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Striking a balance between capitalism and intervention
A COUPLE of months ago I was travelling for a series of industry events, and I noticed that every self-respecting city with over 250,000 inhabitants was trying to cast itself as Silicon Valley 2.0. I visited Malta's "smart city" - which turned out to be a largely empty office building in a secluded suburb with slightly faster Wi-Fi than the rest of the island. Cologne, a German city on its western borders, has more beanbags and Fussball tables per square meter than San Francisco during the 2001 dot-com bubble. Amsterdam is trying to get a seat on the tech table; Tel Aviv is advertising its impressive startup scene; Cambridge, for some reason, is calling itself Silicon Fen these days . . . the list goes on and on.
Singapore is no stranger to this ambition - and it shouldn't be. The country has the talent pool, the educational infrastructure and, crucially, it offers easy access to South-east Asia - the third largest market in the world after the US and the EU. But we (I've been here for 20 years, it's "we" now, Singapore) come with our own baggage, too. Palo Alto's housing costs didn't start exploding until after several startups made global traction and started building big HQs. Singapore didn't need its own Facebook or Apple to have unaffordable rents. This makes bootstrapping a lean startup a much bigger challenge than the guy paying 200 euros (S$319) rent a month in Malta's Smart City.
Our government, as it so often does, decided to step in. It implemented a funding scheme for technology companies in which the government provides up to 85 per cent of the co-funding. Predictably, the notoriously pro-small government Financial Times was critical of the move: "Singapore is a popular place to launch a tech startup, but the generosity of government support means many 'zombie' businesses struggle for years while employing only a handful of people and earning pitiful sales", they wrote in May 2017. The funding scheme was so generous that it ended up funding mediocre deals, they went on to write.
As someone who has been part of the Singaporean startup scene - if you can call it that - I don't agree with that FT assessment, and I actually would argue the polar opposite: The government has struck a remarkably good balance between raw capitalism (let the weak ones die and may the best ones win) and unobtrusive intervention.
In the insurance technology sector (insurtech for the cool kids) in which I operate, the Monetary Authority of Singapore (MAS) has been very hands-off. Anyone who is developing an interesting idea is being called in to make sure that they play by the rules. They'll even point you in the right direction if you're looking for subsidies through the Financial Sector Technology and Innovation scheme (FSTI) - which is generous but wouldn't have kept the lights on in my very modest office.
Here's what the MAS doesn't do: It doesn't pick winners - a strategy that the FT apparently confused with the opposite: supporting losers. They'll accommodate startups and let everyone fight it out. They don't steer the market. But by giving young startups a fighting chance, Singapore may be able to avoid a Chinese scenario where two players (Tencent and Alibaba) have created a duopoly in the tech scene - the kind of consolidation that we also see playing out in the US.
Even though the MAS has been supportive to us - which has been extremely helpful - it is important to note that they have never explicitly green-lighted our business plan from a regulatory perspective. But the fact that they're aware, proactive and approachable is a huge advantage over regulators in other countries who have retrenched and are firing blanks at the blockchain innovators in their market. Even now that we are planning an Initial Coin Offering (ICO) - a way of fund raising that has thrown regulators globally in a state of panic - the Singapore government has stepped up and set some clear parameters: if you play by their rules, your ICO is not considered a capital markets issue.
What this approach has led to is an ecosystem of extremely viable insurtech startups which - by design - are already playing by the rules once they start scaling and the rubber hits the road. This is a huge factor in attracting capital. When a VC can choose between a Japanese insurtech platform - where the regulator is still finding its footing when it comes to ICOs and token-based products - and a Singaporean one (which has had monthly meetings with its regulator since its incubation) the choice is easy.
We can see the outline of the results of the MAS's approach taking shape right now, in real time. "Singapore Poised to Become a Hotbed for Insurtech in Asia", read a recent headline on the digital publication Fintechnews. And I can see it all around us. Startups like Anapi, Axinan, Inszure, Gobear, Policypal, Moneysmart are all in a position to scale at least regionally; and the regulator has worked very hard and smart to make all these stars align.
Now it is up to us to make it happen.
- The writer is a former EVP at ABN-AMRO, a partner at PWC and is currently CEO of insurance technology startup Inmediate.io
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