SG’s newly-minted unicorn PatSnap eyes new markets, set to expand pharma database

PatSnap's co-founders Jeffrey Tiong (left) and Guan Dian (right). Source: PatSnap

Singapore-headquartered PatSnap is looking to strengthen its presence in the international markets such as Germany, France and Japan, besides augmenting its database in pharmaceutical research, its co-founder Guan Dian told DealStreetAsia in an interview.

The company made headlines last week when it raised $300 million in its Series E round led by SoftBank Vision Fund 2 and Tencent Investment, thereby entering the coveted unicorn club with its valuation topping $1 billion.

Other new investors who participated in the round are CPE Industrial Fund and Vertex Growth alongside existing investors namely Sequoia Capital China, Shun Wei Capital and Vertex Ventures Southeast Asia and India.

So far, the total funding raised by the company stands at over $400 million.

Guan, who is also PatSnap’s senior vice-president of Asia-Pacific, said that the startup is looking to ramp up its presence in certain international markets as it carves out its next phase of growth after the latest funding round.

So far, it is present in over 50 countries in markets such as Asia, Europe and North America.

Currently, PatSnap caters to consumers in Germany and France through its London headquarters, where it has local sales and support teams.

In the Asian market, the company is looking to expand its operations in Japan, Guan said. Though the company’s software is available in Japanese for the last two years, “we haven’t managed to grow the business there”, she said. With Softbank on board as a new investor, PatSnap hopes to tap on the Japanese giant’s network and sales team to crack the market.

The company also wants to increase its database and artificial intelligence (AI) capabilities in the pharmaceutical space. “Pharma companies spend a lot of money in research and development, especially with COVID-19 … the spending on pharma research has really increased exponentially,” Guan, who is based in Shanghai, said.

PatSnap’s model 

Founded in 2007, PatSnap’s software helps researchers search and analyse information on intellectual property, using AI to cull through data on patents that have been filed. PatSnap has patent information from 116 jurisdictions dating back to 1790, Guan said.

Companies can use PatSnap to discover who their competitors and potential collaborators are, and use their heat map to find out which research areas have more patents than others.

PatSnap’ business runs on a subscription model – it charges an average of $20,000 per license in a year. Discounts are given for basic versions to users like universities and research institutes. About 90% of its revenue comes from these subscriptions, while the other 10% is generated through consultancy and training services.

Subscriptions from China currently comprise about 60% of its revenue, while the rest is largely from North America and Europe, Guan said.

Last year, Japan’s National Institute of Science and Technology Policy found that China had surpassed the US to become the top publisher of scientific papers, releasing an average of over 300,000 papers between 2016 and 2018, compared to 280,000 papers published by its American counterpart.

However, the US remains the top spender in research and development, forking out $476 billion in 2018 versus China, which spent $346 billion, according to the UNESCO Institute for Statistics. Worldwide spending on R&D has hit a record high of nearly $1.7 trillion.

“It’s one of the very few SaaS startups of a reasonable scale,” said Shunwei Capital founding partner and chief executive Tuck Lye Koh. The fund first invested in PatSnap in 2016. “They are focused on the intellectual property space, and we are a strong believer that the emphasis and regard for intellectual property will improve.”

“Hopefully in the next five to ten years’ time, I hope they can grow to become a decacorn,” he added.

Focus on growth 

PatSnap’s competitors in the patent database space include well-established players such as Clarivate Analytics (a spin-off from Thomson Reuters), PatBase and Questel. Clarivate’s full-year revenue in 2020 was more than $1.2 billion, while PatSnap’s made SGD$64.2 million in revenue in 2019. Guan said they “grew (by) 40%” in 2020.

PatSnap also recorded a loss of SGD$22.6 million in 2019, filings showed.

However, Guan said profitability is not an issue currently. “If we want to be profit(able) we can be profit(able) because we have a very high-profit margin. But right now, it’s a strategic choice to invest more in growth, because we see the market is still very big,” she said, claiming that its gross profit margins are more than 90%.

It is not a cause for concern for investors as well. “You can always reach profitability at the expense of your growth. But what we like is actually their trend lines,” said Carmen Yuen, a partner at Vertex Ventures Southeast Asia and India, referring to how their losses have narrowed year-on-year from nearly SGD$37 million in 2017 to SGD$22.6 million in 2019, based on filings.

Her fund first invested in PatSnap in 2014, after she heard about the company about three or four years earlier from one of the startup’s first investors and board members, Accel-X’s managing partner Edmund Yong.

PatSnap currently has more than 10,000 customers including Spotify, Dyson and Tesla, and over 700 employees in nine offices across the markets its present in.

The next goal for PatSnap would be to increase their clientele by at least tenfold, Yuen said.

“What is 10,000 in the whole universe of companies? It’s still like a drop in the bucket,” she said, adding that Vertex will support the company through its networks in Southeast Asia, the US and Japan.

“The next milestone is how can we move from 10,000 to maybe 100,000 and how many of the mare likely to be your enterprise customers.”

PatSnap differentiates itself from other patent information providers by being AI-driven “from day one”, Guan added.

“We still have an internal team of experts to help to do the ‘last-mile – data annotation, labelling all that, but 90% of our work is done through AI technology,” she said, reducing the risk of human errors and increasing efficiency.

While business took a hit in the first half of last year due to the COVID-19 crisis, inquiries from pharmaceutical players have gone up. The digital acceleration caused by the pandemic has also made Software-as-a-Service, or SaaS, platforms more popular. Last year, PatSnap allowed researchers to use its tool for free so they could work from home, and some of these users became “sales opportunities”, Guan said.

The 34-year-old was inspired to start her own company during her year-long NUS Overseas College programme in Silicon Valley. She studied at Stanford University and interned for a video-streaming company as a programmer between 2007 and 2008.

“There’s always entrepreneurs and investors talking about big ideas … and they were young people who were 20-year-olds, 30-year-olds really making a big impact…. I wanted to be one of them.”

She met co-founder Jeffrey Tiong after she returned to Singapore and joined PatSnap after graduating. Tiong had also been on the NUS programme, interning for medical device upstart BioConnect Systems in Philadelphia in 2004. The firm has two other co-founders vice-president of new ventures Ray Chohan and chief technology officer Markus Haense.

Guan now handles external operations such as fundraising, partnerships and public and government relations.

Going public has always been on the cards, but Guan said the company is not yet ready for it.

“From a new investor’s point of view, we would love the company to accrue more value before the exit,” said Vertex Growth’s managing director James Lee. The group invests in later-stage startups. “We would rather let the company focus on execution for the next 12, 18, 24 months and really ramp up its revenue and profitability metrics before we look at exits.”

PatSnap’s list of big-name investors, coupled with Singapore’s push to become an intellectual property hub, are signs that PatSnap has the elements to become a successful unicorn, iSTOX’s chief commercial officer Choo Oi Yee said.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.