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Ease foreign labor restrictions and support crowdfunding, entrepreneurs tell Singapore govt minister

Singapore is remaking its public policy towards entrepreneurship. To kickoff the process, it has begun a series of dialogue sessions with the startup community to gauge their concerns and brainstorm policy alternatives.

Spearheading this drive is the Entrepreneurship Review Committee, consisting mainly of prominent entrepreneurs and investors. Minister-of-State Teo Ser Luck, Chairman of the Action Community for Entrepreneurship (ACE), is also a committee member.

He was present at the first dialogue session held yesterday at Blk 71, the heart of Singapore’s tech startup scene. Discussions were dominated by the labor crunch issue and startup grants, with high rental costs and lack of access to expertise also brought up.

The discussions culminated in a series of presentations where participants nodded heads about what can be done by the government or the private sector.

Locals shunning startups, foreigners find it hard to join

Entrepreneurs at the invite-only session, predominantly Singaporeans, are facing difficulty attracting and retaining local tech development talent and employees in the services industry.

Generally, university graduates prefer working for multi-national corporations like Google, Facebook, or Microsoft, and Singapore’s low unemployement rate, at under two percent, would mean workers can afford to be picky.

While hiring foreign workers is the obvious way out, the recent tweaks in immigrant staff quotas by the government have made things difficult.

Last year, the allowable local-foreign employees ratio for mid-level workers earning at least USD 1,600 was reduced from 25 percent to 20 percent for all industries. Once a company exceeds that percentage of immigrant labor, it will not be allowed to bring in any more foreign workers.

To counter this, the government has launched a series of initiatives to boost employee training and productivity. The fact remains, however, that implementing smart work practices still require quality employees. Getting them up to speed takes time, and time is a commodity startups are short of.

Attendees at the session put forward a few suggestions:

1) Move away from a one-size-fits-all approach to foreign labor quotas.

Instead of reductions across the board, the government can consider loosening restrictions for industries that desperately need foreign talent. Foreign entrepreneurs applying for the EntrePass should have an easier time.

The government can consider different foreign worker quotas for MNCs and SMEs, such that startups with less ability to deal with bureaucracy won’t have to deal with it.

2) SMEs and startups should have better access to students and undergraduates.

Smaller companies should have the opportunity to pitch to students and engage them at the junior college level and below. Longer-term apprenticeship programs could be set up to give youngsters a chance to know the company and grow with it.

Read: Singapore’s ACE starts USD12.3M entrepreneurship education program for schools

Grants are attracting people who shouldn’t be entrepreneurs

The vibe in the room seems to be that the government’s generous startup grants, which can amount to the tens of thousands, needs to change.

While these grants enable anyone and everyone to give entrepreneurship a shot, attendees agreed that the focus should now be placed on nurturing individuals who are committed to creating a business, not those who would not start one without a handout.

Grant money runs out quickly after all, and a perpetual chase for free cash runs counter to the essence of entrepreneurship.

Essentially, the community needs to identify entrepreneurs with the potential to put Singapore on the world map. Exits, especially big ones, create a virtuous cycle that sustains the startup community.

Some ideas that were brought up were:

1) Expand on and improve the existing Productivity and Innovation Credit.

The scheme, which provides tax credits and outright cash for productivity improvements, has been praised by entrepreneurs in the room for tying a reward loop with business actions that bring the company further.

However, one gripe was that the PIC application process takes too long. An entrepreneur shared that when expanding overseas, she’d have to wait a few months before receiving the cash that was promised to her by the credit scheme.

As a result, she needed to cough up cash upfront to fund expansion costs, tightening her company’s cashflow.

2) Peg grants with customer acquisition and product validation.

Startups could receive cash upon attaining their first customers. MNCs and even government agencies could be subsidized for trying out products from SMEs. Beyond seeing large companies as competitors for talent, they could become allies, business partners, end-users, mentors, and even acquirers.

3) Rework the government’s open tender process.

Startups could be given a leg up for contracts below a certain amount.

This mitigates the public service’s concern about the long-term sustainability of the enterprise, and could even lower procurement costs since large enterprises are likely to outsource their work to small companies anyway.

4) Provide a dollar-for-dollar crowdfunding scheme

With the emergence of crowdfunding as a viable fundraising route, the government could create policies that facilitate crowdfunding, even provide dollar-for-dollar co-funding schemes to augment crowdfunding campaigns.

Read: Singapore’s Pirate3D raises USD 100k in 10 minutes, USD 1.43M in 1 month

5) De-emphasize “hot” sectors, focus on businesses that work

One attendee was puzzled by how the government tends to announce schemes that apply only for certain sectors. Public servants, however, tend to be poor predictors of the next rising industry, let alone investment decisions.

Instead of pegging money to sectors, the government should be industry-agnostic in how it distributes grants, focusing instead on the viability and innovativeness of the company instead.

Networking, internationalization, and high rental costs

Many other ideas and concerns were thrown into the pot.

High rental costs have been a killer of small enterprises. Mall rentals are driven up by Singapore REITS since they need to pay dividends to investors. This speculation has been fueling rental price increases, and tenants have become its unwilling funders.

Some entrepreneurs brought up a lack of expertise and networks when venturing abroad. One idea to address this is for the government or the community to pool together consultants that startups can tap into at subsidized rates.

Initiatives that enable entrepreneurs to “hunt as a pack” and source deals together abroad was also tabled.

Finally, and this is something close to the heart of Singaporean males, SME employees should be given flexibility when it comes to their annual defense conscription (In-Camp Training) scheduling.

Since every employee matters at a startup, losing an able-bodied male for just a few weeks could be highly disruptive.

The Entrepreneurship Review Committee’s next dialogue session will be targeted at angel investors and venture capitalists. Stay tuned for announcements. Send your feedback and suggestions to enrc [at] ace.org.sg.


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