As exciting and dynamic as the local start-up space has been, it has still seen its fair share of disappointment this year.
The hopefuls which have crashed and burned include Ensogo – once heralded as one of the most promising e-commerce companies in South-east Asia.
The online retailer abruptly closed its Singapore operations in June after its Australian unit ran into huge problems. This left its employees here stranded as merchants demanded payments amid a flood of customer complaints.
Ensogo’s collapse made waves in the start-up scene worldwide as one of the year’s most high-profile failures but others crashed and burned as well.
Japanese online retailer Rakuten said in February it would close its early model e-commerce marketplaces in Singapore, Malaysia and Indonesia, while Singapore-based games developer Nonstop Games was shut down abruptly in October by its parent company King, the developer behind mobile mega-hit Candy Crush Saga.
Tech newbies that failed within three years of setting up, according to Acra’s records as at the end of 2015.
Technology services start-ups that failed.
Tech manufacturing start-ups that bit the dust.
Ride-sharing start-up Karhoo told its employees last month, including those in Singapore, that it will close down after starting up a year earlier. The firm, once touted as a possible rival to Uber, had aimed to launch here by the first quarter of this year but failed to do so.
Smaller and lesser-known start- ups which exited the stage with less fanfare include local firm Novelsys, which used wireless charging tech to create consumer products.
Novelsys started on a solid footing, winning a number of industry awards and raising funds on crowdfunding platform KickStarter. It was even awarded a grant by the then-Media Development Authority’s iJAM scheme in 2014.
The No. 1 reason why start-ups fail is that they run out of cash before achieving enough revenue from paying customers.
PROFESSOR WONG POH KAM, of the National University of Singapore Business School.
Creating and growing a successful start-up is always going to be an incredibly risky, time-consuming endeavour.
MR JUSTIN HALL, principal at venture capital firm Golden Gate Ventures.
“However, these stood for nothing as we failed to build a scalable business to enter retail in the competitive hardware space. We failed to find a product-market fit,” Novelsys founder Kenneth Lou told The Straits Times.
But Mr Lou, 23, is not giving up. In August, he kicked off Seedly, which aims to “simplify personal finance for millennials”. Seedly is a personal finance mobile app that helps users aggregate spending cards and bank accounts and generates reports on the finances.
The app has more than 2,200 users and categorises about 150,000 transactions worth $65 million.
FAILURE: IT’S COMMON
Competition in the start-up world is cut-throat, particularly in today’s digital age – which means firms go as quickly as they come.
Within the tech space, in particular, many local start-ups fail every year, says Professor Wong Poh Kam of the National University of Singapore (NUS) Business School. About 25 per cent of tech newbies failed within three years of setting up, going by Accounting and Corporate Regulatory Authority (Acra) data as at end-2015, he notes.
Technology services start-ups had a higher failure rate of 28 per cent, while 22 per cent of tech manufacturing start-ups bit the dust.
“The No. 1 reason why start-ups fail is that they run out of cash before achieving enough revenue from paying customers,” says Prof Wong, who is also director of NUS Entrepreneurship Centre at NUS Enterprise.
This was the case with Ensogo, he adds. Even though it raised tens of millions of dollars – it was once listed on the Australian stock exchange – it never achieved profitability. “As its cash ran low, investors refused to inject more money to keep it going, and it was unable to attract new investors.”
Mr Frank Koo, head of talent solutions (South-east Asia) at LinkedIn, says: “In a highly competitive market such as Singapore, start-ups need to constantly find business opportunities that give them a unique advantage.”
One way to do this, notes Mr Koo, is by tapping their professional network to find a competitive edge in various aspects of their business.
“Professional connections can also help in forging partnerships, collaboration and even business opportunities in new markets through professionals… overseas.”
STILL ON FIRE
Even with some spectacular failures, Singapore’s start-up scene has undoubtedly evolved and thrived.
Mr Justin Hall, principal at venture capital firm Golden Gate Ventures, notes that a few things have become easier for new firms, like accessing early-stage funding. Investors and multinational corporations – notably from China – are also placing more attention on start-ups here.
“I see South-east Asia continuing to grow organically, both in start- up formation as well as venture capital financing,” he adds.
“Even in the light of global economic shocks, the fundamentals of the region – as one of the fastest-growing middle classes in the world, for instance, and with incredible upside across the indices of Internet penetration, mobile phone adoption, and online consumer spend – I think South-east Asia will only go from strength to strength.”
The most attractive sectors, he notes, are marketplaces, alternative lending platforms, payment storage and facilitation (or digital wallets and the ability to use that money both on- and off-line), as well as logistics.
But even the brightest of outlooks will not guarantee an easy journey.
Mr Hall notes: “I don’t think it’s any harder for Singaporean start- ups to find success today versus three or four years ago… Creating and growing a successful start-up is always going to be an incredibly risky, time-consuming endeavour.”
What keeps Seedly’s Mr Lou going is the belief that “with energy, some funds and the right skillsets and mindset, we are able to build anything we put our mind to”.
“Hopefully one day, Seedly will become a household app that helps a million millennials manage their day-to-day budgets and finances.”
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