Southeast Asia Globe: Singapore’s small business ecosystem goes beyond startup glamour

Southeast Asia Globe

Published: 1 December 2021

Some feel Singapore’s focus on fast-growth, high-glamour unicorns can come at the expense of other businesses.

“In the last ten years, Singapore has really embarked very strongly on attracting unicorns,” said Ang Yuit, vice president of the Association of Small & Medium Enterprises (ASME). “Over the last six months we are seeing a lot of well-funded unicorns [and] unicorns-to-be competing for talent with SMEs.”

The not-for-profit association was established to develop and protect Singapore’s small and medium enterprises, defined as a business with fewer than 200 workers and annual sales turnover of less than $73.17 million (SGD 100 million).

Around 99% of Singapore’s businesses are SMEs accounting for 72% of the country’s employment. They also are more vulnerable to volatile economic conditions due to limited resources and weaker access to financing.

“The growth trajectory [of an early stage startup] is very different to a typical SME,” Ang said. “The SME is funded more organically… whatever resources they can find. And they don’t have VC or seed money.”

Government support also differs between the two business types. Ang notes that startups have a wealth of available infrastructure. Aspiring entrepreneurs have access to more than 400 incubators and accelerators, including BLOCK71, a tech startup ecosystem builder backed by various businesses, government agencies, and the National University of Singapore. They may also acquire venture capital from government linked organisations such as investment holding company, Temasek.

For SMEs support comes mostly through direct funding, routed through trade organisations such as ASME. While this may seem simple, it’s not always straightforward. “Most SME grants require demonstration of business revenues and profits and certain numbers of years in operation,” Ang explained.

He notes that since new finance minister Lawrence Wong’s appointment, more funds are being set aside to support SMEs. However, with more money comes more stringent audits, and a more risk-averse approach from the trade associations distributing them.

“What will happen is that we end up betting on [what we think is] a sure winner,” Ang said. “[We need] a healthy tussle between risk taking and accountability.”

Around 20 – 30% of the SMEs ASME encounters are from the F&B sector, according to Ang. Hit hard by the pandemic, these small businesses are also often at the brunt of high-rental contracts that are heavily favourable towards tenants: allowing termination of lease at short notice. While F&B workers have received some government support during Covid-19 through initiatives such as the Job Support Scheme, with low short-term revenue and growth prospects, their businesses remain at risk and their failure rate is high.

Ang thinks of Singapore’s bustling Tanjong Pagar and Chinatown neighbourhoods, renowned for its independent shops and cafés.

“Every few months, a guy closes,” he described.

A cohesive and collaborative approach could benefit all business types. For Khong, the difficulties he sees young startup founders face in building networks and market access can be helped by multinational corporates (MNCs) or even local SMEs “providing the right advice, the right guidance,” or forming partnerships by adopting their solutions.

Ang also expressed that there are beneficial ways to work together. ASME is looking into expanding into the startup space.

“An SME can always reinvent itself with a mindset shift, to be more startup-like,” he suggested. “And very often startup[s] identify a business opportunity, or a market segment that many of the SMEs already did. But they don’t look at it from that perspective… so we see a synergy possibility.”

Tang has turned her podcast into her own entrepreneurial venture, offering business coaching and consultancy to startup founders. She also recently took up a new position as chief of staff and head of communications at another startup, Alchemy Pay, a hybrid payment platform between cryptocurrency (digital financial transactions) and fiat currency (government-backed tender).

For her, the different missions of “small business founders whose aspirations tend to be smaller and more local from the start,” and “high growth, innovative and externally funded start-ups who begin with a strong aspiration to grow,” means that there should be scope for both to bring different strengths to Singapore’s economy.

“Both types play an important part in every city’s business ecosystem,” Tang said enthusiastically. “[And] there is still so much more space, potential and new creative ideas to be played out. I feel like we’re just scratching the surface.”


View the article here: Southeast Asia Globe Article 


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