In another move by the government to make up for the dearth of funds in Singapore, the National Research Foundation has issued a Call for Proposal for the new Technology Incubation Scheme (TIS). Modeled after Israel’s Technological Incubator Programme, NRF will co-invest up to 85% or S$0.5 million per startup, with an appointed incubator investing the rest (at least 15% of the total investment).
Update: 7 incubators have been selected.
Details of the scheme
Stage of startups targeted
- High-tech companies based in Singapore (a sales office here is NOT okay)
- Not to support entirely new startup companies that is at the Proof of Concept stage. TIS will fill in the funding gap of the 200-500k range, as there are many companies who are either too big for other government schemes like iJAM or YES!, or too small for SPRING SEEDS or Business Angels Scheme.
Between NRF and Incubator
- Co-funding between NRF (up to 85% or S$500,000) and Incubator (provide at least 15% of investment). This means that for the max NRF funds of 0.5m, the incubator need only invest around 88k.
- Equity split will be in proportion to amount of investment.
- NRF investment will be in the form of a convertible bond.
- Share buyout option open to incubator. Incubator can buy NRF’s share out at a price of 1.1 times capital in the first 2 years, and 1.15 times capital in the third year.
- There must be physical incubation space to house the startups. Length of incubation period is up to the incubator and startups.
- Incubators must have at least one link to a Higher Institute of Learning (IHL). Rationale for this is that IHL will have facilities that startups can tap on if and when needed (for example, if a portfolio company requires a lab to carry out some experiment, the incubator can activate their IHL link and tap on the latter’s resources.
- Operating expenses will have to be borne by the incubator. There was some discussion during the TIS briefing
How large the scheme is
- Rough estimation of number of startups supported by each incubator could be 6-8, depending on amount of incubation space the incubator manages to secure, how much in operational cost the incubator can support etc..
- NRF said that they haven’t decided how many incubators to accept into the scheme, could be as low as 1.
- NRF has set aside S$50 million for this scheme. Simple calculation assuming each startups gets the max of 0.5m means that 100 companies can be funded.
- The fact that operating expenses will not be supported by TIS had some people in the briefing questioning the viability of it – as it wouldn’t be economically viable then. To this, NRF’s response is that they expect incubators to have a vested long term interest in the startups, and are not looking to “creating a business model with the scheme” (say charging rental for the incubation space). Instead, the incubators should only succeed if the startups succeed.
- Since operating expenses are not covered by the scheme, the amount of investment made by the incubator will be much higher than the upfront direct investment (at least 15% of total investment) into the startup. This would make the scheme more attractive to already established incubators with incubation space and operational costs. Such that being an appointed incubator under TIS will afford them more leverage in making new investments without having to incur new setup costs.
- There was an evaluation done of the Israel’s Technological Incubator Programme (on which TIS is modeled after) by the Technion-Israel Institute of Technology. A major difference is that expenses were funded by the Israeli programme, whereas at TIS, they aren’t.
What does mean by for startups in Singapore?
This scheme is great for startups because I’ve seen many of them struggle at the in-between stage whereby their product or operations aren’t attractive enough to get through the SPRING SEEDS, Business Angels Scheme or iMATCH matching programme and platform whereby startups get to pitch to many investors at a time.
So, for those companies who are ‘graduates’ of the iJAM or YES! schemes, or if you’re been bootstrapping and want to raise funds of a few hundred thousand, you should keep close watch on the TIS scheme (we will of course cover news of the scheme, so please check back).
Featured photo of this piece is courtesy of derekkeats.
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