(Sept 18): For a startup, securing work from a government agency can be a daunting task. A single sales pitch can take six to nine months of talking to 20 different groups of people, all the time with no clarity on how likely it is that a contract will be awarded. But Edwin Low says start-ups should not despair of ever securing government work. Low is director of the Infocomm Media Development Authority’s Accreditation @ IMDA programme, which helps to rubber stamp start-ups and get them through the doors at government agencies and large enterprises.

“[We provide] assurance to the user [of the start-up],” says Low. “We don’t accredit commoditised products; we accredit products with a [unique value proposition] compared with what is out there in the market. We actually benchmark them against what’s out there in the market with real users; we establish UVP and market demand.”

Launched in July 2014, Accreditation @ IMDA has since helped start-ups generate about $80 million in sales to government agencies. It has closed more than 120 projects and raised over $59 million in fresh capital during or after accreditation.

 Low says the hesitation among civil servants to award work to start-ups is understandable. “[They] have to deliver mission-critical systems,” he says. “The main concerns would be whether the product works, whether the company can deliver to the standard [they’re] used to and whether [the start-ups] will survive past six months to a year.” Start-ups that go through the accreditation process are therefore evaluated rigorously before they are given the stamp of approval. Low explains that the companies have to provide access to their books, reveal their sales pipelines and even open their source codes to scrutiny. Start-ups end up cleaning up their products so they become more robust and better equipped to go into production, according to Low. “We also do financial and operational due diligence, very much akin to what a [venture capital firm] would do prior to investing. With that, we accredit them and take them to the customers.”

Better than grants
Accreditation @ IMDA was born out of a desire to help start-ups get work, and revenue, rather than helping them with grants — akin to teaching them to fish for themselves.

“What we try to do is change the dynamics. We try to crowd the agencies for the start-ups [so that they get to] pitch to more agencies at one go,” says Low. Accreditation @ IMDA hosts demo days that allow government agencies to interact with a start-up’s products and solutions. “Then we go behind [the scenes] and talk to the agencies and get a feedback loop going: Are they interested? If not, it’s okay. We’ll tell the start-up to move on,” he says.

“If the agency has some interest, but it has one or two concerns, we try to clear it up and narrow that gap in subsequent meetings,” he adds. For instance, agencies may like a startup’s technology, but may be worried that it will not work for a specific use case. “All this helps the start-up generate and close the pipeline in an expedient way. If you think about it, we’re just compressing the business cycle. They are still winning the business on their own merit. No one is giving them a free lunch.”

Accreditation @ IMDA has also launched a “green lane” initiative to help streamline the government procurement process for start-ups. “[The government has] a very long procurement process: We have to gather [specifications], go for evaluation, and often [the startups] don’t win. So, we came up with a “green lane” to help these particular start-ups, after they’ve been accredited, and streamline the procurement process,” says Low.

In the beginning, he says, Accreditation @ IMDA often had to approach start-ups and ask them if they would like to be accredited. These days, however, start-ups are volunteering for the programme. “[Start-ups] like to be accredited because the brand matters when [they] go overseas, [or] because they like the benefit of some of the assurance work we do. They [become] much tighter ships when they go out to the market. People now understand what this programme means and how to go about deriving some benefit from it.”

Low says the programme is getting start-ups with better quality as well as more late-stage startups across sectors beyond enterprise software. Those with innovative business models, deeper and more interesting tech, as well as overseas start-ups looking to make Singapore a regional or global headquarters, are also participating.

A learning journey
Daryl Neo, founding director of DC Frontiers, had resented the tedious accreditation process. “You have to set aside a lot of management time. Management has to produce the business case, the sales team has to produce the sales chart with competitors, the tech team has to set up the environment for them to do a code scan, penetration testing, your finance team has to sit down with them and open the books, the ops team has to brief them on all the ops. It is a lot of time and for start-ups and small and medium-sized enterprises, time that can be used to generate revenue,” he says. But Neo has since found reason to be thankful for this rigour when it came to his company’s Handshakes solution, which allows users to do counter party checks on relationships between companies and directors. When DC Frontiers went through the accreditation process the first time, it failed because it was relying on manual processing of company announcements to populate its database.

“[The Accreditation @ IMDA] director told me: ‘I can’t accredit you until you have something that’s scalable,’” Neo says. That led DC Frontiers to develop its own natural-language processing technology. “Now, it is actually starting to bear fruit: it allowed me to reduce my ops costs, get more timely information and improve scalability. I can now point this system to other English-language jurisdictions and we can cover it very quickly,” he says.

Having sold his solution to the public sector, Neo says he can now also take it to the private sector quite confidently. “For example, I serve internal audit units, human resources units and grant units, which have their parallels in the private sector. I can go to the internal audit unit in the private sector and say that the government’s already using it. For grants, I can go to banks, which give loans, which is similar,” he says. “For these firms in the private sector, they only take things that are proven in the market. It is a chicken-and-egg problem, and allows us to break that vicious circle. It has been quite useful. Right now we are getting close to 20% of government agencies on our solution, which is giving us a lot of use cases.”

Another start-up that has seen value in being accredited is Trakomatic, a shopper analytics provider that can keep track of traffic headcounts, crowd density, movement paths, age, gender and faces for brick-and-mortar companies. “The accreditation process was very stringent and it is a lot more comprehensive than an investment fund’s due diligence checks,” says CEO and co-founder Allen Lin.

Lin says the accreditation process helped Trakomatic implement some best practices and improve its offerings. “The solutions we offer and enhancements incorporated along the way for government agencies have proven to be a lot more comprehensive for non-government clients, which helps us to hold a better position against other competitors in the market.”

Path to being listed
In May this year, Accreditation @ IMDA signed a memorandum of intent (MOI) with the Singapore Exchange that will see the two parties collaborate in helping accredited companies get listed on the exchange. As part of the process, SGX and Accreditation @ IMDA will work with professional services companies to lower the barriers to and costs of being listed. Currently there are two sponsors, two auditors and two solicitors on board.

Mohamed Nasser Ismail, senior vice-president and head of capital market development at SGX, gives his take: “As the national exchange, [we] can expect these companies at some point in time to flow into the public markets. As part of the national infrastructure, we thought that it would be incumbent on us to work with the various agencies to see how best we can help and facilitate their growth.”

While start-ups tend to sacrifice profitability on the altar of scale, making them unfit for an IPO, Nasser says SGX wants to engage them at an earlier stage to help them transition into a public market-ready company. SGX has also reached out to other government agencies besides IMDA in an effort to encourage collaboration between the public and private sectors and to promote SGX as a listing destination.

“We are working with all of them, basically getting everybody and being helpful to them... in the hope that we would have promoted familiarity with the Singapore [public market] ecosystem and goodwill among these entrepreneurs. When the time comes for them to make a decision to list, then SGX will be a natural choice,” says Nasser. “We have already identified some companies that may be interested and keen [on leveraging the MOI]. That engagement is ongoing.”

This article first appeared in Issue 797 (week of Sept 18) of The Edge Singapore