Germany presents a world of opportunities for Singapore companies. There are already more than 70,000 foreign companies operating out of Germany, and Singapore startups and Small Medium Enterprises (SMEs) stand a fair chance of joining their ranks.
But does Singapore’s reputation provide an advantage in Germany? What are the technologies that Singapore companies have an advantage in, and can offer to German corporations? We invited industry leaders who have extensive experience building and managing businesses in both Singapore and German markets to share their insights over a panel discussion, moderated by our CEO and Co-founder, Claus Karthe.
According to Timothy Toh, General Manager for APAC at Perma Pure and former Centre Director for Europe at Enterprise Singapore, “Singapore companies and startups are able to help large German companies navigate Asia. This is a value which Singapore startups bring, as compared to other startups from Germany or Europe.” He shared an example of a Singapore company that worked with a German company to expand to the China market. “Singaporeans speak English and a good number of us also speak Chinese. So pairing a Singapore company and a German company to expand to the China market is quite a good thing,” said Timothy.
In Germany, having patents is a valuable asset and respecting Intellectual Property (IP) is an important part of the business relationship. Singapore shares this sentiment – it has a business-friendly IP regime, and Singapore is ranked second in the world and top in Asia for having the best IP protection according to the World Economic Forum’s Global Competitiveness Report 2019.
With these strengths and Singapore’s reputation, Singapore companies would do well to capitalise on the market needs in Germany, particularly in industry verticals that Singapore excels at, such as Industry 4.0, Logistics, Smart City, Fintech, Insurtech, Digital Health, and Software and Analytics.
Working With German Companies
One of the considerations when entering a mature market such as Germany is the ways that large German corporations would work with smaller SMEs or startups.
Arunjai Mittal, who spent 24 years working for a German company, gave an example of how a large-scale German company developed a new technology and decided to share it with a startup and support them with the incorporation of the new technology. The company chose to invest in the startup’s growth and shared advanced technology to generate a new stream of revenue and not alienate existing customers who found the new technology risky.
Another way that big companies work with startups is to enter into a relationship first to test out the partnership, with the intent of acquisition if it works out. “A larger, well-established company hired a startup for a 3-year long project where both parties worked independently, with no commitments from either side. After seeing that there was a culture fit, the startup was absorbed by the larger organisation and operated as a business unit after the acquisition,” Arunjai shared.
Litmus Test For Expansion In Germany
Before a company expands to Germany, there are three things it should tick off the check-list to make sure it is ready for expansion: Funding, competency and local talent.
First of all, does the company have sufficient funding for the expansion to Germany? Many startups attempt to scale without having the necessary backup from investors to fund the scaling process. Sebastian Mueller, co-Founder of MING Labs and a mentor at German Entrepreneurship Asia, weighed in: “It is important to secure the appropriate funding for a new market entry, especially when you are looking half-way across the world because you need to be able to make long-term commitments, which you are likely only going to see returns after 12 to 24 months, if at that. Having to raise funds in the middle of the expansion process is not an option, so you need to be able to last for that battle.”
Secondly, is the company more than a ‘one trick pony’? If the company is a one trick pony, having a product or service that cannot be adapted or pivoted to needs of other markets, it may be a mistake to scale. Many startups go into a new market with the same old formula and think it should fly. If the company does not take off, it does not mean the customers are wrong just because the product has been successful somewhere else. Entrepreneurs must remember that the customer is always right. If a company does not have customers, it does not have a business.
Last but not least, companies need to have a local person on the ground. Having someone with local insights and local context cannot be underestimated.
Understanding German Work Culture
Understanding culture makes or breaks a working relationship. Whether a German company works with a startup from Germany or outside of Germany does not matter as much as the culture-fit between the two companies. Both German and Singapore work cultures are similar in the sense that both value organisation and planning. Germany is highly organised and process oriented, and the environment in Germany is a good fit as Singaporeans function well in a well-organised environment.
Another factor to consider is how the German work culture affects the operations of a business in Germany. “Germany is very much rules-oriented. Whether it is from the perspective of training and qualifications or from the perspective of regulatory compliance, these elements are essential to German companies,” said Timothy. The onus is on Singapore companies entering Germany to ensure that the company complies to both Singapore and Germany’s regulations and get certified by the relevant authorities in both countries. What makes this easier is that both countries adhere to similar rules and regulations, and require similar international certifications.
Focus On Consistency
When asked what is the last word of advice for startups and SMEs looking to expand to Germany, Arunjai believes it is to focus on consistency, not speed. “It’s okay to be slow, but it’s not okay to step up, go out and then come back, because that gives the company a very bad reputation. The key to expanding your business to Germany is to have the ability to stay there for the long term,” he said.
How Will Scaler8 Help?
Scaler8 provides companies with a safe space to explore the market potential and maximises the ability of a company to succeed in the German market. It does this by derisking the market entry for companies with an end-to-end market expansion programme.
The Scaler8 team will help entrepreneurs assess their respective companies’ product-market fit, and provide access to potential customers and networks, which are integral to the success of the expansion. Sebastian Mueller, who is a mentor with German Entrepreneurship Asia and seasoned entrepreneur, believes the key strengths of Scaler8 include the mentorship, the connections to German corporations and the necessary legal and regulatory support.