The news in September 2015 that Singapore was to earmark S$40m ($29m) to support corporate venturing investment in early-stage technology companies only reaffirmed the country’s commitment to supporting innovation and entrepreneurship.
The announcement was made at Techventure 2015, the startup event run by the National Research Foundation (NRF), part of the Singapore Prime Minister’s Office. The money will be used to ensure that new technology businesses can attract funding from, and create partnerships with, Large Local Enterprises (LLE) – that is, Singapore-based firms with at least 30% domestic shareholding and annual revenues of S$100m or more.
It is the third instalment of NRF’s Early Stage Venture Fund (ESVF), and the first such scheme globally. The ESVF was set up in 2008 with a second round of investment taking place in April 2014. The ESVF has thus far been used to seed funds with venture capital firms to invest in local early-stage technology startups. This third round, however, is the first focused on stimulating the creation of corporate venture funds among LLEs.
The NRF says it wants LLEs to adopt corporate venture strategies both to access new technologies and to catalyse the growth of clusters of innovative high-tech companies. For their part, startups will be able to leverage their larger partners not only for funding, but also for mentoring and connection to customer networks, for example.
The NRF invited LLEs to submit their proposals for corporate venture funds by mid-January 2016, with details of which funds are to be backed due to be published by the end of March.
The selection panel is chaired by Lee Hsien Yang, brother of Singapore’s Prime Minister and also chairman of private equity firm General Atlantic.
The third round of the ESVF was announced at Techventure 2015 by Dr Vivian Balakrishnan, Minister for Foreign Affairs and also the Minister-In-Charge of the Smart Nation Initiative, a programme which aims to boost innovation and the adoption of new technology in all aspects of Singaporean society.
Addressing an audience of entrepreneurs and corporate investors, Balakrishnan said: “By catalysing the development and the growth of more startups and of more innovative companies, and by building a tightly networked ecosystem, we can help all of you derive more value to exploit new technologies, build new networks, and in your success, you will also help Singapore to transit into an innovation economy.”
He added that the latest instalment of the ESVF would “facilitate the development of technology ecosystems”, where smaller companies grow around a core of larger businesses.
“It serves as a way for LLEs to remain competitive and renew their technology base by accessing new technologies being developed and prototyped through the smaller start-ups around them in the ecosystem,” Balakrishnan explained.
“Investee companies in turn can leverage the organisational resources of their corporate partners to overcome barriers to commercialisation, and access networks and expertise to go global.”
Another area of focus for the government to support entrepreneurs and LLEs is venture debt. State-owned Temasek led the acquisition of Silicon Valley Bank India last year and its new subsidiary is now building a pan-Asia platform, which will be the first in the region for the re-named entity, Innoven. InnoVen has already started setting up the team to cover Singapore and south-east Asia outside of India and is looking at other markets, including China, this year.
Looking at how corporations can fund entrepreneurs follows on from the successes the ESVF has had in helping VCs exit portfolio companies to LLEs.
A number of the startups that ESVF has backed have received follow-on funding or been acquired by other companies. These include JustCommodity, a trading and risk-management software developer acquired by Dallas-based Allegro Development in June 2015, and restaurant review portal HungryGoWhere, which was bought by Singapore Telecommunications for S$12m in 2012.
The NRF was set up at the start of 2006 to set the national direction for research and development in Singapore. It does this by developing policies and strategies for research, innovation and enterprise, and by encouraging international talent in science and innovation to relocate to the country. Its 2020 strategy was set in January with a S$19bn commitment and focus on four areas: the digital economy, smart cities, advanced manufacturing and biotech.
As well as administering the ESVF, the NRF has recently established a collaborative project involving researchers in Singapore and the UK aimed at increasing the resilience of systems and infrastructure against cyber attacks
And last autumn, the organisation announced the creation of the LUX Photonics Consortium, which will promote research into the harvesting and distribution of energy derived from light generation. Photonics is expected to have potential applications in sectors such as medicine, security and defence.