Insights – Comparison of Singapore vs Dubai Startup Ecosystems

What are the pros and cons of the different stages of the startup ecosystem development in Singapore and Dubai? The guest speakers are members of the Club, who have current and experienced perspective of
Singapore, which is widely held out to be the model for encouraging entrepreneurialism, as well as Dubai which
has recently become a popular destination for startups. The panel examined the levels of maturity and challenges
to start and scale a business, and revealed the profound differences, particularly in government policy and
support. What are the learnings for Dubai to become an established and thriving ecosystem for startups?

Moderated by John Bailey, CEO, Side by Side Partnership, at Capital Club Dubai, the guest experts are:
• Kiran Sreedharan, Managing Director, Spade Consulting
• Akshay Arora, CEO, Euphoria Capital Partners
• Bala Chandra, Managing Partner, Vernalis Capital

JB: What are some of the important aspects in the more advanced ecosystem of Singapore that would be useful for Dubai to consider?
AA: The government plays a strong role in Singapore, with many startups, accelerators and incubators funded
and supported by the government. Some of the biggest technology companies have their Asia Pacific regional
headquarters in Singapore. The maturity of Singapore’s ecosystem is related to the country being very strong on
corporate governance, and every small detail must be done correctly. The Monetary Authority of Singapore is a
benchmark which many around the world, including DIFC, are looking at as a standard.

JB: What is the Singapore government’s response to startups that fail?
AA: If founders find themselves failing to set up, they get another chance in Singapore very easily, and this is very
common. I have friends who have been trying to set up their company for the last five years and are continuing
to get capital.

JB: It’s certainly one of the great attributes of the US market, that failure is a badge that many people look for,
because it means that they won’t make the same mistakes again and will be a smarter entrepreneur the second
time around. We don’t have that privilege here.

JB: Are there any vehicles in Singapore that help startups match skills and expectations or is it left to commerce to sort out?
KS: There are incubators and accelerators who do as a part of their offering. An incubator should convert an idea or a pre-product into a business. This is their role, apart from providing facilities and regulatory support. They help startups to identify where they want to go on their business journey? How do they structure the cap table? How much investment they should raise and when? What’s the concept of valuation? How do you make a pitch to a potential investor? Furthermore, the incubators make introductions to potential investors, and give founders
feedback on what went wrong so that they don’t make mistakes the next time around. The incubators are invested in equity, so they make money if the startup succeeds. Singapore incubators take a share of 6-8% of the startup company they house, so it is in their own interest that they succeed.

Audience: What is the first thing needed to be in place to succeed – technology, regulation or talent?
AA: Regulation is first. Government must set the intent, and Singapore did this well. If you compare Singapore universities’ R&D compared to the UAE, the former breeds massive tech talent due to the grants and funding given by the government. Furthermore, the incubators and accelerators that are also funded by the government
work like corporations and this learning as well as facilitating tech talent, can be adopted by Dubai. There are deep tech companies in Singapore, and Dubai is still evolving. The Mohammed Bin Rashid Innovation Fund is a step in the right direction, and they are supporting deep tech companies.
JB: What are some of the other important things Dubai needs to do?
AA: Besides working with universities, Singapore implemented a ‘variable incentive company’, a restructuring of
a company where the fund managers had an incentive to come to Singapore. This is currently being replicated in
Dubai, but it’s very indirect. And many VCs and family offices based in the UAE are investing large funds outside
the country.

JB: Does location matter?
BC: I have operations in the US and India, but Dubai is very conducive to live, so it does play a big factor. There is a lot of the young talent here, and the top 10% of my company would love to move to Dubai. But there’s a cost factor which is quite high, but we are still looking to expand here.
JB: Some funds managers see 100 proposals a month, but how are we going to scale these companies?
BC: Y Combinator is a highly successful tech accelerator in the US, and they generate 300-500 startups every season. They publish knowledge – templates, questionnaires, etc., so this resource is available. And there is an explosion of capital there as well. I would not have moved from the US to Dubai if it wasn’t for covid. You just
can’t create in captivity, and Dubai’s freedom and open doors has been a great boost in people moving here from the Far East and the West.
JB: How do we create an ecosystem with more educational institutions involved, so that there are enhancements in the curriculum offerings, as the skills needed for companies of the future?
AA: It is beginning to happen here. There are universities working very closely with some of the accelerators in the region. And I’ve also met a few Emirati entrepreneurs who are doing a tremendous job. In Singapore, in 2017, there were about 200 accelerators of varying sizes, whereas in Dubai we have about 40. The UAE, as part of the larger GCC, has lots of opportunities to grow, and is on the cusp of becoming the best in the region.

Audience: What is the UAE advantage? How can you build an ecosystem where we can really leverage on the competence in this region?
AA: There is a DNA of a certain territory which should be looked at while building up the startup ecosystem and not just copy Singapore or Silicon Valley. In terms of logistics, oil and gas, we can partly focus on impact investment, and ventures can test alternatives here. For example, some of the biggest startups for solar are
here. Some companies are testing hydroponics, and others how to generate water from air. Certain startups would naturally be attracted to this place, and they can become unicorns in that space, and not necessarily a fintech unicorn.

Audience: Why don’t we talk more about startup generators? Why don’t we build systems and structures to help them build companies and solve the problems in the region? Why is there so much talk about accelerators and incubators a lot earlier now?
AA: I think there’s focus on accelerators for a particular reason because in a set format, they provide you with the entire mix that a founder might need – everything in one place. Having said that, universities are organizing
competitions or hackathons which attracts tech talent. It would be good to have programmes and events for the ideation stage, which then would feed into the pipeline for accelerators.
KS: When we look at an ecosystem, it’s many moving parts – mentoring, financing, regulatory… It’s a vision that the government needs to build this country. If there is an objective for a certain number of unicorns to emerge from here, then what do they require to get there? Regarding regulation, it can be a reactive concept, because
here, when we talk of startups, we need innovation, and you can’t create policy before ideas have time to mature. It will need to evolve over time and be a system that is conducive to startups. The best way is to have many sandboxes which allow mistakes. Entrepreneurs need space, time and freedom to experiment without penalties.

Audience: How would you compare transparency in the financial industry between Dubai and Singapore?
AA: There are better corporate governance controls in Singapore which makes it more transparent, and Dubai is becoming better in controlling money laundering, to improve financial ratings, so that more fund managers relocate here.
KS: The Monetary Authority of Singapore (MAS) do well in balancing between what needs to be regulated and what does not and is a global standard. Dubai is in still evolving. Regarding transparency from an end user perspective, I find that both cities are quite opaque. Essentially there is an MAS list that you can check for
blacklisted institutions. The Authority regularly communicates alerts such as ‘These are the trends. We are not regulating them, but beware.’ Recently, it put out an advisory alert on cryptocurrency saying, ‘You may lose a substantial sum of money, so beware,” although they are very pro-crypto. And in terms of reviewing a financial
institution and if you can put your money there, that transparency does exist. But where it starts to get opaque is when problems start. Very recently in Singapore, there was a phishing scam the culprits were replicating SMSs
sent by banks, and they created websites that mimic the banking websites and close to 500 people lost a substantial sum of money. Some of them lost their whole life savings.

Audience: What should be the goals of an ecosystem? And what should the sequence be to get global capital into the UAE?
BC: If you look at UAE’s free zone concept, there are thousands of small businesses. However, the reason why VCs need unicorns is they want a 40X return, because only 3% of their portfolio will give them this result. However, unlike the US and Singapore, the UAE does not have to go after building unicorns at the cost of neglecting the many other smaller companies.
JB: To add an American perspective to this. Making a unicorn is a formula. We know how to do it. It is a process we go through to take a company and greatly overvalue it to attract and work with the people we worked with on the last unicorn. You need a large and very liquid VC environment, and you need the formula. But we can’t
produce an engineered unicorn here. We don’t have the depth and breadth that you need to have the public believe it is a unicorn. The VC model itself in its extreme forms and doesn’t lend itself to supporting a broad base of great little businesses of 100 to 300 million dirhams. I think that’s what we have the chance to build here. And
as a society, we should be just fine with that.
AA: In most economies, including UAE, 70% of the GDP is contributed by SMEs. And these are profit making companies, but they don’t get access to growth capital, and scaling for traditional ventures is not easy here.
JB: What advice would you give to the government about the structural significance of the general governance laws?
KS: I would advocate a middle path. Regulation should not stifle innovation. If you have a USA’s SEC equivalent in Asia, there’s a good chance that the innovation will not happen, but you also need a regulator with teeth. If
something goes wrong, the trust in the system should be enforced by the regulator. Singapore is somewhere in the middle. I don’t think they will go after you like the way the SEC does.
BC: In my opinion SEC doesn’t meddle so much and the US regulations are quite light handed in general. The reason is good effort, as long as you don’t intentionally carry out fraud.
AA: I think regulation here in the UAE should be homegrown and corporate governance is key.