EARLY-STAGE emerging technology startups in Singapore raised US$253 million in funding last year, down 28.1 per cent from the US$352 million raised in 2021, said government-owned tech investor SGInnovate.

The number of funding deals fell 17.2 per cent, from 58 in 2021 to 48 last year, as startups were hit by uncertain economic conditions, SGInnovate said on Monday (Apr 24).

Amid the tough climate, the average size of seed rounds fell across three key verticals – sustainability, agrifood and advanced manufacturing (see table).

Among them, advanced manufacturing may have been hit by “a shift in investors’ interests to other verticals and a general slowdown in the manufacturing industry”. 

Bucking this trend, health and biomedical sciences startups in Singapore raised US$5.2 million in seed funding on average last year, more than double the US$2.1 million amount in 2021.

However, there are fewer new players as only nine startups were incorporated in the sector last year, down from 19 in 2021 and 28 the year before (see table).

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“This could indicate that startups in this sector are facing challenges beyond fundraising, including perennial talent gaps,” SGInnovate said, referencing its other report on the matter. “These factors may result in a ‘winner-raise-all’ scenario where a small number of startups raise larger rounds to capture limited resources.”

Challenging outlook

Despite the gloom, Singapore is still expected to produce a “steady pipeline” of emerging tech startups, with 35 new players founded here in 2022. SGInnovate estimates that this figure could eventually be revised to about 60, as more startups may have been founded this year, but are still in stealth mode.

In the 2021 edition of the report, SGInnovate had identified 36 emerging tech startups incorporated that year. However, this number was subsequently revised to 63, to account for the startups that have exited stealth mode.

Emerging tech startups are likely to continue facing a challenging fundraising environment this year. Tong Hsien-Hui, executive director of investments at SGInnovate, advised startups to look into alternative funding mechanisms and co-development opportunities.

“Besides extending their runway to focus on product development, this also allows startups to minimise the impact on their valuations until the macroeconomic environment improves,” he said.

But overall, Tong is still optimistic, adding: “Companies leveraging emerging technology to solve difficult problems – in fields such as clean energy production and diversifying our food sources – are likely to continue seeing strong investor interest in 2023.”

SGInnovate also sees “green shoots” in agrifood. The sector accounted for the largest proportion of emerging tech companies incorporated in Singapore in 2022, with 14 new players. Of these, six were spun off from the National University of Singapore, which continues to support foodtech research.

Investor interest is also strong. Last year, Next Gen Foods, a plant-based protein startup, raised a US$100 million Series A round.

“Greater investor interest in this vertical may also be linked to government initiatives and priorities, such as Singapore’s ‘30 by 30’ food security goals, announced as part of the Singapore Green Plan 2030,” SGInnovate said.