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Wednesday, April 17, 2013

7 years on and still no YouTube in SG?

Looks like i was quite right back then to say that the environment conspires to ensure that our startups do not scale into the You Tubes of the world. Things are improving with recent exits and higher valuation rounds. But we are still stuck at the 10-100M valuation and exit area. The geographical constraint and market size is really a major determining factor. And with some many other startups operating in their home country in bigger markets, it is hard for SG based one to win in say China or USA or Europe.

 And i still stand by the good university statement. In fact the recent bunch of funded startups in Singapore are all from good schools and are founded by academically smart people. ======================================================================== (Article First posted on sgentrepreneurs Oct 2006)

I have been reading with interest about the recent debate in Singapore about whether we will ever produce our own YouTube type of company. Here is my take of the issue. I will confine my discussion to just dotcom type of companies since that is the area I believe I am qualified to comment on. To be brief, I believe it is difficult but not impossible for a local startup to duplicate what YouTube has done. That is to say, gather tremendous momentum over a relatively short few years and sell out to a larger firm for a world class payout. That means companies like my own – JobsFactory, Hardwarezone, Shareinvestor are all out of our league. 7.1M give or take 5M is not a world class, attention grabbing payout.

Here are some factors I believe are most important. Many have been debated before.

1) Size of market and relevance of local content.
Sad to say, this is a very real problem. Singapore market is way too small and SE Asia is too non-homogenous for effective economies of scale, even online. The way I see it, this is the major obstacle for any wannabe YouTube based in Singapore. Even the big names that succeed in USA find it tough to penetrate a non-english market easily even with cash and brand. Ebay failed in Japan, Google is losing to Baidu in China etc. Even between USA and Europe, there is difficulty. So I believe for a firm to succeed in Singapore, the concept has to be deceptively simple. Ala google style such that is does not require too much localization across the regions and more importantly, it has to be built for the big markets like USA or China. And you will probably need to start with one or the other since language and styles are so different. Chinese sites are messy with loads of flashing banners which US visitors hate.

A good local example is wholivesnearyou.com. I think it is a wonderful local site with great traffic. I estimate they are doing 5-10M page views per month which is very decent for a local site. They are very web 2.0 and very community led. However, it looks too local to me and obviously is focusing on local market.

2) Lack of vision or rather a different vision for local startups
Most entrepreneurs in Singapore do not have a vision to be a YouTube. I think our vision is to grow a good business, impact people in a good way and make good money. It is not to change the entire world. Again, I think most people in the world are like that. Americans, China PRCs are different, by default of their market size and population, doing well in their market, means conquering half the world already. Frankly, I feel there is nothing wrong with being happy and contented with what we have. One other observation I have is that many who do have world beating dreams are usually very very young startups who seriously have not done anything significant with their company. Once their company has some success, I think the environment conspires to reduce the scope of their dreams. We have exceptions of course, Ron Sim, Sim Wong Hoo, Wong Peng Kin are good cases to learn from.

 3) Lack of access to good quality funds.
Even if a firm overcomes the above two and has a great product or service which is global in outlook focusing on one of the major markets that has scale. And the firm has a strong founding team with brains, strategic prowess and management depth, they will still need money to make it all work. Now, frankly if a company has such traction in a major overseas market, then I believe they will get funding from valley investors rather than local ones.

The above 3 factors to me are the most pertinant in the discussion. There are of course others I am sure.

So does that mean we have no hope? On the contrary I believe we do have hope, it is just that we are against a gradient. So if any company does succeed, I truly applaud them. Some examples which I think can have hope? The characteristics I venture to guess will be as follows : Built with a larger market in mind. Either China or USA. But business can be based in Singapore for development, taxation, IP etc purposes. Web 2.0 community led concept. Spread like wildfire across the targeted market. May not even be known in Singapore. Probably focused on young. Esp since young are slightly more homogenous across the world thanks to cross cultural influences. Simple software and at least American standard designs and branding. Many local sites (mine included) are not up to standard still. We have basic grammatical errors, branding not looked into etc.

World class credentials from management team. Sorry guys, but I do not think a couple of fresh graduates will make it unless they are from Stanford, MIT or harvard, or maybe IIT, Bei Da, Oxbridge. Pedigree attracts pedigree. It’s a fact. There are exceptions of course, but I am taking an educated projection here. Funding from similarly well known firms. Perkin, Sequoia etc.

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