SMALLER firms, including start-ups, are the backbone of the economy but they need strengthening, said the Minister of State for Trade and Industry yesterday.

Mr Teo Ser Luck noted that small and medium-sized enterprises (SMEs) contribute more than 50 per cent of gross domestic product.

They also hire seven out of 10 workers and comprise 99 per cent of all registered firms here.

Mr Teo made his comments after visiting Block 71, a hub for start-ups at Ayer Rajah Industrial Estate.

He dropped in on four firms - Burpple, Zimplistic, Paywhere and Stream Media - as well as technology incubator Plug & Play, which provides new firms with workspaces, mentorship and funding.

Mr Teo, who is also chairman of ACE (Action Community for Entrepreneurship), views start-ups as crucial as they can help reinvent Singapore to be more creative and innovative.

They can be groomed to become "the spark of brilliance that can help put Singapore on the world map" with their unique products and services, he said.

Mr Teo said he is looking at spreading the start-up culture of risk-taking and thinking out of the box which is necessary if businesses are to become more productive and competitive.

One solution is education: "We need to go to the schools, as well as the universities and polytechnics, to inculcate the spirit of trying."

But no one programme will fit all, so different approaches will be developed for schools, universities and polytechnics.

One key lesson Mr Teo wants included in the education programme is the importance of failure: "Entrepreneurship is about picking yourself up from failures. We need to embrace failure, which is a taboo topic here, and not the end of everything.

"Ultimately, we must view entrepreneurship as creating business opportunities."

He noted that discussions with the Education Ministry are under way and details will be released when they are finalised.

The ACE committee is also looking at ways to encourage serial entrepreneurs to start new businesses because of their experience.

"So far we've been focusing on first-timers but we're reviewing this as we go forward," said Mr Teo.

ACE is also partnering 12 organisations to help identify 100 entrepreneurs to start new businesses over the next three years.

Mr Teo had announced this partnership to the ACE Start-ups Scheme at Nanyang Technological University's Ideas.Inc Starting Up 2012 Conference last Saturday at Resorts World Sentosa.

Partners include the Singapore Infocomm Technology Federation, the Social Enterprise Development Centre, Nanyang Technological University, Republic Polytechnic and ITE College East.

Mr Teo said these organisations will give ACE a greater catchment area to reach candidates for its Start-up Scheme and then mentor them for a year so that they have a greater chance of succeeding.

The ACE Start-up Scheme gives each firm $50,000 to prove their business ideas can work.

Another ACE initiative is to create an entrepreneurship ecosystem.

In that respect, Mr Teo said Block 71 has succeeded and more could be developed. While it is not Silicon Valley, it is a place that investors and other people can visit to find out more about entrepreneurship.

"We have to figure this out. Maybe look at older buildings and some spaces that are unused and see how we can convert and use them for entrepreneurs," he noted.

Block 71 is fully occupied by about 60 tenants comprising start-ups, technology incubators and video game companies.

It was started less than two years ago as an initiative of the Media Development Authority. Jurong Town Council manages the building.

Block 71 was chosen for its proximity to the National University of Singapore and Singapore Polytechnic, both centres of research and development and talent - both crucial in helping start-ups form.

It was Mr Teo's first visit to Block 71 and he came away with a good impression due to the passion he felt from the companies he visited.

"They were all taking risks. Some are putting all their eggs in one basket. Some have not taken salaries for two years. But they decide how they will do it themselves and they are charting a path they can manage."

He considers start-up founders "one of the coolest professions today because they can live and tell their tales" which form valuable lessons for businesses.