The ‘Grab effect’ is inspiring a new generation of Asian entrepreneurs

Singapore has grown rich on traditional industries like banking and financial services. When Tai entered the job market, positions at multinationals still carried all the prestige, as did careers in the civil service, which offered some of the country’s best-paying jobs and therefore attracted many of the brightest minds. The results of 2016’s Singapore Graduate Barometer, an annual survey of more than 10,000 students that tracks where they most want to work, were as unequivocal as they were predictable: every entry in the top ten was a blue-chip corporation, government ministry, or utility. 

There were good reasons for Tai’s family to be sceptical. Access to venture capital had long been scarce in the region. 

“When we first started here, there was very little interest in Southeast Asia,” says Vishal Harnal, a partner at 500 Startups, a venture capital firm that opened a Singapore branch in 2013. “We had to sell people on the idea that this was an investable market.” Southeast Asia may have a huge population of 700 million, but its countries are separated by vast disparities in wealth, language, and technological development. It didn’t seem like a market where tech startups could scale. In 2015, total investment in such companies across Southeast Asia amounted to $1.5 billion. In China, the figure was almost $50 billion.   

How things have changed. According to a recent report by Singapore VC firm Cento Ventures, investors poured $8.2 billion into the region’s tech startups in 2020 despite the pandemic. This year’s figure is likely to be even higher: in the first quarter, Singapore’s startups alone attracted around $6 billion. Cento reckons there are now nine Southeast-Asian tech companies with valuations over $1 billion and 70 worth more than $100 million. For aspiring CEOs hoping to join these ranks, Singapore has almost 200 incubators and accelerators to choose from—and demand for them is rising. According to Bernadette Cho, who runs the Singapore branch of the incubator Entrepreneur First, applications are up 21% year-on-year. 

Tai is riding this new entrepreneurial wave. Her software company, UI-Licious, was born at Entrepreneur First. Earlier this year, she completed her first funding round, raising $1.5 million, much of it from Monk’s Hill Ventures, a VC firm headquartered in Singapore that specializes in Southeast Asian tech. But what lies behind this transformation? In short, the Grab effect. 

Around the time Tai started UI-Licious, Grab, a Singapore-based ride-hailing company, was at a turning point. Smartphone penetration across the region was growing fast. In 2015, around 39% of people aged 18 to 35 in Indonesia, the region’s most populous country and largest market, had a smartphone. By 2018 that figure had doubled. The picture was similar in the Philippines, where smartphone use grew from 43% to 68% in the same age group over the same period. The increase gave Grab—along with companies like Sea Ltd, a mobile-first gaming and e-commerce company—a critical mass of customers with the Internet in their pockets. 

Grab began to balloon. In 2015, its app had been downloaded 4 million times, according to data from the company. By the following year, that figure had leaped to 17 million, and a year after that to 45 million. The brand was now a household name on its way to being the tech behemoth it is today, eyeing an IPO that would value the company at $40 billion.

The emergence of homegrown unicorns like Grab had two profound effects. First, it drew capital to the region from investors now convinced of Southeast Asia’s potential. Second, it began to change the culture. Before he started Grab, company CEO Anthony Tan was expected to work in his family’s car distribution business. His father viewed Tan’s decision to launch his own company as an act of rebellion, but Grab’s success justified Tan’s unorthodox path. For Harnal at 500 Startups, stories like Tan’s “changed the perception of entrepreneurship, and changed the perception of good jobs and careers.” 

Take, for instance, the results of the Singapore Graduate Barometer. In 2016, firms like PwC, EY and DBS Bank populated the top ten. In 2020, every single top ten entry for most sought-after employers was a tech company. Grab rose 18 places to No. 9, and Shopee, Sea Ltd’s e-commerce arm, by 30 places to No. 7. Thirty-three percent of the students surveyed said they want to build their own startup, up from 27% in 2019. 

Singapore’s government is encouraging this change. “A lot of traditional companies in Singapore are in sectors where employment is increasingly constrained,” says Florian Hoppe, a partner at management consultancy Bain & Co. “Telcos are a good example: they keep being run more efficiently with more automation, so there are fewer employment opportunities. The government realized they had to pivot into new areas, and get everyone into innovation.” 

To do that, the government is deploying vast amounts of public money. SEEDS Capital, the investment arm of Enterprise SG, the government body that oversees business development, partners with private investors and matches their investments dollar-for-dollar. The program has helped lure uncertain VCs to the region and encouraged aspiring founders to take a chance. In 2013, eight new VC firms were set up in Singapore. By 2019 that figure was 28. “Equity-matching schemes allow investors to really double down on startups, and take bigger risks on new industries they haven’t had exposure to before,” says Entrepreneur First’s Cho.

The government is also turning its attention to education, which has tended to squash the entrepreneurial spirit. Singapore’s pupils have historically produced top scores on the OECD’s Program for International Student Assessment, which tests the world’s 15-year-olds on core skills like mathematics, reading and science. The country’s schools are famously rigorous, practicing a “drill and kill” method of pedagogy. “I went through the Singapore education system,” Tai says, “and if you deviated away from the teaching or expressed creativity, even in solving something like a physics question, they would say, ‘Wrong!’—even if you arrived at the correct solution. A lot of students are used to following instructions, being obedient and memorizing a lot.” 

Fear of failure is endemic. According to the OECD’s last report in 2019, 72% of Singaporean children worry that others will think less of them if they fail, versus the OECD average of 56%. This mindset is a roadblock for budding business people. “The honest truth is that the risk of failure is high,” says Naga Tan, who turned down a lucrative job at management consultancy McKinsey to start a fintech company in 2018. “Culturally,” he says, “acceptance of failure is still very different in Southeast Asia compared to the U.S.” 

Singapore’s schools are trying to address this problem. The country’s examiners are posing open-ended test questions to encourage students to think on their feet, and there is a new emphasis on applied learning that requires students to use classroom skills on real-world tasks like designing robots or computer games. The initiatives might help sow the seeds of an idea for a tech business. They won’t all grow, but that’s the point. “In Silicon Valley,” Tan says, “failure is par for the course.”