With aggressive rate hikes seen across the world, cheap funding is no longer available to financial markets as readily as before. The past decade — where funding cost has been available for next to nothing — is history. Start-ups that have been well-feted by investors might find it more difficult to complete their next round of fund-raising.
From the perspective of EY’s Liew Nam Soon, the end of cheap funding isn’t necessarily a bad thing. For years, the start-ups ecosystem as a whole has enjoyed easy funding from various investors who are eager to spread their bets around in a bid to fund the next unicorn.
For the start-ups that are able to survive the coming two years with disciplined cost management and savvy cash flow management (or, by reducing cash burn), that will actually mark them as companies with the resilience to make it to greater heights, says Liew, who is EY’s Asean regional managing partner, cum EY Singapore and Brunei managing partner.
In the past, there probably wasn’t enough focus on profitability as the start-ups prioritised market share and revenue growth. “So we’re coming back to a stronger focus on profitability, or the pathway to profitability within a certain timeframe. This compels and forces businesses to get more deliberate about when they start making money by cutting costs, which is quite important,” says Liew in an interview with The Edge Singapore.
Liew also points out that the broader economic dynamics of Singapore and the Asean remain “very, very strong”. Sure, when trade winds blow the wrong way, there will be some downward adjustments, but at the same time, investments are still being made in this part of the world. What this means is that companies that are “diligent, deliberate and clinical” about where they should focus on and very careful about managing operating costs, will benefit.
Liew claims that many local companies he knows welcome such a new market environment. They are the ones who have been trying to operate their business in the sane, disciplined way, in contrast to some of the start-ups that just “kind of put out a paper to say, these are the numbers, trust us”. He adds: “So, it’s good, for it bring back some rationality to the industry.”
See also: Doris Hsu of Taiwan's GlobalWafers named EY World Entrepreneur Of The Year 2023
In a sign of how the celebration of entrepreneurship is stronger than never before, EY received nearly triple the number of nominations for this year’s Entrepreneurship of the Year (EoY). From the average of 50 to 60 nominations, the number has nearly tripled to 140 this year.
In addition, the nominations come from a very good spread of industries, ranging from technology to consumer, health sciences and energy. Liew believes that the big jump in nominations is a reflection of the growing entrepreneurship ecosystem built up over the years that includes the growing range of funding options available.
Another key differentiation is that a growing number of the nominations are businesses making more and better use of data and technology. “This reflects the changing business models, and the innovation that comes as a result of digitalisation,” he says.
See also: Nominations open for EY Entrepreneur Of The Year 2023 awards in Singapore
Liew notes that when EoY was started many years back, the majority of the nominees were traditional manufacturers. This year’s finalists, or category winners, come from a good mix: Lim Wai Mun of Doctor Anywhere (healthcare services); Akshay Garg of FinAccel (financial technology); Julian Ng of Grand Venture Technology JLB (advanced manufacturing); Kane Black of Inex Innovate (biotechnology); Jonathan Lim of Oddle (food and beverage solutions); and last but certainly not least, Melissa Tan of Wah & Hua (environmental solutions).
Liew is glad to have this diversity. For example, Tan has proven her mark in what has traditionally been a male-dominated field.
Lam Yi Young, chairperson of the judging panel, has similarly noted the diversity. “Despite coming from different backgrounds and fields, the winners are all driven by a distinctive sense of purpose and passion. They seek to create a better world for the communities they serve or live in and have built compelling businesses that have redefined and uplifted their respective industries,” says Lam.
"They have also shown strong business acumen and clear strategic vision, through capitalising successfully on emerging opportunities catalysed by digitalisation and new market demands, as well as continuing to expand their presence locally and regionally,” adds Lam.
In addition to the six category winners, EY has given out two honorary awards. Keeree Kanjanapas, chairman of BTS Group Holdings in Thailand, has been named the winner of this year’s EY Asean Entrepreneurial Excellence award. The award recognises successful Southeast Asian businesses that contribute to the economy and community in the region.
The other honorary award goes to Agrocorp International, recipient of the EY Family Business Award of Excellence. The award recipient is jointly selected by knowledge partners, Business Families Institute @ Singapore Management University and the Insead Wendel International Centre for Family Enterprise.
The Edge Singapore, together with The Business Times and Portfolio magazine, are again among the official media partners of EoY, which is supported by the Singapore Exchange S68 Group, Action Community for Entrepreneurship, Enterprise Singapore, Singapore Business Federation and SkillsFuture Singapore.
Interesting, disruptive
The way EY’s Liew sees it, the biggest difference in the current crop of the winners is that many of them are able to come up with “very interesting, disruptive business models”.
The pandemic was a public health threat and many businesses have been badly affected. If there is a positive aspect, it is how many entrepreneurs have shown the ability to be more innovative and make use of technology to create business opportunities out of the restrictions they face. For example, Doctor Anywhere is led by Lim, who used to work at Temasek Holdings. Instead of being contented to build a long-term career with the state investment agency, Lim chose to be an entrepreneur. Such trends, says Liew, is good for entrepreneurship, and good for Singapore as a country.
He also sees Singapore as a growing hub for many such businesses to base themselves, given the sound support here, which includes not just funding but also sound regulatory framework and a wide range of government incentives. “People feel safe putting the money and developing concepts here, and use Singapore as a hub to then expand into Asean and possibly even the rest of Asia,” says Liew.
However, there is a set of rather severe nearterm challenges: high interest rates and stubborn inflation, amid geopolitical risks — and of course, the pandemic that is still making its rounds.
According to the October 2022 edition of the EY CEO Outlook Pulse, which surveyed 760 CEOs across the world, more than four in 10, or 43%, have identified a continuation or return of pandemic-related disruption, including new lockdowns and supply chain pressures, as the greatest risk to their business. This risk is perceived to be higher in Asia Pacific (48%) than in the Americas (43%) or Europe (41%).
In addition, 35% of respondents see geopolitical tensions and 34% see inflation as critical risks to growth, with the majority (69%) predicting inflation will negatively impact their company’s performance and growth. A sizeable minority (16%) identified inflation as the single-biggest threat to their revenue and margins.
Survive, more strongly
Interestingly, despite the gloomy outlook, nearly two-thirds, or 64% of the respondents, instead of cutting back on capital expenditure, are keen to increase it. Just 14% of the respondents plan to reduce capital spend. In a sign of how businesses are mindful not to pass up good opportunities, more than half (52%) plan to make an acquisition in the next year, while almost half (40%) of respondents plan to acquire, divest and enter into new joint ventures, or strategic alliances.
However, there is no escaping from the bigger picture. As a result of increased geopolitical tensions, 95% of respondents are reshaping their investment plans and operations. According to the survey, geopolitical risks mean CEOs are delaying planned investments until the situation improves (43%). Many respondents are reconfiguring their company’s supply chains (40%) and relocating operational assets (39%); while a third are exiting businesses in certain markets (30%) or stopping planned investments altogether (29%).
Liew has observed other trends. For example, digitalisation has gotten more prevalent, and is showing no signs of slowing down, which is good news given how many emerging technologies, along with wider deployment, will be further improved in subsequent iterations. Examples include AI and machine learning, which gets better with age and use, leading to better outcomes such as customer experience and operating efficiencies, and then to a “big transformation effect” on the companies doing so.
In any case, there are a few emerging, fast-growing sectors that offer plenty of business opportunities. They include a few of the technology sub-sectors in education, health sciences and e-commerce. There is also a lot of activity in green tech, in line with the overall ESG trend. Agri-tech, which ties in well with food security, is another.
The near-term challenges notwithstanding, the onus, as always, is on the grit and savvy of individual entrepreneurs to identify and try and capture market opportunities, and build a sustainable business for themselves and their community. “Those who can survive this will come out stronger,” says Liew.
