Young, ambitious entrepreneurs these days prefer Singapore to America’s Silicon Valley or other cool counterparts as a launch pad for their startups. The reasons are eye-opening: in Singapore, startups can get loyal investors, government support, access to Asian markets, high-end infrastructure, marketing and business training, startup incubators and unparalleled tax benefits.
Couple the country’s steady political climate, teething startup community, English-speaking and intelligent employees (who’re mad about tech innovations), with the ease of migration and a much lower cost of living than in the U.S, and the die is cast.
Singapore doesn’t hunt after Silicon Valley’s fame. Its government, which is actually the initiator of startup movements, seeks instead to become a part of innovations that will change the world. Let’s look at the most important elements that Singapore’s startup ecosystem consists of.
1. The Innovative & Startup-Obsessed Government
When it comes to the startup ecosystem, we usually imagine a forest of tech buildings irrigated with heavy money rainfall descending from venture capitalists. Money does its job, and startups grow naturally with its help. But the situation in Singapore is different. Before launching startups, the city-state first had to attract venture capital.
Since 2008, the government has channelled more than S$100 million into new companies under the Early Stage Venture Fund (they match the amount that venture capital companies pump into startups). In 2009, the government introduced the Technology Incubation Scheme, investing up to 85% of a startup’s required funding while venture capitalists bring in the remaining 15%. The results of these schemes were tremendous, and investors began to arrive.
The Singaporean government also aims to create 500 tech startups by 2019, by working with and investing in tech incubators such as Joyful Frog Digital Incubator and Infocomm Investments Pte Ltd. The active role of the government is probably the main feature of the Singaporean startup ecosystem.
2. Ease Of Doing Business
In the World Bank’s “Ease of doing business” ranking 2014, Singapore took the cake. Procedures like registering and running a business are streamlined and transparent, while “hiring-firing-filing” paperwork is simple. An entrepreneur needs to have only S$1 to register a company in Singapore in 1-2 working days. Running a startup in Singapore means you’ll work with smart and business-friendly laws and online services, and not with red tape or corrupted authorities.
3. Mild Taxes
The personal income tax rate in Singapore is among the lowest in the world: it applies only when an individual’s salary exceeds S$22,000, and ranges from 3.5 to 20%. For comparison: although income in Hong Kong is taxed at a slightly lower rate, the salary that is subject to tax is also lower, according to this website.
Corporate tax in Singapore is 17%, with full or partial exemptions for startups. The good news is that there is no such thing as capital gain tax in the country, so startups owners can enjoy their revenue without additional penalty. This is absolutely mind-blowing, especially when compared with the tax situation in the U.S. There, revenue can be taxed up to 35%.
In Singapore, entrepreneurs and their startups win at any level of profit. But that’s not all: the government also offers various tax incentives for companies that invest in innovation.
4. Flexible Visa Solutions
You don’t have to be a resident in order to set up a company in Singapore. Foreigners are welcome, and there two basic ways for them to legally stay in the country and set up a business.
1. EntrePass
This is designed for entrepreneurs who would like to arrive in Singapore before launching a new startup. To be eligible, the government requires that you spend at least 100,000 SGD in Singapore during the first year after incorporation, and that you provide an elaborate business plan that proves the innovativeness of your idea. The latter often becomes a stumbling block, especially if the entrepreneur decides to skip involving a professional migration help.
It should be noted that EntrePass will work for you only if you relocate to Singapore no later than 6 months after your startup’s incorporation.
2. Employment Pass
This one’s for the businessman who arrives in Singapore as a director of his already incorporated company.
Getting the Employment Pass is easier, but still requires strategizing. There are 2 requirements that can hide potential risks: firstly, the minimum prospective salary is 3,300 SGD. Secondly, the government insists that local manpower must be considered first for positions in your company. That said, the second requirement rarely becomes a problem if you need specialists in media, design or developers: many Singaporeans who are talented in those areas choose to migrate to Silicon Valley.
5. The Pool Of Investors
Singapore’s political stability, wealth, the government’s business initiatives and rapid development of the startup ecosystem has lured more and more investors to its shores. Over 14 tech incubators have been working in Singapore since 2009 — these help new companies not only with finance infusions but also with guiding and mentorship. There are also companies that introduce potentially successful startups to angel investors, such as Business Angel Network Southeast Asia.
The newest government’s initiative — the Spring SEEDS (Startup Enterprise Development Scheme) —enables new companies with capital of at least 40,000 USD and a venture investor willing to infuse at least 400,000 USD to get government’s investment worth 800,000 USD.
The Singaporean government itself acts as a powerful and reliable investor that enables the existence of hundreds of startups. One of the smartest ways for a government to create fruitful conditions for investment is to put on the investor’s boots and make necessary alterations for the boots to fit ideally. Such an approach will win the pockets of wealthy investors.
Regular generous infusions of Singaporean dollars and a firm vector to innovations has made Singapore a startup candy for dozens of tech companies from India, Australia, and New Zealand, who have already migrated to the island. The country’s exit list may look modest in comparison with that of Silicon Valley’s, but Singapore’s making confident steps onto the startup scene of the world.
This article was submitted by Roman Yarovyi via Vulcan Post’s submission page. He is the PR and Communication Manager for One Visa Ltd, a Singapore Employment Pass agency based in Singapore.