Accelerator avalanche and Singapore’s startup hub issue

By Gabey Goh April 30, 2015

Accelerator model still best way for tech startups to mature in shortest possible time
They still need to address differentiation, and Singapore’s cost of living

Accelerator avalanche and Singapore’s startup hub issue

PUBLIC sector representatives tasked with growing Singapore’s startup ecosystem welcomed the debut of Telstra’s muru-D accelerator, while acknowledging that issues remain in trying to establish the city-state as the region’s startup hub.

The head of Infocomm Investments Pte Ltd (IIPL) Dr Alex Lin (pic above) called the accelerator’s debut a “positive addition” to the country’s close-knit community of entrepreneurs, investors, accelerators and corporate partners.

“We strongly believe the accelerator model is the best way to help high-impact tech startups mature in the shortest possible time,” he said in a statement released in conjunction with muru-D’s launch in the island-republic.

“It is strategic that Telstra is investing valuable corporate resources to support muru-D’s expansion, leveraging business and innovation opportunities throughout Singapore, as the country continues on its journey to become a truly Smart Nation,” he added.

IIPL is the investment arm and a wholly-owned subsidiary of the Infocomm Development Authority of Singapore (IDA).

READ ALSO: Telstra’s muru-D accelerator makes Singapore debut

Meanwhile the director of Infocomms & Media at the Singapore Economic Development Board (EDB), Kiren Kumar, said that Telstra’s strong and reputable brand name, together with Singapore as the digital innovation capital of Asia, would draw technology entrepreneurs and startups from across the region.

“We are pleased that muru-D has chosen Singapore to house its second accelerator. We look forward to continuing to work closely with Telstra to build even more digital businesses across Singapore, while supporting the on-going growth of Telstra’s business throughout Asia,” he said.

IDA executive deputy chairman Steve Leonard, who was present at the launch, said that “As we build Singapore into a Smart Nation, corporate support, innovation and acceleration will be critical.

“We have a lot of things happening with the investment community and the universities, but one of the pieces we’re so thankful for is corporate relationships.

“New ideas, with coaching and mentorship coming from the corporate sector, are really what makes an ecosystem stronger,” he said in his opening remarks.

Accelerator model speeding up

According to Hong Kong's Asian Venture Capital Journal, in 2013, there was US$24.1 billion in venture money available for Asia, but only US$1.7 billion was invested in Singapore – which still accounted for 90% of the total tech investment in the Asean region.

With many international investors establishing a presence in the island nation, offering a ready pool of funding, the next step was to bolster the pipeline of investment-ready startups and increase deal flows.

Via an IIPL investment into the Joyful Frog Digital Incubator (JFDI.Asia) founded by Hugh Mason and Wong Meng Weng in 2010, it was determined that accelerators were a good model for growing startups.

This realisation saw agencies such as IIPL take an aggressive approach towards attracting accelerator programmes to set up shop in Singapore.

In a prior interview with Digital News Asia (DNA), Lin said: “Our instrument of choice is investments, and we invest in accelerators as the tool of mechanism to build the startups that would populate the ecosystem.”

Since then, the market has seen a significant influx of accelerators now calling Singapore home, many with a mission to attract entrepreneurs from across South-East Asia.

Accelerator avalanche and Singapore’s startup hub issue Speaking to DNA, Arnaud Bonzom (pic), an angel investor and author of a recent report highlighting venture capital trends in Asia, said that about seven new accelerators have launched in the last nine months.

“We are beginning to see two very distinct trends in the types of accelerators being launched, the first being corporate accelerators such as Telstra’s muru-D, SPH Plug & Play and Unilever Foundry.

“The second is more vertical-focused accelerators like Startupbootcamp FinTech and InspirAsia – with more on the way,” he said.

Venture capitalists DNA spoke to also welcomed the influx of accelerators, citing the role they play in an ecosystem as a platform and connector.

However, as a source of successful investments, accelerators remain a nascent space in the region compared with such hubs in the United States or Europe.

“With so many coming up, it will really depend on each one’s differentiation. You really don’t need three or four generalist programmes, while an increase in specialist ones like in fintech (financial services technology) or adtech (advertising technology) would be okay,” said one investor who declined to be named for this article.

One drawback to Demo Days, a standard component in any accelerator programme, is the tendency for pitches to be “too polished.”

“There was one startup I really liked during a Demo Day, but I found out that it had pivoted just days before the event, and what we saw were essentially screenshots.

“They were honest about it but it makes it a little harder. You cannot see the whole picture and evaluate a startup this way, so one should take it as a teaser and realise that the meat to the bone will come after,” said the investor.

Bonzom agreed with the sentiment that it’s still early days for the accelerator landscape, and time is needed to know which programme is doing well.

“It will take up to five to seven years for the new accelerator to establish a solid track record. It’s not like a startup, which can succeed very quickly,” he said.

Skyrocketing costs

With more accelerators, and consequently, a larger number of entrepreneurs from across the region expected to land in Singapore, there is just one more thing that needs to be tackled.

The fact remains that the Lion City can be an expensive city to live in compared with others in South-East Asia, and the higher cost of living might be a barrier to startups coming from countries such as Vietnam, Thailand, Indonesia and Malaysia.

Asked about what plans it had for supporting or assisting overseas startups it accepts into its programme when it comes to housing, muru-D entrepreneur-in-residence Joseph Ziegler acknowledged that it would be a potential challenge.

“A large part of the equation when it comes to the cost of living in Singapore is definitely housing – if you take that out with us providing office space, the numbers become quite reasonable.

“This is certainly a critical part of the story and with Singapore continuing with its mission to be the regional startup hub, it’s going to have to address this.

“In fact, every programme active in Singapore needs that,” he said.

Accelerator avalanche and Singapore’s startup hub issue Ziegler said that the team will be looking into options for cost-effective housing for its participating startups coming in from other economies, and is also engaging with the IDA to explore and discuss longer-term solutions.

Asked about this, IDA’s Leonard (pic) told DNA that various stakeholders in the ecosystem have raised the issue.

“We get the fact that housing is not a small expense, and understand that we need to be working on this.

“We’re talking to different people about possible solutions. I’ve spoken to both public and private sector leaders about what some ideas might include, but we’re not through that process yet, so I don’t have an answer or specifics right now.

“The good news is that we understand it, and we’re working with people who are equally motivated to get something done about this,” he added.