Venture investments in Singapore are reported to grow despite a slowing economy. Overall, a total amount of S$13.4 billion (+36%) was invested in startups across 437 deals from January to September 2019.
Emerging interest in Deep tech startups
Notably, Enterprise Singapore saw investments into early-stage, deep tech startups in Advanced Manufacturing, Urban Solutions and Sustainability, and Healthcare and Biomedical Sciences starting to gain traction. Investments in these three domains amounting to S$416.4 million across 76 deals from January to September 2019, a 25% increase from S$333.8 million over the same period last year.
While investments in these three domains are growing, they make up less than 4% of the total capital invested, in part due to the current ecosystem’s lack of lead investors with the expertise and experience to back deep tech startups. Nonetheless, Mr Edwin Chow, Enterprise Singapore’s Assistant Chief Executive Officer for Innovation and Enterprise, finds the emerging VC interest in deep tech domains encouraging.
According to Mr Chow, “globally, we see that an ageing, wealthier population, as well as urbanization and climate change will create a growing demand for new, innovative solutions. On the back of this, we expect to see more deep tech startups being formed – be it through spinouts from our Institutes of Higher Learning or incubators and accelerators – to address these needs. To succeed, they will require more early-stage venture funding. ”
The deep tech startups are from diverse backgrounds, including global startups raising capital here, and startups founded locally by researchers and graduates from Singapore universities and research institutes, who leverage locally-produced intellectual property. Such startups are backed by proprietary technologies that cannot be easily replicated, allowing them to scale and compete globally.
In the first three quarters of 2019, Startups in Healthcare and Biomedical Sciences received about S$148.3 million in investments. Within this domain, investments in pharmbio and other medtech startups reached S$21.4 million, while investments into digital health startups reached S$126.9 million.
Meanwhile, in the Urban Solutions and Sustainability domain, investments reached S$150.4 million, up from the S$96.6 million in the same period last year. This was attributed to increasing attention on cleantech and sustainability.
Additionally, in line with the government’s push to develop Singapore into a leading food and nutrition hub in Asia, there was strong interest in agri-food tech startups, whose investments reached S$28.3 million, up from S$0.75 million last year.
Lastly, startups in Advanced Manufacturing secured S$117.8 million in investments, up from the S$84.4 million in the same period last year.
Rising investments in digital tech startups
Investments into digital tech startups continued to climb, accounting for 93.2% of the total quantum, in part due to the growing Internet economy. The number of investments made in digital startups reached 278 deals, up from 145 deals during the same period last year.
Mr Amit Anand, Co-founder of Jungle Ventures said, “We have seen considerable investment conviction that greatly underscores the growing momentum for startup investments to be injected into the Southeast Asia region. Our capital allocation into deep tech startups has grown over the years and we expect this trend to continue.”
Working with partners to enhance the startup ecosystem
Regional and global funds have been closing bigger rounds this year. This trend is poised to continue as the opportunities in Southeast Asia continue to grow, with the rise of the Internet economy. Several venture capitalists (VCs) have launched new funds in Singapore this year, including early-stage and growth-stage funds such as Jungle Ventures, Wavemaker, EV Growth and Vertex Venture; and corporate-backed funds such as Reefknot, a joint venture between Kuehne + Nagel and Temasek.
Mr Marc Dragon, Managing Director of Reefknot Investments, which is headquartered in Singapore, said, “With Reefknot’s focus on Logistics Technology and Trade Finance startups, and with Singapore’s strong global position as a trade, logistics and financial hub, we believe this is naturally a good location for us to anchor our operations.”
Enterprise Singapore says they will continue to strengthen Singapore’s startup ecosystem through closer collaboration with different players, especially to encourage deep tech funding.
Their initiatives include Startup SG Equity, which helps catalyze financing for nascent sectors through government equity co-investment with the private sector, and Deal Fridays. This joint imitative between Enterprise Singapore and the Monetary Authority of Singapore was piloted in 2019 offering carefully curated deal-making sessions to facilitate regional investments into startups.
Mr Chow added, “Access to smart financing is essential to support the development of deep tech startups based in Singapore. We will continue to work with partners such as MAS to catalyze more smart monies into startups in deep tech domains. As we develop Singapore into a Global-Asia node for tech, innovation and enterprise, we need to build on the momentum to capture and catalyze more venture activities here.”
Commenting specifically on the financial sector’s FinTech Sector, Mr Sopnendu Mohanty, MAS Chief FinTech Officer, said, “Singapore’s growing tech-driven ecosystem strongly echoes our financial sector’s FinTech growth. Investment in Singapore-based FinTech startups crossed the S$1 billion milestone for the first nine months of 2019, growing 69 percent year-on-year.”
He added that “. The success of the digital ecosystem lies with Singapore establishing deep partnership with global markets and integrating into Asia’s digital economic growth.”