Govt grants can baby start-ups

Making it too easy for entrepreneurs to access investment funds can have an adverse impact on the start-up landscape, as it encourages substandard ideas that will inevitably fail.

There lies a fine but important line between making things easier, for example through government grants, and ensuring that budding entrepreneurs do not fall into complacency by being sheltered against hard knocks, said industry players at the first annual Startup Asia on Thursday.

Speaking to ZDNet Australia's sister site ZDNet Asia at event sidelines, Lim Kuo-Yi, CEO of Infocomm Investment, said that government grants serve their purpose well in giving people a chance to experience running their own business. Infocomm Investment is the venture-capital (VC) subsidiary of Singapore's Infocomm Development Authority (IDA). Lim is also the mentor-in-residence at Singapore Management University's Institute of Innovation and Entrepreneurship.

However, he noted that this could also lead to more start-ups being formed just to get the money, and not because entrepreneurs have a really good idea that can become commercially successful.

According to Lim, government grants are about achieving quantity effect, lowering barriers and simplifying things, so to give a shot to as many entrepreneurs as possible.

However, quality also matters, and businesses have an obligation to prove themselves as quality start-ups, he added.

Lim's views were shared by Alvin Yap, CEO and founder of TMG, a Singapore-based developer of mobile games for emerging markets. Also a speaker at Startup Asia, Yap acknowledged the importance of external help, such as government support and funding, but added that a "reality check" with real-world experience is necessary for a successful business.

"The government fund was not to grow my business, but to help teach me how to be an entrepreneur. The only way [to learn to run a business] is to go out and get your arse kicked," he said.

Yap, 26, founded The Mobile Gamer (TMG) when he was 22 years old. "Being young, you don't have much savings." Three years ago, his start-up received two grants totalling about US$80,205 from Spring Singapore and the Media Development Authority. The company has since received two more rounds of private investment.

"We would have never [have] got started if not for government funding. But none of it goes into what we're doing now. Instead, those funds went into us nurturing and maturing [ourselves] as entrepreneurs," he added

While it should not be too easy for aspiring entrepreneurs to set up and run their start-ups, it should also be not too difficult.

Lim emphasised that it is not about deciding what approach has more merits. Instead, there should be different entrepreneurship programs to achieve specific purposes. "If the objective is to just give people the experience of running a business, then lower the bar. If it's to create good, successful companies, then be more selective," he said.

Lim also pointed out that ideally, the local community of private VCs and investors should be strong and vibrant enough to invest in start-ups without government involvement. The government's role is to kick-start markets that have yet to get much attention, and, once enough momentum sets in, private VCs and investor angels step in, he said.

Yap also suggested that government funding programs should increase consultation from entrepreneurs on the ground. This refers to people who are currently active in the market space, rather than academics or those who are very experienced but have since retired. "For today's start-ups, you need today's people who are relevant," he said.

Via ZDNet Asia