Start-ups showcase their solutions at the Echelon marketplace.

The market is different, the opportunities are different and the investor profile is different. So while Singapore may look to Silicon Valley for inspiration, it is time to trail-blaze and create its own path as a hub for tech start-ups in Asia.

Speaking at Echelon 2012, Mr Mohan Belani, Director of e27, the media organisation behind the tech start-up event, noted that more and more investors are starting to get interested in the region, and what sets Singapore apart is its ability to attract the right investors to put their money here. He cited the example of Japanese venture capital firm Global Brain, which manages a US$66 million fund focusing on investments in Southeast Asia and had a strong presence at this year’s Echelon event.

“Singapore is a fantastic environment for start-ups to operate and grow… The government has done a fantastic job in positioning Singapore as a tech start-up hub in this region,” he said.

Investors taking part in a panel discussion on the “State of the Investment Ecosystem in Southeast Asia” generally agreed with Mr Mohan’s observation. Mr Amit Anand, Managing Partner of Jungle Ventures, noted that there are many programmes from government agencies such as SPRING Singapore and the National Research Foundation that provide support to early-stage start-ups.

Venture capitalists and investors discuss the "State of the Investment Ecosystem in Southeast Asia".

The region itself – Southeast Asia – is seeing strong growth, and there are a lot of ideas that have potential to do great things, said fellow panelist Mr Vincent Lauria, Co-founder of Golden Gate Ventures.

However, Mr Lauria felt that the investment ecosystem here was still greenfield. “There is a need for better understanding of what do start-ups here look like, and what investors are looking for,” he said.

Indeed, different parts of the world tell different stories about risk-taking, observed Mr Hugh Mason, Co-founder of JFDI Asia. In Southeast Asia, with its history rooted in trading, old money is more familiar with investing in tangible goods such as oil palm and real estate. “One of the challenges in securing funding is the expectation (from investors) that businesses are going to spit out money,” he said. Digital businesses, however, usually experience a slow climb over the first one or two years, and many may have hundreds or even thousands of users but no revenue in the early stages.

Mr James Chan, Principal with Neoteny Labs, agreed that profile of investors in this region was generally different from that in the United States, where those who put money in tech are often those who have made money from tech. “Here, the ratio is lower, and that affects how the fund managers put money behind companies,” he said, advising start-ups to do their homework before talking to investors.

“You have to know what sort of investors you are looking for. At the end of the day, you have to decide if there is a mutual fit, and whether you fit into their investment appetite.”
For example, the startup will need to be clear if it is going to be a totally disruptive play and if the investor will want to fit into that, or if it is going to pursue the model of bringing in proven solutions and adapting them to meet the needs of this region.

For investors like Jungle Ventures, one area that piques their interest is that of small and medium enterprise (SME) solutions. “A lot of money is being spent on SME productivity and the cloud. SMEs are looking to be more efficient and are open to new products and services. That is a sweet spot for someone like us.”

Mobility is another key area cited by many of the panelists, especially with the proliferation of cheap smart phones in the region. Besides the “obvious markets”, mobile operators are also playing a key role in driving innovation in this space, especially in countries like Indonesia and the Philippines, noted Mr Chan. “There will be a tremendous potential for uptake as the middle class grows.”

Indeed, Southeast Asia as a region presents many unique opportunities for start-ups and investors alike. “Many people talk about Singapore’s tech startup ecosystem as being the Silicon Valley of Asia. We’re not. While we get inspiration from Silicon Valley, it is time for Singapore to trail-blaze,” said Mr Mohan.

Supported by the Infocomm Development Authority of Singapore, SPRING Singapore, Action Community for Entrepreneurship and the National University of Singapore, this year’s Echelon attracted a total of 3,000 participants in six satellite events in Japan, Indonesia, Philippines, Singapore, Taiwan and Vietnam. In Singapore, the event was held at the University Cultural Centre on 11-12 June 2012 and included a start-up marketplace featuring 50 companies.