Singapore’s deep-tech deal volume up in 2023 as rationalisation returns to S-E Asia: report

THE number of Singapore deep-tech deals in 2023 increased 31.4 per cent to 159 from 121 in 2022, even as absolute deal value fell, according to a report by Enterprise Singapore (EnterpriseSG) and DealStreetAsia.

Deal value for deep tech, or technology innovation based on engineering or scientific advances, fell to US$1.5 billion in 2023 from US$1.9 billion in 2022. The majority of deals – 90 per cent – were in early-stage startups, reflecting the nascency of the sector.

The proportion of investment into deep tech by venture capital in Singapore is about 25 per cent, higher than the global average of 20 per cent, noted EnterpriseSG chairman Lee Chuan Teck. Singapore’s research institutes have a depth of intellectual property (IP) that can be translated into commercial use by startups, with the current amount being utilised in the low single digits.

“That proportion and total quantum can grow substantially, the room for growth is there,” said Lee.

Investor interest has shifted to early-stage funding, with deal volume and value exceeding late stage funding in 2023. Early-stage refers to seed, Series A and B funding rounds, while late-stage refers to Series C and D funding rounds.

Despite having more success in fundraising, 2023 early-stage deal volume and value dropped from 2022. Early-stage deal volume was down to 464 in 2023 from 567 in 2022, with deal value decreasing about half to US$3.1 billion in 2023 from US$6.2 billion in 2022.

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The dropoff for late-stage deal volume was more than half from 64 in 2022 to 29 in 2023, while deal value fell to US$3 billion in 2023 from US$4.8 billion in 2022.

Median deal values of early and late-stage deals suggest that there is some rationalisation in valuation across the region. In Singapore, median values of seed rounds have fallen to US$2.5 million in 2023 from US$2.7 million in 2022.

Series A rounds’ median value remained flat at US$10 million between 2022 and 2023; the median value of Series B, meanwhile, has fallen continuously since peaking at US$25 million in 2021 to US$21 million in 2022 to US$20 million in 2023.

In Singapore, Series C median deal value fell from its peak of US$51.4 million in 2021, to US$44 million in 2022, and US$35 million in 2023. Series D median value in Singapore remained flat at US$50 million in 2023, off a peak of US$147.5 million in 2021.

The median deal values for seed funding for Indonesia, Malaysia, the Philippines, Thailand and Vietnam also fell in 2023 to US$1.6 million from a peak of US$2.4 million in 2022. For these five countries, deal values peaked in 2022 – except for Series B, which peaked in 2021.

Series A median deal value for the five countries fell to US$6 million in 2023, from US$7 million in 2022. Series B median deal value fell to US$15 million in 2023, from US$24 million in 2022.

Late-stage funding in the five countries saw Series C and D taking different directions in median deal value. Series C median deal value fell to US$29.5 million in 2023, from US$72.5 million in 2022; series D median deal value, however, rose to US$149.8 million in 2023 from US$81.5 million in 2022. This was the only funding round with an increased median deal value.

Amid the ongoing funding winter, Singapore maintained its lead in fundraising over the five other countries.

Singapore’s share of deal volume stood at 63.7 per cent or 522 deals, and garnering US$6.1 billion or 73.3 per cent of deal value in 2023. Indonesia was a distant second, at 130 deals or 15.9 per cent of deal volume, and US$1.3 billion or 15.4 per cent of deal value, in 2023.

Cindy Ngiam, the director for startup ecosystem at EnterpriseSG, said: “As investors prioritise strong fundamentals during this funding winter, the resilience and solid foundation Singapore has built into its tech and innovation ecosystem are what will allow us to further our growth in deep tech.”