AS National University of Singapore students drifted to the college bar for Wednesday's "Ladies Night", Ishan Agrawal sat in his dormitory's common room, working out how to harness the Internet to fight corruption in India.
Agrawal, 22, is one of 90 hand-picked students at N-House, a residential block modelled after the dorms of California's Stanford University that housed Google's Larry Page and Yahoo!'s co-founder Jerry Yang. They spend their Wednesday evenings brainstorming new ideas or pitching to potential investors as part of a $16 billion effort by Singapore's government to build a tropical Silicon Valley.
"It's like a big dating party, bringing everyone together, which is what Silicon Valley does," says Agrawal, from Dehradun in northern India, who interned for a year at a start-up in the San Francisco Bay area and took classes at Stanford as part of the programme. "Here, you sit in the kitchen and discuss entrepreneurship ideas. You discuss entrepreneurship in the bathroom."
Singapore became Southeast Asia's only advanced economy by moving up the technology ladder, turning a trading port into the region's biggest banking centre and a manufacturer of electronics, petrochemicals and pharmaceuticals. Now, the nation is looking to gain a bigger share of a software industry that raised US$28 billion ($34.6 billion) in initial share sales last year.
N-House, which opened in August 2011, is one strand of a five-year plan by the government that includes offering new technology companies grants of as much as $500,000, supporting venture capital funds, and encouraging high schools to teach business and entrepreneurial skills, in an effort to groom the next Mark Zuckerberg, co-founder of Facebook.
"Singapore looks quite favourable," says Josh Lerner, a Harvard Business School professor who has written about efforts to boost entrepreneurship. "If a programme doesn't work, they've been willing to abandon it or fine-tune it and try something different."
So far, successes have been few. The standard-bearer for the programme is Darius Cheung, 31, who sold his first company, a security program that protects mobile phone data, to McAfee for more than US$10 million in 2010.
His latest company, BillPin, is among more than 100 located in a refurbished public housing block called Blk71 funded by the government and Singapore Telecommunications, Singapore's largest telecoms company. BillPin allows users to divide shared expenses such as rent and bar tabs via an Internet account.
Blk71 companies get subsidised office space and free legal and accounting advice. They share office space with Edgar Hardless, CEO of SingTel's $200 million venture fund, which backs mobile-related start-ups. More than 90% of the tenants are developing Internet-based software and mobile apps, says Lily Chan, CEO of NUS Enterprise, who helped develop N-House and Blk71.
Singapore is "a relatively good place to be doing a tech start-up", says Cheung. "The talent pool, the capital —it's a lot more available than when we first started."
With more Internet-connected mobile phones and residential broadband subscribers than households, the island makes an excellent test-bed, says Andrew Roth, who relocated to Singapore in 2011 from Hawaii. His Perx application, designed to replace store loyalty cards, is backed by Facebook co-founder Eduardo Saverin, who moved to Singapore in 2009 and renounced US citizenship last year.
Saverin, now a permanent resident of Singapore, introduced the start-up to SingTel, Roth says, leading to a partnership announced in October where the telecoms company bundles the program with other apps.
While Singapore's level of development helps test new programs, some companies find its size limiting.
"One of the targets we set was to be out of Singapore within six months," says Vincent Ha, who moved his company Gushcloud to California. The program gets social media users to help retailers advertise in exchange for store discounts and benefits.
"We thought we knew everything, but when we went to Silicon Valley we realised that there are thousands more trying to solve the same problem," he says.
While revenue from Singapore's information-communications industry has more than doubled to $83.4 billion between 2001 and 2011, the share of revenue from software has slipped to 14% from 25%, according to the government's Infocomm Development Authority.
Singapore has spent $50 million on about 140 technology projects over the past four years through a grant programme that offers companies up to $500,000, according to Teo Ser Luck, Minister of State for Trade and Industry. Six out of 10 companies that completed their projects were able to secure initial customers or follow-on funding, or both, says Teo, who also chairs the Action Community for Entrepreneurship (ACE).
Easy to get initial capital
"There are more jobs than workers, so there are many who need to be encouraged to make a conscious choice to be an entrepreneur," he says in an email. "We are breeding a group of young entrepreneurs who are open to and embrace technology."
ACE has approved 37 applications for its smallest business grant, $50,000, since last February, Teo says.
"We're pretty liberal about approving them," says Billpin's Cheung, who sits on the grant committee. "Relative to any other country, Singapore is definitely right there at the top in terms of how easy it is to get initial capital."
That may be a drawback, according to Palo Alto, California- based venture capitalist Adeo Ressi, whose Founder Institute helps start-ups in 37 cities, including Singapore.
"Singapore has done the best job of any government to spawn an entrepreneurial ecosystem," says Ressi, who travels to the city about three times a year to meet with government officials. "However, I think they've gone a little bit too far in making it easy. If they can't actually raise money from people privately, they probably aren't worthy of being in existence."
The island of five million people, ranked the easiest place to do business for seven straight years by the World Bank, is the second-easiest place in Asia after Hong Kong for entrepreneurs to gain access to capital, according to a study by the Milken Institute published in 2010.
Singapore's programme is partly modelled on the success of Israel. In 2008, when Singapore's President Tony Tan was chairman of the National Research Foundation, he flew to Tel Aviv to learn how the Mediterranean country had spawned Internet innovations such as instant messaging and software firewalls.
In Israel, "the presumption was within a couple of years, you were basically supposed to get funding from the private sector and off you go", says Augusto Lopez-Claros, the World Bank's director of global indicators and analysis, who has written about Israel's innovation programmes.
Singapore chose a middle route, continuing funding of chosen start-ups as long as they are also able to get capital from private investors.
Other Asian nations also are trying to foster start-ups. Taiwan's National Youth Commission lent a record NT$2.1 billion ($87.9 million) to 2,661 young entrepreneurs in 2011, according to the agency's website. In contrast, China and India, the region's biggest economies, spawned global software companies such as Baidu and Infosys Technologies with little initial financial backing from the government.
Facebook, which evolved from a dorm-room project when Zuckerberg was at Harvard University in Cambridge, Massachusetts, raised US$16 billion in an IPO in May 2012.
Targeting home-grown start-ups is a departure for Singapore's five-decade-old economic policy of attracting global companies such as Exxon Mobil to set up plants and offices in the city-state.
Information and communications makes up 4% of the country's GDP, compared with 21% from manufacturing and 26% from finance, insurance and business services. The government aims to foster five local enterprises with annual revenue of more than $1 billion, according to a research paper by the Ministry of Trade and Industry.
"We will continue with our strategy of foreign direct investment," says Low Teck Seng, CEO of the National Research Foundation, the country's R&D body which works out of Prime Minister Lee Hsien Loong's office. "At the same time, if our innovation and enterprise efforts are successful, there will be a pipeline of companies that grow."
Trying to move the country to productivity-driven industries from labour-driven ones will take time, says Euben Paracuelles, a Singapore-based economist at Nomura Holdings Inc.
"It's going to take a while to show up in the economic numbers, but this is probably the right path," says Paracuelles. "There's going to be a transition period."
The prime minister says the government would spend $16.1 billion to support research, innovation and enterprise over the five years to 2015. The city-state plans to raise R&D spending to 3.5% of GDP by 2015, similar to Sweden and South Korea, from 2.3%.
To achieve the goal, Singapore will have to change its culture, according to Chan at NUS. The island came in last among 20 entrepreneurial hubs, including Silicon Valley and Bangalore, in terms of having the right mindset, according to a global survey of 50,000 start-ups by Startup Genome and Telefonica SA.
While Silicon Valley has it, "it's taken them 30 years to get to where they are today", says Chan, a former managing director at one of the Singapore Economic Development Board's investment wings. "We don't have it in Singapore. Once you have that, the government policies can pull it all together. So we have to engineer that culture."
To help the change, the government said in November it would spend $15 million over the next three years in the nation's schools to encourage potential entrepreneurs, including visits by executives, on-site incubators, internships and $10,000 student grants.
"No one forces us to work on ideas or create companies or anything," says Agrawal at N-House. "It's more like, if there's a nerd group, they are going to talk about these kinds of things, so it comes very naturally to all of us."
This story first appeared in The Edge Singapore weekly edition of Feb 4-10, 2013.