For Asia to leapfrog Silicon Valley, governments are a big piece of the puzzle

Singapore’s two sovereign wealth funds (SWFs) have more money under management than the entire US venture capital industry. That factoid was shared with an audience at the Startup Asia Singapore conference by Meng Weng Wong, founder and ‘social engineer’ at Singapore startup accelerator JFDI.

And he’s right. The Government of Singapore Investment Corporation and Temasek Holdings are holding north of US$315 billion in assets, compared to a measly $200 billion across the entire US VC landscape.

And it’s not just Singapore. Much of Asia’s wealth is stored in SWFs throughout the region, which are in turn invested into all kinds of properties and businesses. In terms of fund size, half of the top 20 SWFs by asset size come from Asia-Pacific, with China leading the pack with a combined $1.3 trillion (thanks America!).

My point – and Meng’s – for bringing up these facts is to show that wealth and talent are not lacking in the region when it comes to supporting a tech startup ecosystem. Sure, wealth is a precursor to innovation. Bill Gates and Steve Jobs, after all, were sons of wealthy, well-connected parents. So if wealth is the sole indicator, Asia’s already there.

Singapore, specifically, doesn’t lack talent. Many engineers, locked up in government scholarships, are told to project manage instead of code because the latter is perceived as lowly work.

In fact, its former Prime Minister Lee Kuan Yew once acknowledged back in 2004 that there was “too much concentration of talent, drive and energy in the public sector”. Some of these individuals could be released into the commercial world. “Let half go, let one third go and get them to be entrepreneurs, not just managers,” he told The Straits Times.

But there’s a mindset problem. Would-be entrepreneurs opt for stable careers in an MNC or the government sector knowing they will be well-fed for decades. Investors prefer safe assets like property and established businesses instead of technology startups, out of fear of losing their wealth.  Overall, the culture in Asia is risk-averse and conformist, or so we’re told.

Meng said that entrepreneurship in Singapore was a dirty word. Our forefathers were entrepreneurs out of necessity – they eked out a living on the streets to ensure we have a roof over our heads. A university degree and a stable job for their kids were just rewards for a generation who toiled under the sun.

Yet Singapore is in transition. To prosper, it needs more ‘opportunity entrepreneurs’ – folks who create businesses not just to survive but to compete. Asia as a whole is undergoing this change. Wealth is flowing into Asia and creating hope that the next generation can do better than the current one.

So, as far as Asia’s startup ecosystem is concerned, it’s not about attracting US or European money. Rather, it’s figuring out how to uncover the pot of gold right in our own backyard.

Governments are an equalizer

The big G is taboo in many parts of the world, such as the United States and many developing countries. Marred by inefficiency, bureaucracy, and corruption, governments are seen as clueless meddlers with questionable intentions.

But an effective government can play a huge role in fostering innovation, especially in Asia. It could funnel some of that latent wealth into innovative sectors of the economy. As an authority figure, a forward-looking government can become an effective promoter of entrepreneurial behavior.

Conformity, normally a negative trait for entrepreneurs, can become a positive. Conformity has been noted by social psychologists as one of the most effective ways to change behavior. This explains why the best and brightest engineers flock to Silicon Valley – they want to be among folks who share the same values.

Innovation at scale