Singapore needs an acqui-hire phenomenon

Tom Clayton has started and run numerous high-tech startups in Silicon Valley. Now running Bubbly, a Sequoia Capital, SingTel Innov8, and JAFCO backed social media startup that is one of the largest VC–backed startups in Southeast Asia having raised over $60M+ in funding.

Singapore can emulate Slicon Valley’s acqui-hire culture. Image credit: TVrage.com

Just a few years ago, Singapore was not a place synonymous with flourishing technology, but the region has since made huge leaps in the sector and is now considered one of the world’s hottest technology hubs. This is in large part due to successful incentives set up by the local government that have encouraged large amounts of angel investment and increased the presence of top tech companies. Singapore now stands as a magnet for talent and innovation.

However, the country’s ability to maintain its venerated position atop the tech world is at risk. The available funds for startup investment drop off significantly with the Series A and B rounds. This means that although Singapore is now littered with great entrepreneurial tech talent, many of them won’t get a dime more of funding after their initial boost. Their ideas and businesses will fail, and the entrepreneurs and employees will retreat to “safe” engineering, sales, and marketing roles at the regional Singaporean sales offices of multinational corporations (MNCs) battered and gun-shy, reluctant to ever try entrepreneurship again.

This is really bad for Singapore’s tech ecosystem, especially for the startup scene, which is the slice of the ecosystem that is doing the most real product development and innovation. It would be terrible to see a massive reversal of the region’s momentum and the mini-Silicon Valley that has blossomed here. In order to prevent this from happening, I believe Singapore needs to make some major changes. Here’s how I think it can save itself from a significant economic slow-down and productivity stagnation in the tech sector:

Local MNCs and Government-linked Companies (GLCs) need massive cultural overhauls to stay competitive and increase productivity.

Some companies in Singapore have already realized this and made fairly drastic changes. For example, SingTel has undergone serious restructuring to focus on the digital frontier, placing their top operating CEO, Allen Lew, in charge of what is effectively a startup for them and begun an aggressive M&A campaign as well as launching a VC fund for the region in SingTel Innov8 (Disclosure: SingTel Innov8 is an investor at my company, Bubbly).

Other companies are still stuck in their old ways though, and “don’t know what they don’t know,” further securing their position as lethargic conglomerates that are vulnerable to spry young guns.

What these large companies need is an infusion of strong, scrappy, entrepreneurial-minded talent – basically the exact type of people who would avoid joining companies like theirs in the first place. This makes roping in these individuals in a challenge, but these businesses desperately need a breath of fresh air. You simply can’t change a culture with the same people and policies.

The best way to accomplish this transition is through the same acqui-hiring phenomenon that has become so popular in Silicon Valley.

This is when a company acquires a smaller startup for the sole purpose of retaining its talent. Valley behemoths such as Facebook, Google, Yahoo!, and Twitter are notorious for doing this. An aqui-hire not only side-steps the challenge of getting the interest of and landing top tech talent for these large companies, it also allows them to purchase pre-assembled, well-oiled teams, which saves them additional time and money on training and going through extra learning curves. Moreover, there are typically two to four-year retention packages in place for these teams, so turnover is minimal. It’s then up to the companies to make sure their environment remains an inspiring and innovative place to work for these forward-thinking individuals.

Another advantage of going this route is that it will fuel more interest from locals in the startup path. The more stories that Singapore has of solid exits (Viki and sgCarMart are good examples), the more locals will be attracted to entrepreneurship. Often times, the company that gets bought in an acqui-hire situation is in danger of closing its doors already, whether due to insufficient funds, a failing concept, etc. Therefore, having their company welded into a larger one generally means more retained jobs and it shows that the downside of unsuccessful startup attempts can still have a fairly positive outcome.

This will allow more individuals that haven’t lost their will to traverse unchartered territory and embolden them to pursue their ideas and build new things. It will also lead to a more risk-taking culture overall, which will in turn helps boost local innovation.

An acqui-hire movement would be a win-win for the whole economy, since it keeps local entrepreneurs going and transforms culture sat stagnant MNCs and GLCs. My hope is that these large companies will recognize the significance of this issue and make the necessary business decisions, or that the government will continue its string of positive incentives and establish some more to encourage MNCs and GLCs to acqui-hire.