Startup Advisories

Why many Singapore entrepreneurs fail to think big

“What is the total addressable market (TAM) of your product?” I asked. Joe (not his real name) was pitching to fund his new idea under our Tri5 Angels fund. He wanted to create a marketplace for home bakers to market and fulfill their orders via a mobile app.

“There are potentially 6,000 home bakers in Singapore,” he replied. I found out from HCook, a similar competitor, that a home baker takes home around US$354 a month. That translates to about a US$25 million GMV per year. If the platform charges 10 percent on GMV, that leaves it to a paltry US$2.5 million TAM annually.

Despite how energetic and excited he was, I could not support his idea for investment. Going through over a thousand pitches in the last six years, I found that many Singaporean entrepreneurs are finding pain points which have too small a market defined. So what’s the importance of defining a sizeable TAM? After all, it is just a pitch, right?

Importance of a big vision

How big your company grows is as big as you think it to be. Elon Musk dreams of colonizing Mars and being the future of driverless cars. These plans, however insane they may be, are put into action, and talented people join him in doing something that is greater than themselves. Having a big vision correlates to having a large TAM, and that gives everyone, from yourself to all stakeholders of the company, a big exciting goal to work towards.

Having a big vision correlates to having a large TAM.

It becomes a matter of optics. Would you rather wake up each day in excitement to resolve a problem that affects 100 million people or just trying to resolve a problem for 6,000 home bakers?

Put yourself in the shoes of a talented engineer. Would he be interested in trying to bank the 320 million unbanked population of Southeast Asia, or be bored building an ecommerce management system handling specifically 6,000 home bakers?

For investors, they look for the next big win to get the best returns on investment. And a TAM with limited growth potential will not be high on their list for consideration.

Resistance to thinking big

So why are a large number of Singaporean entrepreneurs not thinking bigger in their vision? I asked ecosystem members for their feedback.

Not understanding other geographical markets

Singaporeans may travel overseas a lot, but it is mainly for leisure rather than to observe and understand the differences and problems that specific markets face. After all, people go on holiday to see what the country has to offer rather than to hear the problems they have.

So when entrepreneurs return home to solve a pain point and build a business, it is still very much focused on Singapore, a market that they are familiar with. They don’t include other markets as they don’t understand how those markets work. Unfortunately, resolving pain points in a market of 5.5 million people, which constitutes 0.88 percent of the 620 million population of Southeast Asia, isn’t going to be a big problem to resolve.

Lacking heroes: The need for more successful Singapore entrepreneurs as poster boys

Singapore has to be proud of the born and bred Singaporeans that built (and are still building) successful local startups. Some such startups are Carousell, Ninjavan, Zopim, Shopback, Love Bonito, Reebonz, CoAssets, JobsCentral, and SgCarMart, all of which have great exits or are still fundraising with sizeable valuations.

But such successes are still few in number. There is also a lack of exposure of such successful stories, which fails to inspire the next generation to think beyond Singapore shores.

Perhaps there could be a way to parade these successful entrepreneurs like how Singapore sportsmen are glorified to inspire the next generation.

Embarrassment at failure and the Confucian mindset

In Singapore, failing is an important cultural taboo, especially during schooling years where grades are everything. I find this sense of hesitation among Singapore entrepreneurs when I ask them to think bigger. To them, thinking bigger means a higher risk of failure and is not something they are ready to accept.

To further complicate the issue, a community member explained to me how the Confucianmindset is embedded.

In this mindset, there is a need to respect elders and understand your place in society. It is sub-consciously incorrect to think too highly of yourself and to dream big because you have to remember your social standing and not create chaos. In fact, disruption is not an acceptable outcome. I found this line of argument debatable but wonder at times whether it holds water when speaking to Singaporean entrepreneurs.

Conservative angel investor community

The angel investor community in Singapore is still far from being a vibrant, mature, and sophisticated one that supports entrepreneurship with a pay-it-forward mentality. Rather, they are conservative, think short-term, and are risk-averse.

Many would give paltry sums of up to US$18,000 per investment and would chide their potential investees for thinking over the moon. In their view, startups should not focus on vision, but on getting limited returns in the quickest fashion, without building a long-term business.

How to think bigger

Take a journey out of Singapore

Seeing is believing. The Tri5 Ventures team alone traveled to 13 cities in a year to understand the various startup ecosystems and the differences in markets so that we could value-add to the Singapore ecosystem. We had many incorrect assumptions at the start.

As an entrepreneur, it is all about seeing things for yourself, exploring, talking to locals, and even embracing the culture to understand its pain points. Before even proposing a pain point, choose one to two other geographical markets and travel to that place to see if your product works. You will be surprised by the different requirements that market has.

Find big-minded business mentors

I was fortunate to have an old family friend who was a CEO of his own public listed business. He taught me to think big, shared his strategies, and told me how he tapped into various global opportunities. My view of the world was so limited compared to his.

It is not easy to find business mentors who have been there and done that on a large scale. But when you find one, it really changes you. Sometimes, it is all about being thick-skinned and asking for a meeting. When you get a big-minded mentor, get ready to be inspired by their energy and gung-ho attitude.

Even if you do not have a business mentor whom you can engage with, start to read biographies of successful business people and how they viewed and changed things. Pick up nuggets of knowledge and skills that they used to succeed and apply it to your own entrepreneurial life.

Get a non-Singaporean co-founder

In my previous pro-bono incubator, we helped 38 startups with at least one Singaporean founder each to obtain an aggregated angel funding of US$5.14 million.

Walking with many of them on their journey, we found that startups that had non-Singaporean co-founders tended to present a solution on a global scale more clearly. On the other hand, the full blue Singaporean teams had a tendency to provide textbook answers.

Non-Singaporeans come from a different background which may provide fresh perspectives in addressing a pain point and in developing a scalable and global product.

Select suitable investors

Similar to having a big-minded mentor, select investors who are more open and those who think big. If you face one who tells you to drive for quick profits instead of building a long-term scalable business, you would be better off not having them on your shareholder’s list.

So what are you waiting for? Start to think big today!

This is the fourteenth article of the “Startup Advisory Clinic” series.

This article first appeared on Tech in Asia.