Singapore’s startup scene is overrated. But that’s the only way it can succeed

Here’s a dirty secret: Singapore is really good at getting people to drink its kool-aid. As a tourist destination, it’s great at trumpeting itself to the press. The local media has made an art out of proclaiming that Singapore is number one, or near the top, in everything.

It’s a top financial center. The most competitive economy with the lowest unemployment rate. The list goes on. The Straits Times even proclaimed Singapore the number one place in Southeast Asia for startups. Nevermind that Southeast Asia is a low bar.

But here’s the problem: people believe the Singapore hype too much. The more times you repeat a lie, the higher the tendency for you to believe it. Fortunately, that bubble has burst in recent weeks.

Two startups announced massive funding rounds. Neither are from Singapore. GrabTaxi, which closed a round reportedly worth US$65 million, hails from Malaysia. Indonesian ecommerce site Tokopedia topped that with a US$100 million announcement.

One prominent startup has downsized in Singapore. Thailand’s aCommerce pulled out its logistics operations from the country, citing online retailer disinterest in serving the Singapore market (case in point: Rocket Internet’s Lazada entered Singapore last in Southeast Asia).

These developments have the following effects:

• It puts Malaysia and Indonesia back on top of public consciousness as a startup destination, never mind that most of the largest public-listed internet companies in the region already come from Malaysia.
• Investors will start to take more notice of the region as a whole, and Singapore’s neighbors as a startup destination rather than Singapore itself. Think about it: of all the bigger ecommerce companies located in Singapore, a big name like Sequoia has chosen instead to head directly to Indonesia to fund Tokopedia first.

It’s the second effect that could have lasting impact on Singapore’s reputation as a startup hub. It exposes the country’s weaknesses:

• It’s a tiny market that’s at odds with the region. Asia’s growth story is occurring in places like Indonesia and Vietnam. Many Singapore-based entrepreneurs are not adaptable enough to thrive in these countries as they are culturally more in-tune with the West and other developed markets. Yes, Silicon Valley startups think global from day one, but they have the United States as a primary market and a foothold with which to shoot for world domination.
• Singapore isn’t like Israel. Its people are too comfortable. It doesn’t have neighboring countries threatening to wipe them off the face of the planet. It lacks deep links with countries like the United States.
• Doing business in Singapore is ridiculously expensive. Rents are high. Cost of labor is through the roof due to the higher standards of living. It’s very common even for Singapore companies to hire talent from elsewhere in the region if they can.

Given these factors, it’s very easy to discount Singapore as an overhyped startup hub. If we’re talking lifestyle, there’s beautiful Bali, which offers tranquility together with coworking spaces to get work done. If we’re talking blue ocean, it might make more sense to jump straight into a voluminous market like Indonesia or Vietnam and dominate there first rather than start from Singapore.

Don’t count Singapore out

Think what you will about Singapore, but you can’t blame its government for hyping up the country. It’s a necessary survival strategy, woven into the circumstances which birthed forth the nation. And it remains important today, given the odd environment it is situated in.

Depending on your viewpoint, you’d believe one of two things: either Singapore’s meritocratic ideology was at odds with Malaysia’s racial politics, resulting in an ouster that caused Lee Kuan Yew to famously weep on TV, or Singapore overplayed its hand by meddling too much in Malaysian politics and got shown to the door.

The consequences, however, were undisputed. Singapore had to fend for itself without a hinterland. Its entire narrative, politics, and economic policy, up to today, revolve around that very fact. It’s forever a startup headed by a nimble, near opposition-less government that can react swiftly to changes.

Not just an oasis, but an aircraft carrier