According to data released by the Asian Venture Capital Journal, VC funding for Singapore tech companies hit $1.7 billion in 2013 which puts investment in the city state ahead of Japan, South Korea and Hong Kong. Singapore now accounts for 19 percent of total funding for Asia, up from just 0.3 percent in 2011.
Singapore's government is not only fueling the startup sector through grants, it's also trying to foster a culture of collaboration through "clustering".
The hub takes form
Buildings like "Blk71" in the Ayer Rajah area and "The HUB" in Somerset are becoming hives of startup activity.
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Blk71 houses more than 100 budding companies and allows individual hackers to rent "hot desks" on the organization's website to get in on the action.
Ayesha Khanna, co-director of The Hybrid Reality Institute says these buildings give entrepreneurs a chance to rub shoulders with seed funding companies, other entrepreneurs and VCs.
"Clustering is a very important part of the startup ecosystem. Financing alone doesn't help. People coming together provides an exchange of ideas and mentorship. It's also a place for the graduates of the many polytechnics to congregate and have hackathons," she said.
"Here there are 3-D printing startups, there are software startups, there's an electric mobility startup. We know very well from the literature and research that innovation comes from interaction, cross-pollination and diversity of opinions," she added.
Khanna and her husband moved to Singapore from New York a year and a half ago. The two of them are an example of reverse brain drain, or brain gain, that's starting to become a common story among Singapore's tech scene.
"We clearly epitomize the reverse brain drain and we're seeing that in Singapore especially. A lot of not only Singaporeans, but children of expats who grew up here, are actually coming back here now. They find the environment a lot more enabling, both in terms of the regulatory framework and in providing them the emotional and financial support they need to set up their own companies," she said.
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The founders of online video streaming site Viki also chose Singapore as the place to found their company, despite meeting at Harvard and Stanford universities in the U.S.
"We started in the States, in the Bay Area, but really our make or break years were in Singapore. My co-founders were in Korea at that time, but to be close to the Asian audience, which was growing on Viki, to close content deals and to be able to draw engineering talent, Singapore made sense," said Viki's CEO and Co-founder Razmig Hovaghimian.
Viki was one of about 20 Singapore-based startups acquired in 2013, bought by Japanese e-commerce giant Rakuten for $200 million.
Success breeds success
Hovaghimian says the increase in "exits" will help inspire new entrepreneurs in Singapore.
"Success breeds success, and I feel we are getting near escape velocity, but are not there yet. We're starting to see more of the big guys -- YouTube, Yahoo, MSN, LinkedIn, Uber, Facebook -- open offices here which creates a great foundation for start-ups. It's also bringing phenomenal talent in. Silicon Valley venture capital is starting flow into Singaporean tech companies, tech blogs are regularly covering tech company progress and we're starting to see successful acquisitions and exits," he said.
— By CNBC's Julia Wood. Follow her on Twitter