Start-up Lessons from Asia: Scale up and go global
William Klippgen, an early stage tech investor based in Singapore, moderated a panel at the Norway-Asia Business Summit 2016 about the island nation-state’s meteoric rise and what Norwegians can learn from Asia. “In the past decade Singapore has made itself into an entrepreneurship hub, now ranking as the second-most innovative country in the world,” he said.
Poon Hong Yuen, chief executive of SPRING Singapore, the government agency tasked with helping enterprises grow, tried to shed some light on this emergence.
“It is standard practice in Singapore for civil servants to shuffle jobs every few years to a new post that seemingly has nothing to do with the previous one,” he said. “The country doesn’t want you to become too entrenched in any one position, and this keeps you nimble.”
“I was just reminiscing with a banking friend about how 15 years ago if you put money in a start-up in Singapore, more or less it was gone. But there have been several recent successes here, including a USD 1 billion exit by Lazada thanks to the purchase by Alibaba, and we’re seeing the quality of improve here as well.
“We want to make Singapore a conducive environment for start-ups to thrive, including for foreigners. Most of the start-ups in Singapore have at least one foreign founder. Our launchpad has been described as the densest for startups in the world by The Economist.
“Our start-up launchpad happened almost by accident, as there was a cluster of old buildings that were due to be demolished. But the government agreed to rent them cheaply to start-ups and the neighbourhood grew quickly from there. The government is now adding buildings to the hub.”
Per Gunnar Borhaug, president of Bandak Group AS, believes Norway can build from its strengths in trying to encourage entrepreneurs.
“I don’t think Norway needs to necessarily move away from its traditional industries of maritime and oil and gas as we’ve built up core competencies in these sectors,” he said. “It’s more important to look at how new technologies can add to this strength and work to become more international. That means working to bring some of the clusters we’ve built up in Norway around the world.”
Sigbjørn Dugal, chief executive of Pickatale, said start-ups need an overseas focus from the start.
“Norway should have started innovating 10 to 15 years ago when we were on the cutting edge of the oil and gas industry,” he said. “We can do proof of concept there and then take it out to the world.”
“There is no domestic market for start-ups in Norway. To be successful you have to take your company international to the big markets like China and the US. I think there are a lot of smart people in Norway producing a lot of innovation, but the issue is we don’t have a platform to get them out to the world.
“I don’t think money is the issue; I think the problem is the way the country is becoming a little too fat and happy. Innovation Norway spends a lot of money helping start-ups, but the key today is distribution. It’s getting clients or users and starting to build revenue. That’s how you build a company. Silicon Valley is in the US, it has a big market, firms there build proof of concept and then get money from investors.”
Mr Hong Yuen suggested Norway might look at its cultural strengths to determine investment opportunities. “Singapore has a platform culture — when people think of us they think efficiency, trustworthiness, maybe even too strait-laced. Because of that, we were able to build our finance and shipping industries. Norway needs to consider which industries are complimented by their cultural strengths,” he said.
“Singapore is market-driven in terms of how we invest in start-ups because we are too small to create a market ourselves. Our strengths lie in medical technology, clean technology, the digital economy and advanced manufacturing. We were able to develop water technology because we don’t have any natural water resources in the country.
“The most important document we signed after declaring our independence was our water agreement with Malaysia. We developed advanced water recycling technology out of need. We even recycle our waste water. When the technology was first perfected, the Malaysians were laughing at us because they said we were drinking our own pee, which is true, we were. But we’ve developed such expertise in the field Singaporean companies have been able to export this knowledge to a number of places in Asia.”
Erik Knive, chief operating officer of SN Power, told the audience it isn’t necessary to reinvent the wheel to find successful entrepreneurs.
“A Swede here in Singapore told me nobody ever invents anything new, rather just new combinations of old ideas,” he said. “I think Norway needs to support these kinds of companies rather than
trying to build something from scratch. My biggest concern is that Norway does Mickey Mouse stuff; it’s too small. We need to look at where we can have the biggest impact as a large industry internationally and put some real money behind it.
“I think Norway needs to spend some of the money in its sovereign wealth fund to support entrepreneurs. There are still big structural changes in the energy sector around the world that haven’t been exploited, as many companies have gone bankrupt not realising them. As I look across Asia, there isn’t any country that has adapted to those market lessons yet so I think there’s an opportunity to take that expertise from the European and American markets and bring it here.”
He agreed with Mr Dugal that Norwegian start-ups are being sold when they are still small, meaning scale is not being priced into the valuation. Mr Knive urged the Norwegian government to put some thought into how to help Norwegian founders build up scale.
Magnus Grimeland, managing director and co-founder of Zalora and Global Fashion Group, shared a conversation he had recently with one of the richest men in Indonesia. “I asked him why he was investing so much in digital when his offline business was so successful. He pulled out some lists and showed me the 10 richest men in China from a decade ago, and they were from all the traditional industries. Then he showed me the current list for China and most of them were in technology or e-commerce. He didn’t want the same thing to happen to him,” said Mr Grimeland.
“With my two companies, the founders didn’t really have anything in common except a passion for getting involved in e-commerce in a relatively undeveloped space. None of us had a background in fashion. But one lesson to take away from the Indonesia story is both Norway and Singapore are early adopters of technology, which is going to be a tremendous advantage.”
Mr Dugal thought Mr Grimeland was being too kind to Norway.
“I don’t think Norway is an early adopter of technology anymore. When I came to China in the 1990s with Telenor we had meetings with all the large Chinese telecom companies because they needed our expertise. Now China has surpassed Norway on almost all technological fronts and I don’t think we could get those meetings. We need to speed up our adoption of technology,” he said. not adopted, said Mr Klippgen.
Singapore does not set limits for sales of start-ups supported by state funds to another Singaporean company, or require a return on its investment. “This only discourages investment and entrepreneurship,” said Mr Hong Yuen. “Our goal is to encourage locals and foreigners to build start-ups here so we don’t put any limits on market exits.”
Innovation Norway helps Norwegian entrepreneurs abroad in a variety of ways, and the panel shared some of their personal stories.
“Labour in China is getting more expensive now, so I moved all my developers to Macedonia and was able to get a 10-year tax holiday while the government there pays for the social welfare of my employees,” said Mr Dugal. “The business card of Innovation Norway was very helpful in getting me meetings in Macedonia because of its government connection.”
“Innovation Norway helped us with contacts to talk to the top levels of banks, where it otherwise might have taken five meetings to get to that level. They were very helpful,” said Mr Grimeland.