An Open Letter to the Interactive Digital Media R&D Programme Office (IDMPO): 10 reasons why the current iJAM Grant Scheme is not working
I rarely write open letters and when I do, there usually is a burning reason behind it. The reason this time is to bring to light a deep disconnect between what the iJAM Grant Scheme theoretically aims to help, and what’s actually happening in reality.
In so doing, I hope to start a conversation with the operators and stakeholders of the Grant Scheme and as a result, find a way to improve the existing scheme (or create a better one) that will actually help entrepreneurs. I also hope that this will reduce the lag between current grassroots innovation and entrepreneurship and the government funding schemes that regulate and support it.
Background
Since 2009, I have been interacting with the various parties of the iJAM Grant scheme, namely the IDMPO team (administered by the MDA), various incubators and a bunch of startups & founders who have applied and gone through the process.
This post is based solely from how I see things at the ground level. Though I have never worked for a government statutory board, I do appreciate and understand the bureaucratic nature of government processes and accounting practices when it comes to taxpayers’ money.
Here are my findings thusfar on iJAM’s Grant Approval Criteria & Process:
Positive #1: The total amount of capital set aside is unlike any other country I have ever seen (some smaller exceptions might be Chile and Malaysia), but I continue to be in awe and proud of what Singapore government have done to support the startup ecosystem.
Positive #2: Appointing incubators – both public (universities) and private sectors – to administer, coach and grow the teams is a move in the right direction. Governments just are not suited to make these decisions.
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Finding #1: The scope of the various sectors under IDM and the definition of “Innovative R&D” is not clear to applicants nor incubators. This results in confusion and appeals made by both teams and incubators which delay the grant process and also wastes entrepreneurs’ time.
Fix: Make it as clear and transparent as you possibly can to all stakeholders. Sectors and markets evolve, please keep up to date to what they are.
Finding #2: Founder(s) criteria is to be full-time and have a co-founder who is technical. This rules out non-technical founders who can lead a technology team, and rules out people with great ideas but needed a guided way to test and validate what the market wants (and thus use that as leverage to hire their technical cofounder). This is not lean startup friendly.
Fix: Founders can be full-time or part-time, screened heavily. As long as they execute and profess that they will commit to the project once traction/metrics are achieved, they should be approved.
Finding #3: Why must founders only receive a maximum of $1k per month of salary? Are you assuming all the product development and engineering of iJAM projects have to be outsourced and that the founders are incompetent to develop the product themselves? [Also why can’t incubators fund their own ideas? Like Betaworks or Science Inc. in the US? Makes no sense to me as well].
Fix: Remove this clause and let the founders spend the money like most other founders in the world do, to achieve milestones that signal product market fit whatever it takes.
Finding #4: Approval time takes WAY too long. Besides the incubator approving and processing the paperwork. There is a panel of 7 “experts” on which you need 3 to approve the project. Most are not entrepreneurs, and nobody knows who they are and why they are there. Thereafter IDMPO needs to approve as well. This process takes at least 3-5 weeks sometimes longer and IDMPO has the last say. So either IDMPO is undermining the incubators or is putting unnecessary checks making the process slow and at times laughable.
Fix: Remove the panel and place more trust in the incubators, if not, replace the panel with better people (recent entrepreneurs and investors only) and streamline the process online (e.g. using tools like f6s.com or an equivalent).
Finding #5: Equity stakes. Equity in a company at the early stage is extremely precious. The current feel is that the iJAM incubators are asking for too much of a company with too little value add and no cash injection (except for facilitating a $50k grant – helping you get a grant and investing pure hard cash is a different thing). Hence most savvy founders either negotiate hard or apply to SITF and NTU Ventures where they do not take equity.
Fix: Let the market speak for itself and contractually allow incubators to take no equity early on (make it optional).
Finding #6: Milestones misalignment. Right now milestones are decided primarily by the founders with consultation from the incubators. Milestones as I find them do not help with “pivot or persevere” decisions because they are usually not set up right. This can only be a negative. If the milestones are the wrong metrics to prove product market fit, it is hard for both incubators and 3rd party investors to believe and take the risk to invest at Tier 2. Bear in mind, metrics differ for B2B, B2C, Mobile or SaaS companies. It is already hard to begin with.
Fix: Run workshops with the companies and incubators to make sure the milestones are geared towards the individual companies and their markets with the sole goal of finding metrics that signify product market fit.
Finding #7: Disbursement is based on a fixed budget that is approved before hand and claimed as you spend. As we all know 99% of startups change directions, this means iJAM companies have to maneuver in chaos within a budget constraint, and may not be able to pivot quick enough. This is again not startup friendly. Case in point: Funding for travel is discouraged (and you are complaining we have a hard time expanding overseas? we need to talk to customers/partners not just build products).
Fix: Remove all the budget constraints and let the founders use the proceeds with supervision from the incubators as they see fit.
Finding #8: Fees to the incubators can be better structured not for administration purposes ($9-12k per company) but for achieving the said customer development/interviews or properly structured milestones/traction.
Fix: Disburse fees to incubators because they helped startups achieve the right milestones to validate there is a market for their products and services (even if the market is non-existent and they need to pivot).
Finding #9: Market execution knowledge is not perfect with the current list of incubators but the companies still need serious market entry help, advice and network into the key large markets (a misalignment).
Fix: So if there is a gap, try to form an alliance with partners overseas or run workshops to help companies ideate, grow, network and expand. Stop spending money on pitch/investor workshops when product market fit has not even been achieved. Spend to bring worthy companies overseas to make the right connections. If you have something good, investors will find you.
Finding #10: Follow on financing, post iJAM. If the entire iJAM process and milestone/metrics monitoring is poorly executed, 3rd party investors outside of the iJAM incubators may not invest again after a few companies went in the wrong direction because of poor monitoring/guidance. This includes the NRF TIS Incubators, Spring Seeds, angels and larger institutional funds.
Fix: Have some of the NRF TIS incubators, angel groups, and VC firms be closely tied to a few iJAM incubators (to match expectations early on) or even be able to manage one.
Conclusion
The “high growth startup” cannot be executed well within the realm of the iJAM Scheme. iJAM does not facilitate the fail fast, pivot or stop decision making that is needed for founders to build a meaningful and enduring technology company. It needs to be clear on what it stands for and what its objectives are. If it is R&D you want, this is not the scheme to do it in, if you want the companies to somehow return the grant money to you after achieving revenue targets (as in “commercialized products with customers”) then it is time to change, Period (otherwise it’s a waste of taxpayers’ monies).
What is iJAM? (more here)
i.JAM is a micro-funding Scheme (i.JAM scheme) that supports start-ups and individuals with breakthrough ideas that can be developed into innovative products and services.
Objective – To fuel grassroots innovation and entrepreneurship.
Criteria, FAQ, Application form (full guideline)
Note Best: This post is a work in progress. Please feel free to comment below and give me feedback on whatever you think is missing. Thank you.
Thanks to Nicholas Gan for reading and helping to edit drafts of this.
Crazy idea for my next blog post: If we have our way, how would a startup government grant scheme look like? With a new incubator (as guinea pig) that only employs a lean startup method, new process, new disbursement, new monitoring…stay tuned.