Strengthening the Role of Singapore Muslim Professionals in Community Advocacy

A ‘service business’ on the other hand, is like being Gordon Ramsay running a Michelin star restaurant, which is essentially a boutique manpower operation of elite sous chefs providing a masterful service – serving high cuisine. Are both viable business models? Absolutely. Can both be regarded as tech companies? That depends. The typical Silicon Valley venture capitalist would almost never invest in a restaurant, run by Gordon Ramsay or otherwise, but would fall over themselves in trying to fund a Willy Wonka. The key difference? Product businesses can scale exponentially.

The ‘product versus service’ distinction is not only critical, but increasingly difficult to ascertain, even to business owners ourselves. In software, where we used to literally ‘ship code’ as perpetual licences in CD-ROMs packed in shrink-wrapped boxes, most of us today only market via Software-as-a-Service (SaaS) subscriptions. SaaS overcomes the problems of physical distribution, software piracy, and promises predictable recurring revenue – customers simply subscribe online, like to Slack, Canva, Office 365, or Dropbox. First coined by Marc Benioff in 1999 as the Salesforce CRM⁶ product, the SaaS business model has evolved significantly, but is arguably the model of choice for practically all software products today. SaaS is also the model I adopted ten years ago to go-to-market for VersaFleet.

Similarly, many service businesses offer productised services, for example weekly food subscriptions, starter packs of accounting services, out-of-the-box legal templates, and so on. While innovating the business model is crucial and distinct from product innovation, the cost infrastructure of a service business is fundamentally different from a product business. Service businesses typically have variable costs that pair closely with revenue, like the cost of manpower to prepare a steak dish. However, for product businesses, costs can trend independently of revenue, for example, software development costs are heavy upfront, but once developed, more copies can be produced at negligible cost. This is why software product businesses are highly investable, because production can quite literally scale infinitely.

For brevity, at least in the context of this article, I shall define a tech company as a ‘product business’ centred around technologically developed products and/or processes. I also use the word ‘founder’ as the startup lingo for ‘business owner’. It is worth noting that corporate and venture-built startups regularly put up job posts for ‘founder’ or ‘co-founder’. While technically not incorrect, because there is usually an equity component in the package, these C-suite executives might more correctly be described as ‘intrapreneurs’.

What Does It Take to Start a Tech Company?

Unlike Willy Wonka who invents candies, our company invents enterprise software, specifically what supply chain professionals call a Transport Management System (TMS). Essentially, a VersaFleet TMS SaaS subscription helps brands like Watsons optimise the truck movements that restock their hundreds of stores across Malaysia; NTUC Fairprice Online optimise their thousands of home deliveries across Singapore; and likewise for many other consumer and retail brands across ASEAN⁷.

In computer science parlance, we call this constraints-based programming, specifically the vehicle routing problem (VRP). If this was a technical article, this would be the part where I’ll briefly explain that VRP is an intractable NP-hard⁸ problem, which is why VRP solvers typically incorporate metaheuristic techniques like genetic algorithms or simulated annealing to find solutions that satisfice, rather than aiming to solve completely by generalising into mixed-integer linear programming formulations.

So, how did our invention come about? Quite simply, by chance and then years of hard work. In two sentences: I incorporated Sypher Labs in 2012 to invent a bilirubin blanket, for the treatment of neonatal jaundice using fibre-optic cables. In between my failed biomedical experiments, I wrote scripts to help operations managers (I was working from my parent’s logistics offices) plan faster and more optimally – the VersaFleet TMS was thus born.

It took two to three years to encode the algorithms into a Ruby on Rails web application stack in a scalable, true SaaS multi-tenant infrastructure – this was enabled in no small way by National Research Foundation (NRF), which co-matched Get2Volume, our seed investor, via the Technology Incubation Scheme⁹. Prior to that, we had an early leg up from the ACE Startup Grant¹⁰, although my first application there was rejected.

That seed round in 2014 allowed us to start growing a team of software engineers to ramp up product development. It also provided us the cash runway to run lean startup experiments, or what I call the ‘death race’ to find product-market fit, which is as Reid Hoffman¹¹ more elegantly describes, “…like jumping off a cliff and building a plane on the way down.” Blitz scaling is when this plane design requires jet engines.

Looking back, I wished we had conducted even more experiments, and more quickly. Partly inspired by Vinod Khosla¹², to almost maniacally ensure that our TMS SaaS product would exactly fit our first customer’s expectations, we worked on-site in their office – every day for weeks, iterating on the spot, launching feature after feature.

To this day, whenever we launch a major feature or new minimum viable product (MVP), we conduct user-tests obsessively – if it’s a driver mobile app, we will shadow drivers all day to observe user interactions. This race to find product-market fit simply cannot be over-emphasised. It is crucial because only from this point is a product company actually in business.

Books and courses have been written about this, but I have a simple working definition: Product-market fit is the point where the business can repeatedly find paying customers. From there, it’s all about scaling for growth.

Since then, VersaFleet has raised more than S$5 million in funding, including from SMRT Ventures, Seeds Capital, Prestellar Ventures¹⁴, National University of Singapore, and almost a dozen angel investors, but this starting point was the most crucial and challenging.

NOC alumni, including the writer (extreme right), at a campus talk at NUS¹³

How To Actually Run a Tech Start-Up

In 2006, six years before I founded VersaFleet, I had the opportunity to participate in National University of Singapore (NUS) Overseas College (NOC) with a small group of fellow undergraduates. This was then an experimental programme where each of us interned in overseas startups for one year while continuing our curriculum part-time at partner universities like the University of Pennsylvania. I landed an internship position at First Round Capital, an early-stage venture capital firm in Philadelphia. As a ‘deal flow analyst’, I organised the pitch decks and business plans founders would submit for potential funding – basically a dream position from which to read and learn from hundreds of actual founders’ experience coast to coast, from Silicon Valley to New York. NOC is now a part of NUS College along with the University Scholars Programme, which I am an alumnus of as well.

NOC alumni have started many tech companies, including Jeffrey Tiong (Patsnap), Henry Chan (Shopback), Kelly Choo (Brandtology, Neeuro, ReferReach), Anthony Chua (StratifiCare), Yiping Goh (All Deals Asia, Quest Ventures), and Wayne Chia (TechSailor) — we all met in NOC Philadelphia. In NOC, we learned the startup ropes by directly apprenticing with tech founders, often experiencing the extreme highs and lows of high-tech entrepreneurship, as the founders were going through these very journeys themselves.

The NOC experience not only imparted deep lessons and practical life skills, but also gave us the confidence that Singaporeans can do this startup thing too – and we did. It would not be a stretch to say that it was a life-changing experience for many of us.

Founders must at the very least be technologically inclined, if not highly skilled practitioners in the art. For good or bad, the startup hype has attracted many business types. While the broader view is that it enriches the startup ecosystem, it may sometimes under-represent the importance of sheer technological prowess. In tech, the rate of change is relentless and unforgiving, and even tech companies are not spared from malicious black hat hackers. There is a good reason why Y-Combinator, a highly regarded startup accelerator, absolutely requires a technical co-founder, even rejecting Dropbox¹⁵ initially, and essentially bans all management consultants. Simply put, trying to start a tech company without a technologist is like trying to start a restaurant without a cook – not strictly impossible, but absurdly difficult.

The ‘Lean Startup’ movement broke into mainstream startup consciousness around 2010, with Eric Ries’ book¹⁶ by the same title. Combined with the ‘Agile Manifesto’¹⁷, where Scrum quickly became the de facto framework for software engineering, the standard guides for tech founders have thereby been established.

There are too many key ideas and critically important themes from both ‘Lean Startup’ and ‘Scrum’ to cover in any one article, but suffice to say that since then, no tech founder should be found guilty of not knowing how to execute. Practically all aspects of the ‘how’ have been prescribed in these materials, often step by step – running a tech startup today should mostly be a matter of execution, timing and luck.

That said, I should add that lifelong continuing education is hugely important – we are not off the hook just because we are business owners. In fact, a company’s growth can often be restricted by the founders’ inability to learn and grow. As a case in point, to seriously implement ‘Scrum’ for my team, I obtained a PMI Agile Certified Practitioner certificate. Years later, I pursued a part-time master’s degree in supply chain management at NUS to learn ‘operations research’ and the theory behind problems we had been solving.

Venture Capital: Be Careful What You Wish For

For some reason, not helped by headlines screaming, “Startup A raised X million”, there is this infatuation, especially among aspiring entrepreneurs, about investors and venture capital. Nailing that multi-million-dollar round is seen as the ultimate validation, the highlight of the surely glitzy life of a high-roller entrepreneur, the proverbial ticket to riches. Unfortunately, this is clearly a lopsided view and at best portrays as overnight successes the startup journeys that were many years in the making.

On the contrary, when old school business veterans talk about investors, they use words like sleeping partners, financiers, chettiars (pioneer bankers), or vulture capital, will sometimes relate the story of Judas and pounds of flesh, and may even throw in cautionary advice about riba’ (usury) for good measure. The reality of modern venture capital is probably somewhere between these two perspectives.

Starting with first principles, the business of a venture capital firm (VC) is in providing financial services. Each VC firm is typically made up of a group of Limited Partners (LPs) who each commit capital to a fund managed by a General Partner (GP). This fund typically has a 10-year fund life, within which the GP is expected to make investments in startups to produce high returns to their LPs, within a prescribed investment mandate. Without delving into the mathematics, this translates to every startup in the portfolio expected to produce a 3 to 10 times exit multiple on average.

Therefore, in a very real sense, when a startup accepts an investment, especially from a VC, it inherits the VC’s business model – the company’s share price is now the product, not the product itself. Accepting this simple truth can often help shed light on strange startup things, especially around valuation. Truth be told, I was initially just as confused and fell for every one of these mental traps, even as much as I had literally worked in a VC firm myself.

However, there are important distinctions between ‘venture capitalists’, ‘strategic investors’ and ‘angel investors’. Angel investors are all about supporting the next generation of entrepreneurs, hence the name. They are usually high net worth individuals or family offices who invest with a social agenda. Their investment, which can range from $20k to $500k+ is their way of giving back while potentially earning some upside.

‘Strategic investors’ mainly include corporate venture capitalists (CVCs) who invest to uncover synergy, the partnerships that are “1+1=3”. Usually operating as an investment office within a large corporation, they are the organisation’s astute strategic eye to prevent Kodak moments of disruptive redundancy, to anticipate and ride new technological waves, to capture new opportunities with existing organisational assets and capabilities.

SMRT Ventures would be a prime example of a strategic CVC. As owner-operator of a vast network of public and private transportation assets, from taxis, limousines, vans, buses and trains, combining this hardware with VersaFleet’s TMS software makes perfect sense. And indeed, since our formal partnership in 2018, our combined synergies have been producing significant new value and opportunities together.

With hindsight of experience, I would advise founders to take a cautiously balanced approach, probably with larger doses of caution. Ideally, fund the business entirely from sales revenue – this should be our main preference. But if we must, forecast the exact amount of investments to fund growth plans – planning for a 12- to 24-month cash runway is fairly standard. Be selective of whose money we accept and regard investors as fellow shareholders (they will be!) – genuinely ask if we would start business anew with them.

Should I Start My Tech Company in Singapore?

This might be a strange question to ask, but it is worth asking because a tech company’s journey simply cannot start and end in Singapore. With our modest population of 5 to 6 million people, the total addressable market in Singapore is simply too small to sustain the growth expected of a venture-backed tech company. Be global from day one.

For that matter, the hard truth is that no product company, especially a tech company, should restrict its market size to segments of a limited Singapore market. Again, this is perfectly feasible for a trader, drop-shipper, a ‘service business’, or if one has largely social objectives, but it is usually not acceptable for a venture-backed business – we must grow globally.

The good news is, Singapore is an excellent place to start – our legal and governance frameworks are so strong that many tech founders in the region choose to incorporate in Singapore. Our frameworks around intellectual property give assurance that our technologies can be protected, especially important for a ‘product business’.

The bad news though, is that having found that elusive product-market fit in Singapore, it does not mean that it will hold true outside of our borders. The hard truth is that even the infrastructure we take for granted as Singaporeans, like data connectivity and electricity, might be fundamentally different in another city.

As a case in point, when we first launched the VersaFleet TMS in Indonesia and Malaysia, although by then we had hundreds of driver-users on our mobile app across Singapore, we had to re-engineer our tech stack substantially to support offline mode. The simple reason being that our driver-users outside of Singapore would frequently have no cell signal as they drove across say, Johor to Seremban, or from Jakarta to Bandung. We could not have anticipated the massive re-engineering required to support that, and we were fortunate to have the technological bench-depth and backing to improve our SaaS products quickly.

Another hard truth is that Singapore’s funding ecosystem has persistent gaps, for example between ‘Seed’ and ‘Series B’, there are only a few ‘Series A’ investors. As for tech talent, local startups unfortunately have to compete with practically all the FAANG companies and even government agencies, but tech talent shortage is a global issue. Is Singapore the perfect place to start? No, but comparably, we are world-class precisely because there is so much tech innovation happening here – tech talents spill over and re-circulate quickly.

YOLO, I’m Gonna Go Solo

As tech founders, we must of course assess all advice as dispassionate ‘data points’, but I’ll share some practical “advice” anyway.

If you are young, perhaps get some (ideally relevant) working experience first – best is to work for your ‘competitor’, that giant you are looking to slay. Learn the ropes, build a network. I was in big pharma, medtech and diagnostics for 5 years before I started my own.

If you are career-switching, perhaps start the idea as a side-hustle while working full-time, find like-minded friends who might prove to be potential founders, then iterate from there. Be open, to ideas and industry sectors you never knew – luck might find you, as it found me.

If you wish to start-up as a ‘third wave’, probably secure the nest-egg first and ideally a steady income stream as well, perhaps as a locum doctor, freelance consultant, or the like.

Lastly but perhaps the most important: develop a social support system. I count myself really fortunate to have a loving wife, supportive parents and siblings, and adorable children to get me through the darkest days of my tech company’s journey, which come often and intensely.

Ultimately, starting a tech company, or any business venture for that matter, means different things for different people. Depending on our circumstances in life at that point, it could be about scratching an itch, it could be forced upon us, or it could be about self-actualisation.

Regardless of the trigger, own it! Your founding vision, your product idea, this dent in the universe you wish to make, must be real. It must be strong enough to give you hope, to give you comfort, and to drive you through the ups and downs that is the unpredictably intense roller-coaster journey that is tech entrepreneurship. May the Force be with you!