Deep tech offers society the opportunity to solve entrenched problems in healthcare, urban mobility and other areas, but commercialization of deep tech is a high risk venture that requires massive investments. The long gestation period means returns are slow to materialize, unlike for general consumer tech.
Across Southeast Asia, Singapore has one of the most advanced startup ecosystems, but deep tech investments are still few and far between. There aren’t many venture capital firms that are keen on funding startups in this sector. Instead, governments are stepping in to invest aspiring deep tech developers.
SGInnovate, a government-owned investment firm, recently released a paper titled “Deep Tech Investments: Realising the Potential,” examining the differences between deep tech and general tech, as well as the challenges, risks, and rewards that lie within investments in deep tech. In particular, the report mentions the following points.
Singapore lacks experienced people who can commercialize deep tech
Singapore’s deep tech ecosystem is not held back by a lack of research or interest. In fact, approximately SGD 60 billion (USD 43.3 billion) has been invested in hard sciences and engineering since 1995. In 2017, it was estimated that Singapore had more than 35,000 research scientists and engineers working in the city-state.
Rather, it is the lack of experienced people with both industry knowledge and supply chain know-how who can commercialize the technology.
As a result, deep tech research projects tend to stagnate, prompting Wong Poh Kam, director of the NUS Entrepreneurship Centre to describe the ecosystem as “[lacking] the depth and specialization of other high-tech startup hubs.”
Wong recently stepped down from his role at the NUS Entrepreneurship Centre to focus on being an angel investor and further develop his research on innovation and entrepreneurship.
In a separate interview with KrASIA, Wong said that the number of patented technologies coming from Singapore is growing. Between 1996 and 2000, 943 patents were granted by the US Patent and Trademark Office to Singaporean inventors; that number rose sharply to 7171 between 2011 and 2016. Despite the increase in patents, there is still a lack of commercially successful Southeast Asian deep tech startups compared to Silicon Valley, said Wong.
Deep tech research concentrates on a few key areas
SGInnovate’s report finds that deep tech research projects typically cover fields like life sciences, medical technology, clean technology, renewable energy, and autonomous technology.
During Wong’s interview with KrASIA, he noted that Singapore invests significantly in water technology, specifically membrane technology. This is an area where Singapore has sufficiently advanced technology to make a difference.
One main reason for such heavy investment is to reduce Singapore’s reliance on foreign countries for water. The tiny nation has no natural resources and has imported water from Malaysia for many years. But this is unsustainable, prompting the government to channel money into this particular area.
Food tech is another sector that is becoming increasingly popular in Singapore, driven by the urgency to develop food locally due to an expanding population, erratic weather patterns, and an uncertain geopolitical landscape.
Strong government support comes in the form of monetary investments. In January this year, Enterprise Singapore’s investment arm Seeds Capital announced a collaboration with seven co-investment partners to invest more than SGD 90 million into Singapore-based early-stage agrifood tech startups.
Singapore’s future food and alternative protein industry is on the rise with case studies like Shiok Meats, Life3 Biotech, and Karana. Life3 Biotech aims to produce alternative protein using legume and vegetable extracts, while Karana is working toward replacing meat with jackfruit in some dishes.
The city-state lacks a sophisticated deep tech investing community
Deep tech research demands a lengthy gestation period. Behind every discovery is years of research, which requires large doses of funding. Translating the research into consumer products also takes a lot of time because the findings must be tested for safe use, so the processes of conducting clinical trials and receiving regulatory approval add on to the already long timeline. Altogether, it might take a startup many years and many millions or even billions of dollars to commercialize a deep tech research discovery.
Few venture capital firms have that sort of patience and are willing to overlook an extremely high failure rate. Also, deep tech companies are typically not based in Singapore.
An example is Unum Therapeutics. Founded in 2014 by Dario Campana, a recognized figured in immunotherapy for cancer, and veteran pharmaceutical executive Charles Wilson, Unum Therapeutics is a biotech startup that uses the special antibody-coupled T-cell receptor technology discovered by Campana to fight cancer. The company encountered hurdles in commercializing the research in Singapore as they could not find funding to buy laboratory equipment. Eventually, the company relocated to Cambridge, Massachusetts. By 2018, Unum Therapeutics had several ongoing clinical trials, a US patent for the technology discovered by Campana, and was listed on the Nasdaq. It raised about USD 69 million during its IPO.
The absence of a sophisticated deep tech investment community in Singapore results in startups often have to look overseas for capital. A recent example is Seppure. The Singapore-based company specializes in a nanofiltration technique that can separate chemical mixtures using minimal energy. It just raised USD 2.55 million in its seed round led by SOSV, a US-based hardware investor, which was joined by Silicon Valley-based VC firm and accelerator 500 Startups. SOSV is a multi-stage venture firm founded as the personal investing vehicle of entrepreneur Sean O’Sullivan. It is more well-known for its accelerators, including the hardware-focused HAX and IndieBio for life sciences startups.
The Singaporean government is the biggest investor
When there is a void, sometimes the government steps in. Since the late 2000s, deep tech-focused incubators and accelerators have been set up, like Clearbridge Accelerator and a cleantech accelerator set up by the Sustainable Energy Association Singapore.
SGInnovate was founded in 2016 specially to fund, build, and grow deep tech startups in Singapore. It formed a partnership with Entrepreneur First, an international venture builder that expanded to Singapore in 2016 to create startups within the deep tech sector. SGInnovate invests in deep tech firms that are built out of Entrepreneur First.
There is also the Startup SG Equity scheme, a government-backed fund that invests in startups, including those in deep tech. On top of that, Singapore has a SGD 80 million fund set aside for advancing cell therapy research and a SGD 144 million fund for research and development of advanced food production, including cell-based culture meats.
In July, the Singapore-MIT Alliance for Research and Technology (SMART) finalized a partnership arrangement with A*STAR Institutes with support from the National Research Foundation (NRF). Together, they launched a new initiative called Smart Critical Analytics for Manufacturing Personalised-Medicine (CAMP). The SMART CAMP initiative focuses exclusively on finding ways to produce living cells as medicine.
These various kinds of top-down support have led to a clutch of startups in the deep tech sector and created a global reputation for Singapore. Even so, concerted efforts are needed to further improve the ecosystem, especially from the private sector. Larger funds are definitely needed. In its conclusion of the report, SGInnovate suggests a potential source of money—the 180,000 millionaires in Singapore.