entrepreneurial nation," it seems that a wise bet would be to:
Gain a deeper understanding of entrepreneurs, especially Singaporean entrepreneurs.
Identify them early.
Support them with funding and the necessary infrastructure.
Get out of their way.
Hopefully in doing so, more of the wealth Singaporeans are so good at managing will also be created at home.
A version of this article originally appeared in The Business Times.