Singapore is renowned as one of the most business-friendly countries globally, ranked second by the World Bank for ease of doing business. If you’re considering starting a tech business, Singapore offers a promising environment. The Singapore Economic Development Board (EDB) has introduced the Tech@SG program, which expedites work passes for tech-industry professionals. Before you embark on your new venture, let’s explore what you should know when launching a tech start-up in Singapore.
- Why is Singapore an ideal launch pad?
- Are you prepared for a tech business?
- Steps to Success for Your Tech Startup
Why is Singapore an ideal launch pad?
The Singaporean government’s Smart Nation Initiative aims to establish Singapore as a hub for key technologies. Under the government’s Digital Economy Framework for Action, three key strategies are outlined:
- Accelerate economic growth through digitalisation of industries and businesses.
- Foster a vibrant and competitive tech ecosystem to support businesses.
- Cultivate an Infocomm Media industry to drive digital economy growth.
These broad goals make Singapore an attractive destination for tech start-ups in Southeast Asia.
In addition to accommodating government agencies, Singapore boasts a considerable talent pool, ranking second globally in attracting talent according to INSEAD. It also has Free Trade agreements with the EU and Trans-Pacific, offering free zones for foreign companies. Moreover, Singapore provides a low-tax environment, with a flat corporate tax rate of 17 percent. Start-ups enjoy tax exemptions of up to 75 percent on the first $100,000 of chargeable income and 50 percent exemption on the next $100,000.
Are you prepared for a tech business?
Regardless of whether your tech start-up involves deep tech or innovative solutions, certain core essentials remain consistent. Key considerations include:
- Initial market research
- Existing competition
- Available funding
- Ownership/shareholding details
Initial market research
Initial market research is crucial as Singapore’s tech ecosystem presents unique characteristics. For example, while Singapore is a regional proptech hub, most real estate tech companies are portal sites rather than sites managed by developers. As a result, networking with agencies becomes crucial for tech start-ups in this sector.
If your tech start-up targets Singapore’s real estate market, bear in mind that despite a high overall homeownership rate of over 90 percent, 81 percent of Singaporeans do not own private property. Understanding such nuances specific to your chosen sector helps you develop a scalable business model.
Singapore is known as both a financial and tech hub, leading to a growing acceptance of robo-advisors among even senior citizens aged 50 and above. This trend attracts fintech firms. In the edtech sector, substantial innovation is required as education is one of the country’s most lucrative yet competitive segments. Singaporeans spend 2.5 times more on their children’s education compared to their own retirement.
Avoid making generalisations and conduct thorough research into your chosen sector before launching in Singapore. Understanding cultural and regulatory norms will provide a clearer market picture and help you determine the viability of your business model.
Existing competition in Singapore is fierce. The country surpassed the UK and Hong Kong to become the world’s most competitive economy in 2019. The government actively promotes competition and enforces a Competition Act that breaks up monopolies or cartels. Foreign tech start-ups can rest assured knowing that Singapore is committed to defying the global wave of protectionism, ensuring a level playing field for both local and global competitors. Singapore ranks fourth globally for intellectual property protection and first in Asia, providing ample safeguards for new companies. To thrive amidst competition, differentiate your tech start-up and develop a robust marketing plan.
Singapore offers a wealth of funding options with over 117 foreign banks and six local banks, rivalling only Hong Kong and Japan in the Asia Pacific region. Tax deductions for angel investors and tax exemptions for eligible venture capital funds make it an attractive destination for securing funding. Startup SG Equity is a popular initiative where the government co-invests with select third-party investors.
With numerous financing options, grants, and venture capital avenues, Singapore provides solutions for various start-ups. Take the time to research the available options. Consider reaching out to government agencies like Enterprise Singapore for direct assistance and explore the Business Grants Portal (BGP) to identify available resources quickly.
Ownership and Shareholding Details
Creating a Shareholder Agreement (SA) is crucial for any start-up. The SA outlines the rights and obligations of shareholders, protecting against share dilution when additional shares are issued. It ensures fairness among investors and clarifies the company’s direction and goals.
One significant advantage is safeguarding against share dilution. As your tech startup issues additional shares, there is a risk of your ownership percentage decreasing unexpectedly. For instance, if you initially hold 1,000 out of 2,000 shares, you own half of the company. However, if the company later issues more shares, and you find yourself with 1,000 out of 5,000 shares, your ownership will be reduced to only 20 percent.
Steps to Success for Your Tech Startup
1. Patent your device or innovation
Singapore’s strong intellectual property laws make this crucial in a competitive economy.
2. Create a detailed business plan
Develop a detailed business plan for presentations to potential investors, financiers, and government agencies. Include:
- A description of your innovative product or service
- The targeted market segment
- Forecasts for market penetration and growth
- Initial costing, especially for a Proof of Concept prototype
- SWOT analysis highlighting your main competitors
3. Seek support from incubation centres for startup and growth
If you only need a small amount of funding, consider smaller lenders or non-banking financial institutions. Explore options like Enterprise Singapore and IDA labs in Singapore for collaboration and idea generation. For local startups looking to pitch for contracts, contact Accredition@IDA to compete for government and large enterprise contracts.
4. Apply for funding
Singapore offers various funding avenues, including business loans and government-assisted funding with third parties. Check out government funding options and explore wider market sources. If your company is based in Singapore and connected to an educational institute, reach out to your faculty administration for government agency connections, mentorship, and potential funding.
5. Register your company through the ACRA website
Follow these steps:
- Choose a company name that adheres to ACRA guidelines.
- Set your share capital (minimum of $1).
- Appoint directors (at least one residing in Singapore) and list shareholders (maximum of 50).
- Appoint a qualified company secretary who is not a shareholder or director.
- Ensure compliance with administrative tasks, such as handling meeting details.
- Consider engaging professionals for the company secretary role.
- Provide your business address (not a PO Box) and avoid using a home address for privacy reasons.
- Submit the application, including supporting documents, and pay the registration fee online.
By following these steps, you can navigate the process of launching your tech startup in Singapore with greater ease and set yourself up for success. If you require assistance with company secretary services, RMS can provide expert support.
Singapore offers a straightforward process for setting up a business. However, certain aspects can pose challenges, such as finding a suitable corporate secretary and navigating available support options. Singapore’s well-regulated and business-friendly environment attracts numerous new businesses each year. To ensure a smooth start and expedite your tech start-up’s success, consider seeking assistance from professionals like RMS, who can handle administrative tasks, allowing you to focus on your technology-driven business.