In an era marked by rapid technological advancement and a growing emphasis on sustainability, Singapore stands out as a beacon for deep-tech innovation. According to the Singapore Venture Funding Landscape 2023 study, the city-state’s environment is highly conducive to nurturing breakthrough technologies.
Halfway through 2024, we are keen to explore whether Singapore continues to attract substantial investments and maintain its growth trajectory, solidifying its position as the deep-tech hub of Asia. To find out more, we speak to Luuk Eilens, Founding Partner of SDTA, on his insights on the evolving landscape of deep-tech funding and innovation in Singapore.
iFlyTek shares why Southeast Asia is the next destination for AI growth
Singapore’s robust support system, involving both public and private sectors, plays a crucial role in fostering deep-tech ecosystems. Government initiatives such as the Research, Innovation, and Enterprise (RIE) 2025 plan, with its substantial budget of S$25 billion, highlight the nation’s dedication to advancing key sectors including health, sustainability, and the digital economy. However, financial support alone is not enough; strategic alliances and a thriving venture ecosystem are vital. Over the past year, there has been a significant increase in deep-tech venture deals, reflecting the strategic focus on nurturing startups with strong growth potential and long-term competitive advantages.
In our interview, he will delve into the challenges and opportunities facing deep-tech ventures in Singapore. From the impressive success stories showcased at recent demo days to the innovative solutions tackling global challenges, Eilens will provide valuable insights into the future of deep tech in Singapore and the broader region.
The Singapore Venture Funding Landscape 2023 study highlighted Singapore’s conducive environment for deep tech innovation. Halfway through 2024, do you believe Singapore still promises steady investments and growth that can anchor it as the deep tech hub of the region?
The steadfast support from both public and private sectors, coupled with strategic alliances and world-class infrastructure, ensures that Singapore remains a fertile ground for deep-tech startups through 2024, anchoring its position as the deep-tech hub of Asia. In order for deep-tech ecosystems to thrive a lot of different elements have to come together, from access to talent, to capital, to technologies to the right amount of government support. Singapore is slowly but surely piecing together the puzzle that will lead to significant value creation through deep-tech.
Firstly, Singapore’s government remains highly supportive of deep-tech innovation through grants, subsidies, and strategic initiatives aimed at fostering a conducive environment for research and development. This governmental backing ensures that deep-tech ventures have the financial support needed to advance their cutting-edge technologies from concept to market. The Research, Innovation and Enterprise (RIE) 2025 plan, with a budget of S$25 billion, underscores the nation’s commitment to advancing key sectors such as health, sustainability, the digital economy, and manufacturing. But just ploughing money into R&D is not enough; commercialisation plays a big part in achieving growth. The risk-sharing initatives taken by the government for investors and financial institutions through equity and cash flow financing has pulled in substantial private capital in recent years and we believe this is a key factor to maintain a steady flow of capital for deep-tech startups.
Second, by stepping on public funding support for incubators, accelerators and venture builders, the private sector in Singapore has delivered increased investment through specialised programmes for deep-tech startups. Over the past year, we’ve observed a 31.4% increase in the number of deep-tech venture deals, which was the fastest growth of any segment in Singapore. In 2023, early-stage deals in Singapore accounted for 94.1% of the deal volume and 49.8% of the deal value, up from 89.9% and 43.7% in 2022. This trend reflects a strategic focus on nurturing innovative startups with strong growth potential and is likely to persist as deep-tech companies, with their proprietary technologies, offer long-term competitive advantages and substantial market potential once they overcome initial research and development hurdles.
The recent demo day showcased several innovative deep tech ventures. Can you share some success stories from this event that you believe will shape the future of industries and address pressing global challenges?
At the recent demo day, several standout deep tech ventures showcased innovations with the potential to significantly impact industries and address pressing global challenges.
One notable venture is Footprint IQ, a carbon management platform driven by artificial intelligence and blockchain technology that focuses on providing manufacturers with very granular insights into their energy usage. The solution helps manufacturers understand how much each individual machine or component is costing them in terms of carbon and energy footprint so that they can actively reduce emissions. At this moment, many generic carbon management platforms already exist in the market, but none of them are able to provide such granular insights.
Another promising venture is Electrofuel Marine, pioneering the world’s first flue-to-fuel reactor on ships. This technology helps shipping companies capture greenhouse gasses and convert them into carbon-neutral fuel using patented Graphene oxide membrane technology and renewable energy. Through its reactor, ElectroFuel Marine is able to save 25% in shipping emissions and save up to 30% of fuel consumed.
These ventures exemplify how deep-tech innovations can drive substantial progress in sustainability and cleantech, paving the way for a more sustainable future.
The term “funding winter” is often used to describe the current landscape of funding for deep tech ventures. What challenges do these ventures face in securing investment, and how can strategic investments help them thrive despite these difficulties?
Generally speaking, funding has slowed considerably in 2023 and 2024. This is true across the globe. So one could say we are still in a funding winter, where capital is not deployed as aggressively. The challenges faced by deep tech ventures primarily stem from the longer development cycles and higher initial costs associated with deep tech innovations. Investors are often hesitant to commit significant capital upfront due to the extended timelines before seeing returns and the inherent risks involved in pioneering new technologies.
- High Initial Costs and Long Development Cycles: Deep tech ventures typically require substantial upfront investment for research and development. The long timelines to bring products to market can deter investors looking for quicker returns.
- Technical risk: The advanced technologies at the core of deep tech ventures often involve high technical complexity and associated risks. Investors can be hesitant to commit funds without clear proof of concept or market validation.
- Difficulty in Assessing Technical Risk: One other reason why deep tech ventures still face difficulties to raise capital is simply because not every investor is suited to properly assess deep technologies and the associated technical risk. If technical or engineering risk is not properly understood, that might lead to lower confidence and fewer funding opportunities.
However, we believe that the funding winter for deep tech ventures will soon be over and deep tech investments represent one of the biggest investment opportunities going forward for a few reasons:
First, significant government support is available to help deep tech ventures cover the so-called ‘valley of death’ during the early-stage of technology development. Second, investors are starting to recognize that even though investing in deep-tech might require more capital up front. In many cases, once this initial phase has passed, deep-tech companies have long-term defensibility through their proprietary technology and therefore can maintain margins and become attractive targets for acquisitions or trade-sales. Finally, in downturns such as 2023 and 2024, smart investors do deliberately deploy capital since valuations are coming down and therefore times are right to find attractive investment opportunities.
Could you detail some of your key initiatives and how they are making a difference in the ecosystem?
At SDTA, our fundamental belief is that deep-tech ventures should be built in collaboration with partners. By smartly sharing resources and risk, the likelihood of building successful deep tech ventures together is much higher. We therefore actively build long-term partnerships with corporates, investors, research institutions, and government agencies to pool resources and expertise, ensuring a holistic support system. Factors that set us apart include:
- Alliance Model: At SDTA, we employ an alliance model that brings together corporates, investors, research institutions, and government agencies. This model diversifies risk and pools resources, ensuring a robust support system for ventures. By collaborating closely with all stakeholders, we create an environment where deep tech ventures can flourish even in a funding-constrained landscape.
- Market Validation: Strategic investments should focus on early market validation. By involving corporate partners from the outset, ventures can ensure there is a demand for their product before significant resources are committed to development. This approach reduces uncertainty and makes the venture more attractive to potential investors.
- Expanded Recruitment Approach: This year marked a significant milestone with the launch of our dynamic brand refresh which articulates our value to the world: innovation and sustainability intertwined in an infinite loop and the expansion of our SDTA25 venture cohort. With the launch of our SDTA25 venture cohort, we have expanded our recruitment to include pre-investment ventures. This broader approach aims to attract a diverse group of innovators, from seasoned executives to fledgling startups, who can contribute significantly to the climate tech sector. This initiative enhances our ability to cultivate a wide range of sustainable solutions and presents a unique opportunity for organisations to engage with cutting-edge innovations and drive meaningful change within their sectors.
- Partnerships with Corporates: We prioritise product-market fit by involving corporates early in the venture development process. For instance, our partnership with Lenovo provides mentorship and guidance to our ventures, offering strategic insights and access to Lenovo’s smart manufacturing ecosystem. This collaboration ensures our ventures have market validation and support from established industry players.
Strategic partnerships are crucial in the deep tech sector. Can you discuss some of the partnerships SDTA has formed and how they contribute to the overall mission of catalysing meaningful change?
Strategic partnerships are indeed crucial in the deep tech sector, and at SDTA, we have formed several key collaborations that significantly contribute to our mission of catalysing meaningful change. Here are some notable partnerships and their impact:
- Lenovo: Our partnership with Lenovo is pivotal in providing mentorship and guidance to our ventures. Lenovo offers strategic insights and access to its smart manufacturing ecosystem, which is essential for validating market demand and supporting product development. This collaboration ensures that our ventures receive the necessary support to scale their innovations effectively. In addition to providing our ventures with market validation, mentorship and GTM support since 2022, Lenovo’s sponsorship of Sustainable Innovation Asia 2024 is demonstrative of our continued commitment to jointly bring sustainable innovation to market.
- Dentsu: We have extended our innovation capabilities through a strategic partnership with Dentsu. This collaboration aims to enhance the sustainability capabilities of Dentsu’s APAC clients by providing cutting-edge sustainability innovation solutions. By working with Dentsu, we can drive impactful outcomes and enable their partners to achieve tangible progress towards their sustainability goals.
- Singapore Science Park (SSP): Establishing our home base at SSP is a significant step in our joint endeavour to foster impactful technological innovation. SSP provides us with access to world-class facilities, resources, and a thriving ecosystem of startups, researchers, and industry partners. This strategic location enhances collaboration, knowledge sharing, and entrepreneurship, accelerating the development of transformative solutions.
- Research Institutions and Government Agencies: We actively engage with leading research institutions and government agencies to pool resources and expertise. This holistic support system ensures that our ventures are equipped with the best-in-class expertise to tackle complex challenges and drive impactful innovation. For example, our deep support from research institutes provides ventures with access to the latest technological advancements and research findings, giving them a competitive edge in their respective markets.
Looking ahead, what are your expectations for the deep tech sector in Singapore and the broader region over the next few years?
Looking ahead, I’m genuinely excited about the future of the deep tech sector in Singapore and the broader region. With continued government support, increasing private investment, a focus on sustainability, enhanced collaboration, talent development, and regional expansion, we’re on track to drive innovation and address some of the world’s most pressing challenges. Here’s what I see on the horizon:
- Continued Government Support: The Singaporean government has been a steadfast supporter of deep tech innovation, providing grants, subsidies, and strategic initiatives. This unwavering backing creates a stable environment for deep tech ventures to flourish, and I believe this support will only grow stronger, laying a solid foundation for future advancements.
- Rising Private Sector Investment: Despite the challenges of the current “funding winter,” I’m optimistic that private sector investment in deep tech will increase. Investors are starting to see the long-term value and competitive edge that deep tech companies offer. As these ventures mature and prove their market potential, we’ll likely see more investment, especially in areas like healthcare, sustainability, and advanced manufacturing.
- Focus on Sustainable Technologies: Sustainability is becoming a central focus, and I expect to see significant growth in sustainable technologies. Innovations in clean energy, water purification, and carbon capture, like those from Electrofuel Marine and EnGel, are crucial for tackling global environmental challenges. This emphasis on sustainability will attract both public and private investment, driving the sector forward