Climbing the Totem pole in Southeast Asia

Recently, a Singaporean founder and CEO of Visier, remarked that the reason that there aren’t more Singaporeans running large companies is because culturally, they are too risk averse. This flows through to why it can be difficult for B2B companies to scale their sales operations in Southeast Asia and why they tend to move their focus to the US once they get past a certain point.

Based on experience, it generally takes 12-18 months of knocking on doors in the region before prospective enterprise clients will take a start-up seriously. In Singapore, it’s seldom a question of whether the product is a “vitamin” or a “painkiller” or whether it’s able to increase sales or reduce revenue. More often than not, it boils down to “Who else has worked with you?”

This leads to early-stage companies being forced to climb the brand totem pole, starting with smaller unknown local brands, working up to known regional brands, and then moving on to the larger multi-national prospects. This can be challenging at times because the issues that companies face differ based on their size so different development strategies are needed to be successful in the enterprise market.

The focus on “loss avoidance” as opposed to “value creation” means that most Singaporean companies fall into the late majority in the technology adoption curve. This doesn’t need to be the way, but it would require a relatively large cultural shift to occur. Risk isn’t a bad thing, it’s a necessary part of life. If you were to never take a risk, then you would never leave your bed and that wouldn’t be much of a life.

Howard Marks recently wrote about how winning in markets requires that you have a few winners but fewer losers or by having a lot of losers but more winners. “Neither maximizing winners nor minimizing losers is necessarily enough.” He draws an example from the final at Wimbledon, where Alcaraz was able to beat Djokovic by hitting more winners at the cost of having more unforced errors as well.

This doesn’t mean that risk is inconsequential, but it is an inherent part of playing the game. Companies can do well even if they fail sometimes as long as they have more successes than failures or the outcome from the successes is larger than the outcome from the failure. Most of the time, the risks in business partnerships can be ringfenced, ensuring that they are bound on the downside (i.e. the maximum cost is the cost of the contract).

Faced with this mindset, I’ve seen a number of Singaporean start-ups turn their attention to the US and other developed markets once they prove out some level of product-market fit because it’s easier to scale. This transition can be made more difficult if they have been weaned on the teat of “Singapore Inc” where they are lauded in the local press and manage to cultivate relationships with multiple government linked entities. These relationships can be great to build a foundation of reference customers and further develop the product. However, they can hinder the company from asking questions about how they could develop more aggressively internationally because they perceive that they are doing well.

Summing up

Personally, I’m incredibly lucky to work with some tenacious and relentless Singaporean founders that are early in their entrepreneurial journeys. They’re optimistic about solving challenges in the markets that they’re operating in, but they are typically hamstrung by the reception that they get from more established companies domestically. More of them are looking to move their focus offshore earlier in their journeys. If there isn’t a shift in attitude locally, then it’s likely that the next generation of entrepreneurs will want to skip a step and?start their journey in the US or another developed market, which would be a real loss for Singapore Inc.