Over the weekend, there was an op-ed that was written by Mr Teo MK, who is the Perm Sec in charge of R&D as in the Prime Minister's office and Ministry of Finance.
I think his article quite interesting about how R&D can be developed to benefit Singapore.
If I were to imaging his plan, it would be an inverted pyramid, where at the base would be the smallest portion and the top the widest portion. It starts whentechnology is created, protected and then commercialized and brought to the world. In the ideal circumstances, a single platform technology could be used to create many different products.
Example could be something like bluetooth technology. At the base, bluetooth is a communication protocol between several devices at short ranges, aka PAN (personal area network). One product at the now quite ubiquitious wireless headset that we use with our handphones. Next, we now see AD2P which is stereo bluetooth headset, and we also see bluetooth enable storage, etc etc. Therefore, theoretically from one technology there are multple spin-off opportunities to be exploited.
However, as great as the concept sounds, there are distinct difficulties in doing this. Primarily, bluetooth technology is not something cooked up by one party but a consortium of companies , plus not every technology being created is platform in nature. Therefore how does one pick winners?
I once had an interested (albeit short) conversation about this. I believe that industry would dictate what it wants, and thus drive R&D whereas my esteemed colleague at that time, was of the opinion that R&D should drive industry. So which comes first? The chicken or the egg?
I still believe that R&D should be guided in principle by industry. Why? Primarily because industry would have taken the effort to determine user requirements. Too often I have seen project requests for funding, not because it was what users had said they wanted, but because it was the neat thing to do. But perhaps that is the academia's way to exploring the outer limits of technology.
But what is most important is how much of this technology is commercialized. Even if we take the altruistic position of bringing benefit to Singapore companies, in the end, commercial returns from this R&D effort must be measured. If the industry is not taking up the exploitation of R&D that has been paid for by the government, then it shows that either:
a) These local companies have no clue how to exploit the technology
b) These technology are of no use to them
c) or the answer lies somewhere in between.
If C is the answer then, this is where Venture capitalists would come in, as they would provide the opportunity and platform for the reseachers, or creator of the said technology to commercialize it own their own behalf.
But I do not see how local VCs are being supported for this endevour. Admittedly, Singapore is muct too small a market for a company to base its business plan on, especially a technology company.
But how does one break the conundrum of the VCs not having enough dealflows, and technopreneurs not having enough funding sources.
What do you think?
Monday, November 27, 2006
Friday, November 24, 2006
GST Increase
The PM had announced the GST increase in FY2007 from the current 5% to 7%.
The primary reason behind the increase was to assist the lower income group to close the income gap between the bottom and top quartile.
As a consumer, I do not look forward to this increase, as it would impact everything that we do on a daily basis. However, it has been eluded that the corporate and individual (not sure about this) tax would be lowered to maintain the competitiveness of the country. If it means lower taxes, then it is good.
But how does it stack up? I guess the rationale is that the rich folks would not mind spending more to purchase that $ 10,000 plasma or LCD TV or home theater system, but the not-so-rich would only spend, perhaps $200 to buy a normal TV. Therefore, the state coffers would increase without taxing the no-so-rich too much.
While I have not taken the time or effort to analyze all the possible scenarios, I do worry about how the government would spend the extra money to assist those who need the financial help. Many commentators have openly questioned if this was the start of a welfare state?
More intriguingly, I see some commentators pushing for early childhood education as a way to get the needy get out of their povertry trap, and I think this is a fantastic idea. While I am a proponent of the meritocracy system here in Singapore, I do see certain downsides to this system, especially when it comes to awarding scholarships to students.
Most scholarships are based on grades (even if not, a big chunk of the consideration is based on grades), but if 2 persons of the same age, but not of the same social status were to compete for the scholarship, the odds are that the student whose parents are from the upper-middle class to upper class strata would have better grades than the one who is not on this strata.
Why? Primarily because this kid would have had the benefit of the best pre-school, tuition, enrichment and whatever classes that you can think of, that money can buy. Whereas the other kid (from the not well to do family) may not such opportunties, but nonetheless strives to suceed the best they can.
So who deserves to get the scholarship? If it were me as the parent, I'd let the poorer kids have a chance, especially if I could already pay for my kids' education by myself. If the poor kid who got the scholarship goes on to become a manager, a VP, a minister, then the system would have done its job for this kid.
What do you think?
The primary reason behind the increase was to assist the lower income group to close the income gap between the bottom and top quartile.
As a consumer, I do not look forward to this increase, as it would impact everything that we do on a daily basis. However, it has been eluded that the corporate and individual (not sure about this) tax would be lowered to maintain the competitiveness of the country. If it means lower taxes, then it is good.
But how does it stack up? I guess the rationale is that the rich folks would not mind spending more to purchase that $ 10,000 plasma or LCD TV or home theater system, but the not-so-rich would only spend, perhaps $200 to buy a normal TV. Therefore, the state coffers would increase without taxing the no-so-rich too much.
While I have not taken the time or effort to analyze all the possible scenarios, I do worry about how the government would spend the extra money to assist those who need the financial help. Many commentators have openly questioned if this was the start of a welfare state?
More intriguingly, I see some commentators pushing for early childhood education as a way to get the needy get out of their povertry trap, and I think this is a fantastic idea. While I am a proponent of the meritocracy system here in Singapore, I do see certain downsides to this system, especially when it comes to awarding scholarships to students.
Most scholarships are based on grades (even if not, a big chunk of the consideration is based on grades), but if 2 persons of the same age, but not of the same social status were to compete for the scholarship, the odds are that the student whose parents are from the upper-middle class to upper class strata would have better grades than the one who is not on this strata.
Why? Primarily because this kid would have had the benefit of the best pre-school, tuition, enrichment and whatever classes that you can think of, that money can buy. Whereas the other kid (from the not well to do family) may not such opportunties, but nonetheless strives to suceed the best they can.
So who deserves to get the scholarship? If it were me as the parent, I'd let the poorer kids have a chance, especially if I could already pay for my kids' education by myself. If the poor kid who got the scholarship goes on to become a manager, a VP, a minister, then the system would have done its job for this kid.
What do you think?
Tuesday, November 14, 2006
R&D in Singapore
This is quite a favorite topic of mine. Those who have discovered this blog and know who I am would know why.
It is a well known fact that Singapore has commited S$ 5 B over the next 5 years on R&D alone. THis is split among the National Research Foundation, A*STAR and the Ministry of Education. The main thrusts of the R&D effort is on biomedical, water and energy and new media (ie animation)
While the funding is being lauded almost universally worldwide, I do wonder how much is this effort is spent on commercializing the resulting technologies? How much effort has gone into the thinking process of what to do post-project?
Those who are well versed with the R&D scene in the past will know that there was a time when technopreneurship was supported and encouraged among the research centers in Singapore. Now this was during the last technology bubble and if the stats of Silicon Valley can be transported to Singapore, I can assure that many of the companies spun off during the bubble days are either dead or dormant or zombie'fied. THis is sadly the world of capitalism and free markets.
Now the situation has improved and companies spun off during that time who are still surviving are thriving, but that lesson (of the high mortality rates of start-ups) have caused the pendulum to swing to the other extreme.
But moving foward, especially with the new leadership about to take over the A*STAR organization, perhaps it is time for the incoming Chairman to think about various models that promote entrepreneurship among the researchers.
Do we encourage researcher to become entrepreneurs? Are they the best entrepreneurs? Would they then spend more time priming their research topics that will make good business? Or will they stick to the true cause of research: extending and expanding the general body of knowledge? Will they seek to enrich themselves at the expense of Singapore?
I think this are all worthy questions, but it is a minefield. One can discuss the pros and cons of such a move until the cows come home without resolve.
However, one radical (or not) approach that I can think off is .... outsourcing.
Outsourcing of early stage investment to a VC firm. This model has been successfully proven in the University of Chicago by ARCH Ventures, and now being replicated in many areas.
What is the benefit of outsourcing this effort?
1) The team who receives the funding will comprise of people who have previously done it. They could do it on their own, or partner with overseas VC firms. But bottom line, the managing partners would very likely be people who have done venture investment.
2) These folks would have their own network of investors, both locally and overseas, thus projects being championed and funded by them would stand a higher chance of being funded until the start-up is either acquired or IPO.
3) These folks would also have the ability to manage the fund as they see fit, and not be ruled by bureaucracy. These folks could opt to invest 0.5 M at the start to kick start the team, and then upon successful milestone, opt to syndicate or lead a new round and invest a further 1 M or so, carefully calculating the risk-reward between further investment and dilution.
4) Foremost, the public servants must acknowledge the fact that these guys are in it for the money. The sooner they realize this, the better it will be for everyone. There is no altruisic goals behind it. It is purely for the money, and so you have gotta trust that these guys will be professional enough to manage your money for you. Therefore you cannot run it like another stat board or government arm. They get paid well (most of these guys do anyways.. or at least the good ones), and when they get a successful exit, they will get their carry.
5) There will be good deals, bad deals, sour deals, and deals that you kick yourself for missing. Again, the sooner the public servants realize this fact, the happier they will be. Take for instance, the investors of Google.com would most likely be sitting of a huge pile of cash. Whereas the investors of... excite.com would most probably be happy just to get some money back. Both are search engines, both got their start just before the bubble and both have catchy names. Sometimes, it's the technology but most investors would tell you, success is a combination of doing due-diligence and luck.
6) You may loose all your money. To be honest, you most probably won't loose all of it if you're smart (commit, call, liquidate etc). But it would be foolish to peg an unreasonable ROI on the scheme.
But after poking around, I firmly believe this model is needed. THe government can choose to go with the many foreign VC firms that "specialize" in such venture investment activities, or it can take a chance and look for home grown talent.
But prior to giving the money away for someone to run, it is common sense to have competitive bidding, include management fee, carry interest and perhaps more importantly, making sure these guys know the current state of R&D in Singapore, the challenges faced by start-up companies, and a plan to bridge both of these chasm. Oh yes, plus also their CV to make sure you don't give the farm away to someone who has no experience doing venture investments.
C'mon Uncle Lee (referring to the PM), c'mon uncle Tony (referring to the head of the NRF), c'mon Uncle Lim (referring to Minister of Trade and Industry), put 1% of your % B into a competitive bid for VC firms/partnerships to manage it on behalf of the government's effort to translate the R&D effort into some sort of economic after-effect that could benefit all everyone (be it the researchers that conceived the technology, to the managers who run the company, to the workers to man the company).
It is a well known fact that Singapore has commited S$ 5 B over the next 5 years on R&D alone. THis is split among the National Research Foundation, A*STAR and the Ministry of Education. The main thrusts of the R&D effort is on biomedical, water and energy and new media (ie animation)
While the funding is being lauded almost universally worldwide, I do wonder how much is this effort is spent on commercializing the resulting technologies? How much effort has gone into the thinking process of what to do post-project?
Those who are well versed with the R&D scene in the past will know that there was a time when technopreneurship was supported and encouraged among the research centers in Singapore. Now this was during the last technology bubble and if the stats of Silicon Valley can be transported to Singapore, I can assure that many of the companies spun off during the bubble days are either dead or dormant or zombie'fied. THis is sadly the world of capitalism and free markets.
Now the situation has improved and companies spun off during that time who are still surviving are thriving, but that lesson (of the high mortality rates of start-ups) have caused the pendulum to swing to the other extreme.
But moving foward, especially with the new leadership about to take over the A*STAR organization, perhaps it is time for the incoming Chairman to think about various models that promote entrepreneurship among the researchers.
Do we encourage researcher to become entrepreneurs? Are they the best entrepreneurs? Would they then spend more time priming their research topics that will make good business? Or will they stick to the true cause of research: extending and expanding the general body of knowledge? Will they seek to enrich themselves at the expense of Singapore?
I think this are all worthy questions, but it is a minefield. One can discuss the pros and cons of such a move until the cows come home without resolve.
However, one radical (or not) approach that I can think off is .... outsourcing.
Outsourcing of early stage investment to a VC firm. This model has been successfully proven in the University of Chicago by ARCH Ventures, and now being replicated in many areas.
What is the benefit of outsourcing this effort?
1) The team who receives the funding will comprise of people who have previously done it. They could do it on their own, or partner with overseas VC firms. But bottom line, the managing partners would very likely be people who have done venture investment.
2) These folks would have their own network of investors, both locally and overseas, thus projects being championed and funded by them would stand a higher chance of being funded until the start-up is either acquired or IPO.
3) These folks would also have the ability to manage the fund as they see fit, and not be ruled by bureaucracy. These folks could opt to invest 0.5 M at the start to kick start the team, and then upon successful milestone, opt to syndicate or lead a new round and invest a further 1 M or so, carefully calculating the risk-reward between further investment and dilution.
4) Foremost, the public servants must acknowledge the fact that these guys are in it for the money. The sooner they realize this, the better it will be for everyone. There is no altruisic goals behind it. It is purely for the money, and so you have gotta trust that these guys will be professional enough to manage your money for you. Therefore you cannot run it like another stat board or government arm. They get paid well (most of these guys do anyways.. or at least the good ones), and when they get a successful exit, they will get their carry.
5) There will be good deals, bad deals, sour deals, and deals that you kick yourself for missing. Again, the sooner the public servants realize this fact, the happier they will be. Take for instance, the investors of Google.com would most likely be sitting of a huge pile of cash. Whereas the investors of... excite.com would most probably be happy just to get some money back. Both are search engines, both got their start just before the bubble and both have catchy names. Sometimes, it's the technology but most investors would tell you, success is a combination of doing due-diligence and luck.
6) You may loose all your money. To be honest, you most probably won't loose all of it if you're smart (commit, call, liquidate etc). But it would be foolish to peg an unreasonable ROI on the scheme.
But after poking around, I firmly believe this model is needed. THe government can choose to go with the many foreign VC firms that "specialize" in such venture investment activities, or it can take a chance and look for home grown talent.
But prior to giving the money away for someone to run, it is common sense to have competitive bidding, include management fee, carry interest and perhaps more importantly, making sure these guys know the current state of R&D in Singapore, the challenges faced by start-up companies, and a plan to bridge both of these chasm. Oh yes, plus also their CV to make sure you don't give the farm away to someone who has no experience doing venture investments.
C'mon Uncle Lee (referring to the PM), c'mon uncle Tony (referring to the head of the NRF), c'mon Uncle Lim (referring to Minister of Trade and Industry), put 1% of your % B into a competitive bid for VC firms/partnerships to manage it on behalf of the government's effort to translate the R&D effort into some sort of economic after-effect that could benefit all everyone (be it the researchers that conceived the technology, to the managers who run the company, to the workers to man the company).
Monday, November 13, 2006
Virgin Post
Well this is my virgin post.... well perhaps not exactly. I also blog under another pseudonym, and good luck to you if you can find it.
In essence, this blog is my candid view of the Singapore economy, and perhaps the world in general. I felt the need to produce a dichotomy of myself, one as a serious viewer of the economy and investments, and the other, a naughtier part of myself.
For today's post, I would like to pick on the article that was written on The Edge Singapore about 2 weeks back on the Singapore economy and the need to perhaps restructure the economy now rather than wait for another bubble or correction to happen.
The article (I shall have to come back with the title and the name of the author) rightly pointed out that the Singapore economy has not had it so good in the past 5-6 years, and may not see such good times perhaps for awhile.
All this while, the government has been harping on the ever growing divide between the have's and have not's and the sacred cow is that of some sort of welfare. This I will leave for another time.
The point I wanted to stress on was the point that much of the Singapore GDP is reliant on MNCs and GLCs and a few successful private enterprise. While GLCs are ever reliant to be anchored in Singapore, I can't say that much for MNCs. It is and will always be a business decision on whether to stay rooted in Singapore or to move to a lower cost country.
THe fallacy of the MNC approach and how it benefits the Singapore economy is that the MNC is, if you will, at the top of the food chain pyramid. In the second tier there are suppliers to these MNCs. Some of these will be MNCs themselves (ie, Applied Materials, KNS,etc) and some will be local players. Of late, we have been seeing the local suppliers having a good run on the SGX, like MMI and Jurong Tech, who supply to MNCs such as Seagate and Motorola.
What would happen if Seagate or Motorola were suddently up and relocation to another country? These companies would certainly have to move with them as their lifelines depend on the MNCs? And so what becomes of the Singapore economy? Jobs would naturally be lost and the impact would be felt on the lower income group people.
Instead, I think not enough attention has been put to develop our own companies that market to the world, instead of just to MNCs. These guys chase dollars whever the dollars may be. These guys bring Singapore's cutting edge to the world.
Prior to the bubble of 2000, there were dreams of making Singapore into another Silicon Valley with the TIF Venture FoF, etc etc. Lately it seems that it has all be quiet on this front. Even with the latest announcement by EDB on the Business Angels Scheme, I'm amazed at what is termed as business angels in this context.
THe manager of one such scheme has stated that he'd like to see some revenue as part of the consideration for investment. THen it defeats the purpose of angels as angels are people that entrepreneurs turn to when Venture Capitalists (VCs) fear to tread.
In Singapore, there is a lack of such risk taking angels, with most VCs preferring to invest in Series A or expansion stage companies. I know a friend who has tried to raise an early stage fund to no avail. There are some early stage VCs such as Upstream, but these are too few and far in between.
What is the use of spending all those billions of hard earned money on R&D where commercialization or future economic impact of these R&D projects are an afterthought? There are foreign VCs that specializes in helping technopreneurs develop their companies from such an early stage and I think there are opportunities for Singaporeans or locals to develop such a niche and prosper. But beware, it may take a few cycles of losing ones pants before striking it rich. And the investment value chain needs to be beefed up.
VCs tell me there is a dearth of good investible projects in Singapore, but as I see it, technopreneurs have a hard time getting into the radar scope of such VCs when they can't get access to early money.
TO be continued....
In essence, this blog is my candid view of the Singapore economy, and perhaps the world in general. I felt the need to produce a dichotomy of myself, one as a serious viewer of the economy and investments, and the other, a naughtier part of myself.
For today's post, I would like to pick on the article that was written on The Edge Singapore about 2 weeks back on the Singapore economy and the need to perhaps restructure the economy now rather than wait for another bubble or correction to happen.
The article (I shall have to come back with the title and the name of the author) rightly pointed out that the Singapore economy has not had it so good in the past 5-6 years, and may not see such good times perhaps for awhile.
All this while, the government has been harping on the ever growing divide between the have's and have not's and the sacred cow is that of some sort of welfare. This I will leave for another time.
The point I wanted to stress on was the point that much of the Singapore GDP is reliant on MNCs and GLCs and a few successful private enterprise. While GLCs are ever reliant to be anchored in Singapore, I can't say that much for MNCs. It is and will always be a business decision on whether to stay rooted in Singapore or to move to a lower cost country.
THe fallacy of the MNC approach and how it benefits the Singapore economy is that the MNC is, if you will, at the top of the food chain pyramid. In the second tier there are suppliers to these MNCs. Some of these will be MNCs themselves (ie, Applied Materials, KNS,etc) and some will be local players. Of late, we have been seeing the local suppliers having a good run on the SGX, like MMI and Jurong Tech, who supply to MNCs such as Seagate and Motorola.
What would happen if Seagate or Motorola were suddently up and relocation to another country? These companies would certainly have to move with them as their lifelines depend on the MNCs? And so what becomes of the Singapore economy? Jobs would naturally be lost and the impact would be felt on the lower income group people.
Instead, I think not enough attention has been put to develop our own companies that market to the world, instead of just to MNCs. These guys chase dollars whever the dollars may be. These guys bring Singapore's cutting edge to the world.
Prior to the bubble of 2000, there were dreams of making Singapore into another Silicon Valley with the TIF Venture FoF, etc etc. Lately it seems that it has all be quiet on this front. Even with the latest announcement by EDB on the Business Angels Scheme, I'm amazed at what is termed as business angels in this context.
THe manager of one such scheme has stated that he'd like to see some revenue as part of the consideration for investment. THen it defeats the purpose of angels as angels are people that entrepreneurs turn to when Venture Capitalists (VCs) fear to tread.
In Singapore, there is a lack of such risk taking angels, with most VCs preferring to invest in Series A or expansion stage companies. I know a friend who has tried to raise an early stage fund to no avail. There are some early stage VCs such as Upstream, but these are too few and far in between.
What is the use of spending all those billions of hard earned money on R&D where commercialization or future economic impact of these R&D projects are an afterthought? There are foreign VCs that specializes in helping technopreneurs develop their companies from such an early stage and I think there are opportunities for Singaporeans or locals to develop such a niche and prosper. But beware, it may take a few cycles of losing ones pants before striking it rich. And the investment value chain needs to be beefed up.
VCs tell me there is a dearth of good investible projects in Singapore, but as I see it, technopreneurs have a hard time getting into the radar scope of such VCs when they can't get access to early money.
TO be continued....
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