Singapore’s National Research Foundation (NRF) has given out grants up to S$40 million (around $30 million) to four large local enterprises (LLEs) for investments in startups in the city-state, in an announcement at InnovFest unBound 2016, a innovation festival and digital conference organised by NUS Enterprise and unBound Media.
The firms who will receive S$10 million each to pursue corporate venture investing include listed entity DeClout, realty major CapitaLand, agribusiness group Wilmar International and logistics firm YCH Group. This is a first of its kind partnership that Singapore’s NRF has entered into with large corporate entities.
This scheme, the third instalment of NRF’s Early Stage Venture Fund (ESVF) programme, will see the government agency match the investments that these large local entities make in startup ventures on 1:1 matching basis.
So, for every dollar invested by LLEs in local tech startups, the government – read NRF- will put in an equal amount. What would otherwise be a high-risk investment, this move will help spread the risk across the public and private sector.
The scheme is designed to encourage these enterprises to engage in corporate venturing, in order to source for new technologies and business models. It will also complement and supplement efforts to develop an M&A pipeline, should the corporations choose to pursue such a strategy. The mutually beneficial scheme enables startup ventures to access the mentorship, resources and networks of the LLEs.
CapitaLand stated that it would target investments in Singapore technology ventures that complemented and enhanced its core business operations in areas like design and construction, operations and maintenance, and well as smart living solutions.
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Wilmar International will focus on startups with technologies in food safety, industrial biotechnology, and the YCH Group will look at funding startups engaged in 3D printing, logistics and robotics.
YCH Group’s fund, Supply Chain Angels (SCA), will focus on investing in startups operating in the logistics sector. Executive chairman Robert Yap commented: “YCH is committed to contributing to the growth of the supply chain startup environment by equipping its players with the right technical, operational and knowledge capabilities.”
Commenting on their involvement, CapitaLands chief corporate development office, Ng Kok Siong, said, “This grant supports our endeavour to invest in and work with start-ups in our space and identify transformative ideas that can be commercialised. With our significant asset base and network, we offer tremendous opportunities for Singapore-based startups with emerging technologies to test, validate and enhance their innovations at our properties.”
Meanwhile, SGX Catalist-listed venture builder DeClout, which focuses on incubating and developing cloud computing, data centre-related, e-commerce and marketplace companies, said its investment focus would be on entrepreneurial ventures operating in the digital economy; big data analytics, smart logistics, cyber security and financial technology (fintech) ventures are amongst the ventures it will be evaluating.
Lim Swee Yong, head of DeClouts’s corporate office, said: “It’s a tremendous opportunity and privilege to be selected as a co-investor in the (fund)along with the NRF. We believe that(the fund) will allow DeClout to play an important enabling role in assisting early-stage tech companies in the digital economy space. With our proven management expertise and ecosystem reach, we look forward to incubating the next generation of tech start-ups that will put Singapore on the world map of emerging technologies.”
A piece by the Harvard Business Review on why startup-corporate collaboration is crucial notes: “Startups and established companies bring two distinct and equally integral skills to the table. Startups excel at giving birth to successful proof of concepts; larger companies are much better at successfully scaling proof of concepts.”
Startup ventures operate in a marketplace environment where they are developing their business model and product concurrently, with a conservative failure rate of 75 per cent. And venture capital represents an asset class that is both high-risk and highly illiquid. Whether these Singaporean firms can successfully build the capacity to operate in the venture capital space is yet to be determined.