Singapore’s very founding is rooted in a strong sense of entrepreneurism. Our forefathers crossed great oceans to strike it out in this veritable emporium of the East. Even today, small-medium enterprises (SMEs) make up the beating heart of Singapore’s economy. They comprise 99% of enterprises on the island which, numbers roughly 188,000 entities, contributing up to 50% of our nation’s GDP, and providing employment to 65% of the workforce. Jostling alongside globally recognised MNCs for business both locally and overseas, these figures might come as a surprise to most.
Featured Image Original Source: SMEPortal.sg
SME’s, are described by the Ministry of Trade and Industry Singapore as companies with group annual sales of not more than $100 million or group employment size not exceeding 200. Even in the USA, SMEs pack a powerful punch, comprising 97.9% of all employer firms and provides more than 45% of GDP. Although small in size, they are valued for being nimble – being able to adapt to changing situations, customer needs and changing client requests, highly innovative and scalable are all hallmarks of SMEs.
Drivers of the Future
As drivers of a country’s future, it is then only right that there is so much emphasis on SMEs by government bodies. In Singapore, there are several organisations created especially to provide assistance, financing and guidance to SMEs, such as A*Star, Spring Singapore, IE Singapore, and separate agencies like IMDA (Info-commercial Media Development Authority) and GovTech (Government Technology Agency of Singapore). This has helped greatly in encouraging a fledgling entrepreneurial spirit and drive for innovation in the nation.
In most aspects, Singapore is already a nexus point for ideas, start-ups and creativity, much in the same vein as Silicon Valley, Tel Aviv, Bangalore or London. Google, Paypal, Facebook, Amazon all maintain a presence on the island. Venture capitalists, the likes of Eduardo Saverin’s B Capital Group and Sequoia Capital have followed to provide their services and the community has been thriving since the last several years. With a vibrant, burgeoning scene, access to funding and developing markets not yet saturated with players, this is the place to be and the time is now.
Making Waves in Asia
Grab, with headquarters in Malaysia and Singapore, is a regional poster boy where prominent, successful and international start-ups are concerned. Founded only in 2012, Malaysians Anthony Tan and Tan Hooi Ling have ousted rivals the likes of Uber in several markets and acquired funding of US $2.7 billion.
Sea Group, more recognised by its gaming arm, Garena which is an internet gaming platform provider, attracted funding of US $1.4 billion. This shot in the arm allowed Singaporean CEO and founder, Forrest Li to diversify from fun and games to internet shopping and digital financial services.
Taking on the likes of Netflix, is Viu Singapore, that picked up US $110 million in funding. Since its launch in late 2015, it has acquired 12 million monthly subscribers across Asia and the Middle East, with plans to serve 20 million by 2020.
Aside from attention-grabbing tech companies, Singapore’s F&B SMEs have also found success by making forays into neighbouring countries. Breadtalk, the bakery, and even Bee Cheng Hiang, the barbequed pork chain have both penetrated markets as far away as Japan. Even banks, with its traditionally prudent approach to working with SMEs have begun to tailor its offerings to this sector which, have seen venture capitalists and angel investors snap up chunks of the pie. Case in point is OCBC and Lion Global Investors establishing a private equity fund in 2015 to invest in SMEs in Singapore, Malaysia, Indonesia and China.
Bright Sparks Despite Difficult Times
It seems that SMEs have got it made but the truth is that topping the competition is a hard worn battle. Competitors can come from all angles. Globalisation has proven to be a double-edged sword providing opportunity as well as rivals from around the world. The perennial problem of high operational costs, especially rent and staff-related expenses remain a bane for small businesses. Office rentals reached a peak in 2015 after rising about 40% in 10 years, only abating less than 10% in the 2 years since then. Customers are also becoming harder to get a hold of. Greater access to information empowers customers to make the best or cheapest purchases, making it more difficult for SMEs to make a sale even if their product or service is superior. These empowered customers have more choices, more information and also more demands.
Overall, in the face of these challenges along with fears of a global slow down, SMEs are maintaining a brave front about the future. There is a general wave of confidence that 2018 will bring positive developments. A survey done by the Singapore Business Federation, indicated that services, manufacturing, trading and the construction industry showed the highest levels of confidence due to public sector construction works in the pipeline. Many companies also expected to expand their business within the year and have sanguine expectations of continued availability of financing options such as SME loans in Singapore.
Rising to the occasion with enough grit to make our pioneering forefathers beam with pride, several SMEs have, nevertheless, already beaten the odds to carve a niche in their respective fields. Aside from the usual measure of perseverance, foresight and creativity, these tenacious establishments had much more in them, allowing them stand out from the pack.
Since the halcyon heyday of local film studios like Shaw, Cathay Keris and the Malay Film PRoductions Ltd. of the 1940s through to the 1960s, local and even regional talent has been sidelined into obscurity. MM2, however, has made great strides in recent years to put Singapore back on movie-goers’ minds and fending off modern cinema stalwarts from Hollywood, Japan, Korea and China. Having the foresight to identify a gap in the film industry, MM2’s core business started in film production. Relentlessly producing content to the tune of almost 80 films in the decade leading up to 2018, they honed their craft and released favourites like the “Ah Boys to Men” series. By 2014, they were the first and only Singaporean film production company to list on the stock exchange (SGX). With this available financing, they diversified into upstream and downstream activities such as expanding their production capabilities into animation, as well as operating a string of cineplexes and even a foray into organising events. This approach has paid off, with revenue growing 73% and profits increasing by 127% since 2013.
The Watch Fund
Although Singapore has branded itself as a financial centre, there had not been an exotic investment of this breed until now. The brainchild of local watch aficionado, Dominic Khoo, the fund allows those who buy in with a minimum of a quarter of a million dollars to wear insanely valuable timepieces while potentially earning a return on the investment.
Image Source: NYTimes
Investment grade watches are difficult to come by and unavailable to most. The founder spent many years building up a global network of contacts in the highly guarded industry by getting involved in watch publications, marketing and then in auctioning. This in turn led to the idea of starting an investment fund centered around watches. Its secret to success comes down to access. Firstly, investors are allowed to wear the time pieces that form the underlying asset of the fund and this is a strong inducement. Next, the founders have access to the products which otherwise lie behind high barriers to entry. The ability to procure items on first access, at lower prices, that are limited editions or provenance pieces is the key to obtaining watches that can yield a return when sold.
As Singapore’s other favourite pastime aside from watching movies and making money, we spend much of our time looking for that next delicious dinner. Combining new technology with the age-old love of food, Chope is the most successful in a slew of restaurant reservation booking platforms, attracting a funding round by venture capitalists in 2015 and 2017.
Starting in 2011, Chope was amongst the first movers to attempt to capitalise on the idea of making restaurant bookings online from a single platform. Since then many competitors have entered the scene and many have also thrown in the towel. In an interview, founder Arrif Ziaudeen cited tenacity, constantly building its network of restaurants and expansion into new markets as the reason for its success. Having aggressively extended its reach into markets like Shanghai, Hong Kong and Indonesia in its relentless search for new business, is the chief reason why international venture capital firm Square Peg Capital took notice of the hungry, growing start-up. It seems that equally ravenous patrons have not overlooked them too.
With the often quoted dismal survival rates of businesses in their first year and fifth-year milestones, running one seems like an uphill task. However, with some good old Singaporean perseverance and can-do spirit together with ingenuity and elbow grease, rewards can be reaped.
Together with government support initiatives and confidence in the economy expected to turn a corner, the next Adidas or Apple might just be around the corner. After all, these juggernauts all started from humble beginnings themselves – all part of the natural lifecycle of an enterprise.