Entrepreneurship and You: Dr Alex Lin
In this issue of Entrepreneurship and You, we have caught up with Dr. Alex Lin, Board of Directors of ACE. He is the Chairman of ICOra Asia, a Digital Economy Think Tank based out of Bangkok. Alex and team advise and help companies structure their digital economy and fundraising strategies via blockchain crowdfunding such as Initial Coin Offering (ICO). Dr. Lin previously headed Infocomm Investments, which is a government-owned $200m venture fund. With his vast experience, he is no stranger to the startup ecosystem in Singapore and regionally. We are privileged to have him share some of his thoughts and insights about entrepreneurship, its transformation and challenges, and how startups could tap into the opportunities of the startup ecosystem.
- What is entrepreneurship to you?
“Entrepreneurship” and “innovation” are overused and over-romanticised words that it could mean anything to anyone. I once presided over a youth entrepreneurship award judging panel, and I noticed that every nominee had differing definitions of “entrepreneurship” – ranging from simple “creating a business”, to grandiose “doing well and doing good, and save the world” ideas. Undeniably, the media has also played a part in stereotyping entrepreneurship by impregnating everyone with the ideas that “a startup is a tech startup”, as well as “fundraising is what startups do”.
During my tenure at Infocomm Investment Pte Ltd (IIPL) when I needed to rapidly build the startup ecosystem for Singapore, I focused only on tech startups because it was the easiest and fastest way to get returns and attract investment, although my startup accelerator team and I were careful to educate the right definitions in the members of the startups (i.e. build businesses that your customers want) rather than generalising startups to a tech startups.
It is important that we define entrepreneurship and innovation adequately so that people do not generalise entrepreneurship and innovation, and everyone has a common yardstick towards entrepreneurship. During the judging session of the youth entrepreneurship award, if I had not constantly reminded the nominees of the award’s definition of entrepreneurship, the judging panel wouldn’t been able to rate the nominees equitably. Similarly, I will always define “entrepreneurship” and “innovation” at the beginning of my speeches or sharing, just to ensure my audiences understand the perspectives and opinions presented.
Innovation & Enterprise (I&E) are closely connected to Research & Development (R&D), together they form the concept of knowledge acquisition and exploitation. So far, the clearest and best explanation of the R&D and I&E complex is by Dr. Geoff Nicholson, the father of the 3M Post-it ™, who described R&D as converting (investing) money into knowledge, while I&E is converting (extracting) knowledge to money”. Hence, entrepreneurship is the process of creating a viable business that returns both shareholder values as well as serving its customers for financial returns.
Most people also confused the term “customer” and “user”. I define “customer” as someone who pays money for the product or service that the entrepreneur is providing. Without customers paying money, an entrepreneur cannot return shareholder values, additionally he is also unable to get a financial return.
To sum it up, my understanding through my own entrepreneur journey is that entrepreneurship is simply about creating and building a viable business that provides financial independence for the entrepreneur.
- Based on your understanding of the entrepreneurial landscape in Singapore, how has it changed over the last 10 years?
To understand Singapore’s landscape and ecosystem, one must understand that everything in Singapore is very “man-made” instead of being developed “naturally”. This is due to our lack of natural resources and our desire to survive in an extremely competitive environment.
Singapore was formed by trading and immigrating communities in Asia. Our forefathers were mostly traders and entrepreneurs who were frowned upon in traditional Chinese culture that pride scholars as the most desirable career. With the success of the Singapore government’s Foreign Direct Investment (FDI) and job creation efforts, Singaporeans could get suitable jobs and the necessity for entrepreneurship is not needed over the years. The government also placed less emphasis on entrepreneurship since we are doing well financially.
However, less effort did not mean no effort. There are still ongoing government initiatives to create hotbeds and lay the foundation for entrepreneurship in Singapore. These initiatives include the Entrepreneur Talent Development Fund (ETDF), the predecessor of the YES! Grant, and the ACE Grant, before it is finally morphed into the AMP under StartupSG Grant, i-JAM (Jumpstart And Mentorship), Technology Incubation Scheme (TIS by National Research Foundation NRF) and more.
In these earlier days, the world ranking system for R&D and I&E were heavily weighted toward R&D as compared to I&E. And since the Singapore government wanted to focus on getting a higher world ranking, it focused its efforts on R&D by creating more research programmes that generated Intellectual Properties (IPs), such as research papers, patents, knowhows and etc, and spent less on the exploitation of IPs created. This is reflected in the Research Innovation & Enterprise Funding (RIE) 2015 whereby $16.9B was allocated for R&D while the National Framework for Innovation & Enterprise Funding by National Research Foundation has only $360M. This huge contrast was evidence of the government’s focus towards R&D.
As the world realised that the exploitation of IPs was instrumental to economic development and with growing pressure from FDI competition with neighbouring Asian countries, the government began to focus on entrepreneurship slowly. Although Singapore still ranks highly, i.e. 5th, on the Global Innovation Index (GII), its Innovation Efficiency (i.e. the ratio of innovation input vs output) is at the median (i.e. only better than half of the 190+ economies surveyed). This is a subtle embarrassment because this means that “the most innovative country is not very innovative in its innovation”.
IIPL, which was a subsidiary of the then Infocomm Development Authority (IDA) under the Ministry of Communication and Information (MCI), was tasked to develop and energise Singapore tech startup ecosystem.
Adopting the startup accelerating strategy, IIPL invested and groomed more than 10 commercial and corporate startup accelerators that accelerated over 380 startups within 3 years. Over 170 of these accelerated startups managed to reach Series A. Over $1B additional venture capital funds were attracted to Singapore during this period. All these conscious activities changed Singapore’s tech startup ecosystem and moved its ranking from 17th to 10th within a short 2 years period. Singapore was then known as the fastest growing startup ecosystem and our landscape has since changed permanently.
Growing fast is not without its danger, fast growing startups begin competing with established corporations for tech talents. Talent shortage on all spectrums became unbearable. IIPL, working with IDA, then introduced several finishing schools like General Assembly into Singapore and focused on converting PMETs into tech talents for the ecosystem. This successfully changed the situation and moved Singapore’s talent ranking amongst other tech startup ecosystems from 20th (last place) to 1st within the next 2 years.
As you can see the development of the ecosystem is with heavy government design and intervention, for without such intervention, Singapore would not be able to develop its startup ecosystem naturally and rapidly.
With the startup ecosystem being well established and growing today, the focus will have to shift to grooming those stronger companies into regional players and capitalise on ASEAN’s vast market. Singapore must also improve our Innovation Efficiency by working on commercialising technology invested by RIE2015/2020.
- Based on your interaction with startups, what are some of the challenges you see in starting up in Singapore today?
Startups everywhere face the same issues:
- Finding a big market for growth
Like most startups, Singaporean startups love to create stuff in the absence of a validated customer. Some may have validation on a small customer archetype, but a small market segment in the small Singapore market is probably not worth the effort. This fundamental underlying challenge is then manifested into many symptoms causing entrepreneurs to lose sight of the issues and lead to their eventual failure.
If you were to ask any mentor, the advice to entrepreneurs will always be: focus on creating the product and service that your customer is willing to pay for; nothing more, nothing less. Interview as many potential customers as possible to understand their pain points. The pain points are out there with the customers, not in the entrepreneur’s head; validate, validate, and validate.
- Finding technology that allows you to scale
Once the entrepreneur finds and validates the pain point of his customers, it is easy to find a solution that the customers are willing to pay for. Most startups create the solutions without validating with their customers. This posts another challenge because changing a solution to fit the pain point is a lot more difficult than creating one that fits. Furthermore, tossing out months and years of work creating the unwanted solution is another heartache that most startups refuse to accept, which resulted in additional months, if not years being wasted.
Technology solutions are everywhere as long as the startup is willing to look for it. Licensing agreements can always be obtained instead of always developing the technology in-house. Ultimately, the technology that addresses the pain point faster, cheaper, and better will win the race.
- Finding talents to execute expansion
In the race for growth, most startups neglect to groom their own talent pool for future growth. The startup must constantly look out for suitable talents, recruit them, and train them to excel in the company.
This is a continuous process. Startup founders must not only hustle for customers and investors, he must also hustle for talents to join his cause. Essentially, good talents join startups because of the vision, and not only for the remuneration.
- Finding low cost funding
Under media influence, tech startups are always associated to fundraising and pitching to potential investors to snatch a few millions here, bagging a few millions there, and getting invested is like winning. The reality is, that is the beginning of stressful hard work which startup does in order to return profits to the investors. On the other hand, it is difficult for startups to achieve all the above without enough funding.
There are many ways to get funding, below are a few popular funding sources. The challenge is for startups to know which is more suitable, and how to go about getting the right funding:
- Funding from profit is the lowest cost of funding a startup can get. Focus on delivering products and services that customers are willing to pay for is the recipe to get this funding. As an entrepreneur, I think this is the best fund source the startup should be focusing on. To gain more profit, startups need to look for bigger market instead of staying local where the market is relatively small.
- With enough profits, it is easy to attract Venture Capitals (VC) to invest. Do be mindful that VCs are eyeing a huge valuation increase and hence will push its investees to grow big at all cost (i.e. burn the investment for scale). Therefore, to get VC funding, the startup must focus on huge growth, especially on valuation. Getting VC funding comes with a cost as the startup must give up equity which can be significant when the company scales.
- A startup can also borrow from banks when it has assets and profits to support the borrowing. There are government supports to subsidise the interest payment to the bank. Most importantly, the startup must work hard to comply with the payment schedule to maintain a good credit rating for future borrowing. The interest payment is the cost of borrowing, which is probably less than the VC funding.
- The increasing popularity of blockchain Initial Coin Offering (ICO) or Token Generation Event (TGE) has opened up new methods for startups to fundraise. The key challenge is, ICO and TGE may sound attractive and easy but it can also be the costliest way to fundraise even without giving up equity.
Therefore, knowing which way to fundraise is important for a startup to achieve its goal.
- What are the competitive advantages do you think our startups have in Singapore today?
Challenges are always opportunities in disguise, by addressing challenges, the competitive advantages present itself. These are 4 challenges Singapore startups (and startups elsewhere) face that may become an opportunity if they are overcome:
- Market size: Singapore has a small 5.6 million population, but it is right at the center of ASEAN which has over 700 million population. Although there are 10 countries and hence 10 laws, cultures, demographics and etc, the consuming household of ASEAN is surprising homogenous. Furthermore, the ASEAN consuming household is over 40 million in population, which is larger than USA’s and Europe’s combined number of consuming households. Therefore, focusing on addressing these customers’ needs present a huge geographical advantage for Singapore startups who are near to these customers and have the gift of breaching the language barrier that startups elsewhere lack.
- Technologies available: Singapore invested billions on technology under RIE by NRF. These are technologies ready for exploitation. The government will be happy if the startups can find ways to commercialise the technologies. What entrepreneur needs to do is to negotiate or hustle his way to obtain the technology. Such resources are not available to startups elsewhere.
- Talent available: Talent used to be an issue for the Singapore startup ecosystem, but it is no longer an issue now. Furthermore, Batam, which is an hour boat ride away from Singapore, has many affordable (i.e. S$400 per month) youths who can be groomed into good talents in the area of programming, back office operation etc. What is most advantageous is the proximity of Batam to Singapore. A project manager can travel there to discuss with the developers and back to the office all within a day of work plus golfing.
- Funding available: As mentioned earlier, there are more than S$20B AUM for VC domicile in Singapore. Singapore is one of the global financial and fintech centres; investors are within reach. The challenge startups need to overcome is getting its pitch right by understanding what the investors want, which is not that difficult to find out.
- As ACE’s Board of Director, in what ways do you hope to help startups through ACE or other means?
ACE builds and maintains Singapore’s entrepreneur ecosystem locally as well as establishing bridgeheads beyond our shores. It is not easy to maintain and constantly energise the ecosystem as it has many moving parts and stakeholders contributing to the ecosystem as well as receiving benefits from it continuously. The Board’s duty is to ensure that the ecosystem works continuously, the team at ACE keeps its focus, and most importantly, reacts to changes expediently. Startups within the ecosystem will learn from one another, while those who are not learning fast enough will be eliminated. This is how an ecosystem works, where the fittest survives and thrives.
Beyond the fundamentals, I am looking at how to energise the ecosystems with a new mechanism that will give more advantages to Singapore startups. I am working with the university to groom Singapore/ACE startups into regional focus companies, providing them with overseas market access opportunities, and experimenting with ingenious fundraising methodologies.
Beyond expansion, I am also experimenting with a group of startups off-shot from ASEAN SMEs, digitalising the SMEs business and creating new exponential opportunities. I am creating a playbook based on Singularity University’s Exponential Organization concept, digitising and later digitalising the SME’s business into exponential startups. These off-shoot startups would have business model featuring “Staff-on-Demand”, “Community and Crowd”, “Algorithmic Operation”, Leverage Assets”, and “Engage Continuously”.
- What is your vision for the Singapore Startup Ecosystem?
The vision for Singapore Startup Ecosystem is for PM Lee and/or the 4GL PM to decide. I only wish to see our Singapore startups continually making progress on the world stage and create a stable economy for Singaporeans.
- If there is one advice you need to give to our startups, what would that be?
Always focus on delivering a product or service that solve the pain point that the customer is willing to pay for. Aim for a more generic customer archetype so the market is bigger and available for growth.
My most common testing question is “WITCH: What Is The Customer’s Heartache?”. Those entrepreneurs who can clearly and directly answer this question are the ones who go forward to create a startup that is successful.
- What is the most common question your mentees ask?
This is a very good question because most people have the same questions, occasionally asked in a different way.
“What are the skills I need in order for me to be successful?”
This is the question, or a variant of it is what I get most of the time.
The answer is very simple:
- An ability to persuade people to help you. Put it simply, you must be able to sell anything to anyone. Selling your products to your customers, selling your company to investors, selling your value to your collaborators, or selling your dream to the government. To do so, you need to have a clear understanding of people’s needs, and how you can address it. To have a clear understanding, you need to have clear thinking and ability to ask questions.
- The next skill is the ability to observe. As mentioned above, you need to have a clear understanding of others’ needs. Unfortunately, not everyone is open to sharing such intimate details. Therefore, an ability to watch, probe, observe will help you find the deep clarity you need to pitch to them.
- The last skill you need is an ability to let go. For things that you have no need, let them go…
Additional Notes: This is the power of digitalisation
In my assessment, businesses, including small and medium-sized enterprises (SMEs), have embraced digitisation within their business. This has been spurred on by government support and initiatives such as the Productivity and Innovation Credit Scheme (PICS), and the Infocomm and Media Development Authority of Singapore’s SME Go Digital Programme. The key challenge is in the digitalisation of SMEs.
Digitisation is defined as automating or removing the paper from operation processes, such as making data entry automated or using e-signatures for invoices. Other than operation efficiency, digitisation enables efficient data collection for later analysis.
Digitalisation, on the other hand, requires a company to overhaul its core business from a physical operation to a digital one. For example, instead of relying on traditional methods to gain customers, the business could put itself on an app and have customers coming to them.
Digitisation is a cost-saving productivity improvement for business. Digitalisation, on the other hand, is a business transformation that changes the core of the business. Digitalisation change the way revenue is generated by apps and systems. Although you may be solving the same pain point for the same customer with the same solution, the approach is vastly different, and the scale is unlimited. The algorithm of digitalisation allows the company to leverage assets from competitors, has staff on demand instead of on payroll, forms crowds and communities that are constantly engaged on the systems and app.
A good example of comparing and contrasting digitisation and digitalisation is the dispatch system in a ground logistics company. The system automates dispatching of couriers after receiving jobs from customers, this system replaces the dispatcher and automates the process with algorithm. This system saves the logistics company manpower and improves efficiency by having a better schedule automatically, but it doesn’t generate revenue.
While the same system in Grab also dispatches drivers (instead of courier) to customers, but the drivers are staff-on-demand, the car is a leveraged asset, and the community and crowd are constantly engaged on the app. None of these are paid by Grab. In fact, they pay Grab to be on the platform and get jobs. This is the power of digitalisation which Singapore SMEs can exploit to transform into exponential organisations.