Singapore's startup ecosystem is growing. A study by Compass released in July this year ranks it the strongest in Asia. This growth is a result of government initiatives including numerous tax benefits and financing options that help founders access funding.
Robust Intellectual Property protection and transparent compliance rules also attract foreign founders. While hiring talent can be difficult, identifying the right procedures can make the hiring process less tedious.
Extensive tax exemptions
Startup entrepreneurs can benefit from a tax exemption scheme, which fully exempts a newly incorporated company from taxation on the first $100,000 of taxable income and 50% of the prevailing corporate tax rate for the next $200,000 of taxable income.
All qualifying startups, including foreign-owned ventures, can apply for these exemptions. They can also apply for tax incentives based on high-value addition activities, research and development, and industry-specific tax incentives.
The government provides financing through various grant schemes, which have succeeded in growing Venture Capital investment in Singapore. Total VC investment crossed $1 billion in 2014, having grown over 100% – from $454 million – in just one year. Early-stage VC investments are supported by an Early Stage Venture Funding Scheme, which targets local technology startups.
In September 2015, the government announced the third allocation of the Early Stage Venture Fund under which it will invest $40 million to encourage Large Local Enterprises (LLEs) to support early-stage technology companies. Startups can also raise money from grants such as the ACE grant, iSPRINT, and iSTART.
Easy access to high-growth markets
Singapore provides easy access to Asia's growing markets. According to the Compass report, about 50% of Singaporean startup customers are located abroad with China and Indonesia leading as top target markets. Singapore is also attracting foreign startups to set up headquarters here. Each year up to 200 Indian startups move their headquarters to Singapore.
Robust IP protection
Protection of intellectual property is a high priority for startups. Singapore has an established framework for IP protection that has become highly respected. Companies cite a robust IP protection system as a reason for moving their research and development divisions to Singapore.
Business registration can be a hassle to budding entrepreneurs who have to focus their attention on product development and market growth. Only three processes are required to incorporate a new company, and these can be completed in less than two days.
Electronic procedures and applications also make business registration a simple and easy process. Professional services firms can also help founders identify the right business structures to extract the most benefit out of tax incentives and capital gains rules.
Although compliance processes are simple in Singapore, professional services firms can help startups prepare early to identify and successfully meet compliance requirements.
Hiring the right talent
Startups find it difficult to hire the talent they require, and hiring foreign talent can also take a long time. For instance, it takes 17% more time to hire an engineer in Singapore compared to Silicon Valley.
Professional services firms can help startups match the right candidate for the right work pass. Since many technology startups fall within niche industries, their hires may be covered in the skills-in-demand list published by the Ministry of Manpower.
Singapore is emerging as a leader in nurturing innovation and entrepreneurship in high technology. However, startup founders can find it difficult to hire talent, which is essential in a highly specialised industry. Grant application processes and compliance rules can be a tedious experience for entrepreneurs who would rather focus on perfecting their product.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Satish Bakhda is the Chief Operating Officer at Rikvin. He brings with him over 15 years of experience in the corporate services industry and is a regular speaker at marketing events around the world. He is also a consultant on matters relating to incorporation, relocation, accounting and taxation in Singapore.