Singapore’s deeptech blueprint takes shape, but hurdles dent ambitions

Update July 3, 2024, 7:22 PM SGT: This article was updated to add a line on an Enterprise Singapore program.

In 2020, Singapore committed S$300 million (US$215.4 million) for deeptech development in the city-state.

Under the Startup SG Equity Scheme, the government planned to co-invest with eligible investors in promising startups focused on biotech, agritech, and advanced manufacturing, among other sectors.

“These startups need larger investments, longer gestation periods and face higher risks,” Deputy Prime Minister and Finance Minister Heng Swee Keat said when he announced the scheme in 2020.

Image credit: Timmy Loen

But four years later, after investing nearly US$1 billion in deeptech, Singapore is faced with headwinds in executing its plan.

About a tenth of companies incorporated between 2019 and 2023 have shut down, according to data from SGInnovate, a government-owned investment firm focused on deeptech startups. Some sectors like biotech also saw many of its startups leaving the city-state, which Tech in Asia had previously reported.

A spokesperson for EDBI, the corporate VC arm of the Singapore Economic Development Board, tells Tech in Asia that building a base of deeptech investors is crucial for the government’s plans.

“Even if some companies fail, the ecosystem will still benefit from the expertise and global networks of these venture funds, allowing the talent and capabilities to be recycled back into the system,” the spokesperson says.

It doesn’t help that the investing environment now is “horrible,” says Cyril Ebersweiler, general partner at deeptech-focused VC firm SOSV.

“When money is scarce, and the interest rates are high, do you really want to invest in a deeptech startup?” he tells Tech in Asia.

Investors and deeptech founders agree the challenge the sector faces may be bigger than what the Singapore government alone can handle. For one, deeptech startups take years before they go to market, which investors in Southeast Asia may not always have the patience for.

“The issue about deeptech at the moment is its business model doesn’t work with the VC model perfectly,” Ebersweiler says. Valuations are unlikely to grow at the speed of, say, SaaS companies, which VCs in the region are used to, he adds.

Almost every sector in the city-state is challenged by the lack of talent in the country, but it is more pronounced for deeptech startups, which may require scientists and researchers with specialized skills.

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