Silicon Valley and New York might still be the most attractive locations for startups, but the competition coming in from the APAC countries is growing intense. Over the last half a decade or so, total startup fundings in the Asia-Pacific have been on an upward trend, while that in the US have been slightly tapering off (venture capital funding was ~41% for both locations in 2017). China has emerged as a serious ‘startup haven‘ to reckon with – while both Singapore and Sydney (NSW, Australia) have buzzing startup scenes.
In terms of local connectedness opportunities for startup founders, both Sydney and Singapore are located in the top ten list of cities worldwide. While the former accounts for nearly half of all the startups in Australia, Singapore too boasts of well over 2000 startups. In fact, a 2017 Startup Genome report placed Singapore right at the top in terms of startup talent/innovation availability. In what follows, we will do a point-by-point Sydney vs Singapore comparison, and find out which of the two cities offers bigger advantages to startups:
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Sydney benefits from natural resources; Singapore focuses on innovation
Compared to Sydney in particular, and Australia in general, the total volume of natural resources available in Singapore is much lower. The sheer extent of readily available resources give Sydney a headstart – a significant competitive advantage to the startups over here (particularly those in the primary sector). On the other hand, in Singapore – the emphasis is more on making the most from the relatively scarce resources. This is precisely where the importance of innovation – for engineering and biotech and advanced manufacturing – comes into the picture. Given its small size, the growth of Singapore as the most competitive Asian business nation has been nothing short of remarkable.
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Which sub-sectors are thriving in Sydney and Singapore?
The multi-dimensional startup ecosystems of Singapore and Sydney make both of them great places to do business in. Fintech leads the way in the two locations: on average, 6 out of every 10 fintech companies in Australia are Sydney-based, while Singapore is home to nearly 300 fintech startups. The digital media business sector has also taken off in a big way in Sydney and Singapore – with the former serving as the headquarters of multiple leading media companies (the Australian digital media market will be worth >48 billion by the end of this decade). In Singapore, reports show that one-tenth of all VC funding in the last 6-7 years have gone to the digital media sector. Apart from these, adtech is the other dominant startup sector in Sydney (even though the growth rates of the advertising industry at the national level have been flat) – while big data & analytics startups in Singapore have received more than 5% of the total local VC investments. There is room for startups from different sectors to enter the two markets and earn big.
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Co-working spaces and the cost factor
Both Sydney and Singapore have close to 2000 registered startup companies, with the Asian city-country having a slight lead (1800+ vs ~1600 in 2016). However, with close to 50 coworking spaces, Sydney has an edge over Singapore, where around 30 coworking spaces can be found. Australia is the more expensive place to start off a new business too with nearly 3X higher office rent figures ($107000 vs $37000) and considerably more pricey office spaces ($85/square feet in Sydney; $30-31/square feet in Singapore). The average corporate tax rates in Singapore (~17%) is also quite a bit lower than that in Sydney (can go up to 30%). The governments at both places play a proactive role in the growth of startups over there – with a multitude of favourable policies, tax benefits and other initiatives. For example, the ACE Startups Scheme in Singapore offers easy financial help for entrepreneurs, while the Entrepreneurs Infrastructure Programme of NSW tackles a lot of the networking & finance requirements of Sydney-based startups. The R&D tax incentives implemented in Sydney are also worth a special mention.
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Singapore marginally ahead of Sydney for fintech startups
In 2014, Australia had less than 90 fintech companies. Cut to 2017, and that figure has surged to 590 – underlining the remarkable growth of this sector in the last half a decade. Nearly 60% of these companies are based in Sydney – making the ‘Harbour City’ the ‘fintech hub’ of the country. The fact that fintech investments Down Under are rising at a time of globally declining trends is all the more remarkable. Singapore has an even stronger fintech ecosystem – with close to $990 million being invested on this sector in 2017 alone (in 2016, Australian fintech sector received $670+ in the way of investments). Wealthtech, payments and lending are the three fintech startup categories that are growing the fastest in Sydney. Silot and InstaReM are two of the leading fintech players in Singapore.
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Business environment
There is a lot in common, when it comes to the basic business legalities for startups in Sydney and Singapore (both taking features from the UK system). The two locations offer uniformly conducive environment for business – facilitating new entreprepreneurs to kickstart their businesses here. However, Singapore once again has slight advantages in this regard. While there is little to separate the countries in terms of ease of starting a business (in a World Bank report, Singapore and Australia occupy the 6th and 7th slots respectively) – Singapore offers more protection to minority investors, and has easier procedures for business contract enforcements as well. It’s not for nothing that Singapore has remained the ‘easiest place to do business’ globally right through this decade. Sydney, with all its startup-friendly policies and venture capital availability, comes in at the 15th spot in the World Bank study.
Note: The border clearance processes of Singapore have also been recognised as the most transparent and efficient in the world.
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Singapore has the ideal infrastructure; Sydney has some catching up to do
From space allocation and mentorship, to incubation and business acceleration, the government of Singapore offers specialised assistance to startups at various stages of growth. The Australian government (the NSW authorities in particular) have a similarly supportive attitude – but according to many entrepreneurs, there are still gaps in the day-to-day interactions between the government and the Sydney startups. What’s more, life is just that bit easier for venture capitalists in Singapore – since funds can be obtained from the government, with an expected return as low as 5-6% (in other wards, Singapore has ‘more VC funds’ than Sydney). The Australian startup hub definitely has the more naturally innovative minds – but the inherently risk-averse nature of many Aussie investors are somewhat holding things back. Political stability, peace and timely assistance are bolstering the startup scenes in both Singapore and Sydney – and at present, these helps are making a more telling effect in the Asian island nation.
Note: A couple of months back, AirTrunk – a fast-developing Singapore startup – raised $850 billion as funding, for a business expansion in the APAC region. Incidentally, the company also has centers in Sydney and Melbourne – and has plans to pump in funds in these centers too.
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What are the entrepreneurs thinking?
Understanding the mindset and the thought processes of the business entrepreneurs/founders at any place is a great way to predict how the startup scenario will pan out over the long-term. According to the 2018 Startup Genome report, more founders in Singapore has the typical ‘entrepreneur mindset’ (32% vs 24%) – while those in Sydney have a slightly greater inclination to emerge as ‘business builders’. In terms of ambition, drive and hunger for success though, Australian business owners are a step ahead of their counterparts in Singapore (31% of Aussie founders have high ambition levels, while 56% of them wish to make a difference to the world; the corresponding figures for Singapore founders are 18% and 49% respectively). The naturally innovative nature of Sydney-based startup owners becomes apparent by the fact that only 30% of them have ‘relevant experience’ in their respective sub-sectors. In Singapore, this figure is as high as 44%. One thing is pretty much clear – neither at Sydney nor at Singapore is money-making the sole prerogative of the startup-owners. Many of them actually want to ‘change the world’ with their business.
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Tax rates and incentives in Sydney are great; but Singapore is even better
Apart from the much-lower average corporate tax rates in Singapore, the Asian location also has the more favourable income-tax (IT) structure. The cap on the progressive personal income taxation in Singapore is at 22%, while in Australia – the IT rates can go up to 45%. The single-tier corporate tax system in Singapore is also simpler (and rules out chances of double taxation) – while in Australia, dividends are also taxable, according to the ‘franking credit’ (tax amount paid by company) mentioned in the statements. It also has to be kept in find that the 43.5% refundable tax for Aussie startups with turnover <AUD 20 million (under the R&D tax incentive programme) is a major incentive for people looking to start businesses in Sydney. There is, however, a difference in which foreign-sourced funds are managed by the respective governments. While resident Aussie companies have to pay taxes on profits earned anywhere in the globe – the profits earned outside of the country are not taxable in Singapore.
Note: In terms of enabling trade (openness to trade), Singapore emerges as the clear winner, While it has the top spot in a 2016 report, Australia is listed at the 26th spot.
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Where are the more knowledgeable startup founders located?
Once again, the numbers are close – but it seems that Australian entrepreneurs, on average, have greater business knowledge than those in Singapore. A recent report pegged the ‘theoretical know-how index’ of Aussie founders at 5.8 – significantly higher than the 4.9 index for Singapore-based founders. In terms of practical know-how too, Sydney edges it – albeit the fight is closer (5.7 vs 5.3). The metropolitan GDP of Sydney (~$335 billion) is much higher than that of Singapore (~$270 billion). This automatically means that the size of the local market is greater in the Australian city. In Sydney, founders also have a greater sense of being part of a community (‘sense of community index → 7.5’). In both the places, founders regularly interact with each other, and strike up mutually beneficial strategic partnerships.
Note: The average salary of a corporate professional in Singapore is around the $3100 figure, slightly lower than the average salaries of $3500-$3600 in Sydney.
10. Availability of qualified workforce
Human capital is the biggest asset of any startup – and there is no shortage of highly-qualified human resources in either Sydney or Singapore. Nearly half of the total employable population in Singapore hold advanced degree certificates (or diplomas) in their respective fields – while 4 out of every 10 members of the Australian workforce can boast of having tertiary qualifications in their CVs. Finding and recruiting suitable, qualified workers is fairly easy at both places. However, the differences in the work hours and the minimum wage (nothing specified in Singapore; AUD $17.70/hr in Australia) have to be taken under consideration. While Singapore does not allow people to work for more than 12 hours in a day, the maximum work-hours in a week for Australian workers is 38 hours.
Note: The procedures for registering and protecting Intellectual Property Rights (IPR) are more or less similar in Sydney and Singapore.
11. The flow of startups from Sydney to Singapore
The recent trend of Australian startup companies to expand in Singapore – with a view to nurture and grow their businesses – is interesting. While there is no doubting the merits of the startup ecosystem in Sydney (and, of course, the government initiatives), experts feel that the tax incentives and other assistances are targeted more towards companies in their absolute nascent stages. For startups that are a bit more established, Singapore is probably the easier market to tap into, for funds and collaborative networking, and even customers. There is just a bit of additional bureaucracy in the research support incentives in Sydney, which is not present in Singapore. However, as multiple entrepreneurs have confirmed, startups are NOT LEAVING Sydney in favour of Singapore. Instead, the Aussie companies are looking to streamline and speed up their growth by strengthening their presence in the Asian market.
Note: The Dream Collective, Shootsta and HashChing are some of the major Australian companies that have initiated plans to expand into Singapore.
Sydney is a relatively peaceful city with a charming lifestyle – which adds to its attractions as a startup haven. While Singapore’s lifestyle is probably not as alluring, the stability and peace in the country offers encouragement to entrepreneurs. The inflow of foreign direct investment (FDI) is, understandably, much higher in Sydney, unemployment rates are lower, and the cost of a single-bedroom house is roughly the same at the two places.
Sydney, as has been pretty much well-documented, is a terrific place for launching a startup – particularly tech startups. However, from our discussion above – it is pretty clear that Singapore has certain extra advantages for new businesses. Both the places are certainly in the race to become the ‘next Silicon Valley’, and it seems that Singapore has taken a slender lead in this race.
Hussain Fakhruddin
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