Why Singapore is Asia's emerging hub for deep tech

SINGAPORE outlined its vision for the country's tech ecosystem during the Budget announcement in February this year. By injecting S$300 million into the Startup SG Equity co-investment scheme, the government seeks to accelerate development of deep-tech innovations in the country by providing startups in the field with greater access to capital, expertise and industry networks.

While it is a relatively modest sum, it is important to note that the new funds are just a part of Singapore's broader Transformation and Growth Strategy, for which S$8.3 billion has been dedicated for the next three years. This is aimed at enabling stronger partnerships, deepening enterprise capabilities and, most importantly, developing Singapore's people.

These initiatives give Singapore a strong foothold in the deep tech race. However, realising its potential and affirming its position within the larger Asian ecosystem requires a greater and more cooperative effort to grow the country's deep tech ecosystem - and Singapore is off to a great start.

EVOLUTION OF AN ECOSYSTEM

In a nutshell, deep tech refers to fundamental discoveries in science and disruptive engineering innovations that offer significant advances over existing technologies. Deep tech companies encompass transformational technologies such as artificial intelligence (AI), robotics, big data, blockchain and medtech, and are trying to solve the big issues that affect the world around them.

When it comes to having a thriving tech startup ecosystem, Singapore ranks high. The island is now home to some 3,800 technology startups, with about 150 Singapore-based venture capital funds investing both locally and regionally. Singapore further cemented its reputation last year, with tech investments in the country reportedly reaching US$6 billion in the first half of 2019 alone. That is about a quarter of all tech investments in South-east Asia!

Singapore is indeed attractive as a tech hub, but while the biggest bucks previously went to consumer-focused startups, their counterparts in the deep tech field are catching up.

A case in point - data from Enterprise Singapore (the state agency championing enterprise development) shows that startups focused on research-based technology raised S$305.2 million in the first nine months of 2019; that is 25 per cent more than during the period in the previous year.

WHAT IS CAUSING THIS SHIFT?

Singapore is a nation that is focused on preparing for the future. With the advent of Industry 4.0, the country seeks to ensure its competitive position in the global economy, especially since it stands to gain possibly US$10 billion in GDP from the digital economy by next year.

Yet, the prime challenge for deep tech innovations is that they often require long gestation periods (meaning slower returns for investors), as compared to consumer-focused tech. This has made many VCs more apprehensive of investing into such ventures, with the government instead stepping in to lead Singapore's deep tech charge.

But there is only so much that the government can do by itself.

SCALING DEEP TECH NEEDS TO BE A COOPERATIVE EFFORT

Previously, limited private-sector investment meant little activity for the deep tech ecosystem (as compared to the investment vibrancy in consumer-focused tech).

However, more investors are wising up to the long-term opportunities presented by deep tech innovation. This is especially true for those who view Singapore as a launchpad to the wider Asian market. Singapore can achieve much more impactful growth for its deep tech companies by partnering closely with international players, including institutions, organisations and private sector firms that focus on investing in the sector.

To its credit, the government has already made overtures. For instance, Singapore has signed MoUs with Russian partners and Sichuan, China, to foster more collaborative development for deep tech, as well as (most importantly) helping to bring them to market.

It is still early days, but Singapore's initiative to work more closely with international partners (especially those from countries leading the global deep tech charge) may prove to be the catalyst to put the deep tech ecosystem into the next gear.

There are several international platforms that are supporting the innovation in the deep tech sector. Most of these provide business development assistance to scale deep tech startups in Asia. Thanks to them, a large variety of deep tech startups can establish their base in the country and bring innovative deep tech solutions to Singapore and the region.

These include: Neurotrend, which is using advanced neuro technology to optimise advertising and customer experiences; Vision Labs, which is commercialising facial recognition technology for banking, retail, security and other industries; and WeHire, which is implementing emotion-recognition software for interview screenings, enabling companies to profile candidates more accurately and reduce costly hiring turnover.

WHAT IS ON THE HORIZON FOR DEEP TECH IN SINGAPORE?

Singapore is poised to become a global leader in the deep tech space, as it has set itself as a standout global example for business ecosystem digitalisation and becoming a data-driven economy.

Beyond the boost to national income, Singapore's vision of future prosperity arising from the digital economy ties heavily into improving the welfare of its citizens - who, in the years ahead, will need to grapple with an increasingly ageing population, more infrastructural strain due to rapid urbanisation and the ever-present problem of land scarcity. Turning to practical deep tech solutions to address these challenges will thus be done not by choice, but out of sheer necessity.

Therefore, in terms of building a world-class deep tech ecosystem, Singapore still needs more support to reach its potential. To help it get there, greater onus must be placed on private investors who see the long-term opportunities from deep tech.