Originally positioned by the British East India Company as a strategic entrepôt, Singapore has always managed to punch above its weight when it comes to rapid economic development.
The island nation’s state-owned investor Temasek is ensuring it remains ahead of the pack in the tech revolution by pouring venture capital into promising domestic start-ups. Just as Singapore has succeeded in becoming a hub for trade and industry, it is seeking to lead the way in the digital economy and cutting-edge technology on the back of the pandemic’s disruption.
Google Singapore’s Country Director Ben King told CNBC this week, “E-commerce in Southeast Asia — it’s surging. But what sets Singapore apart is its policies and its initiatives that help cultivate an environment for the digital industry and the digital economy to thrive.”
Global SWF data shows that in the first half of this year to date, Temasek has deployed more capital into the city-state’s tech sectors than in any previous full-year. An estimated US$500 million of venture capital has been released into the economy by the investor, ranging from early stage to pre-IPO rounds.
The strategy chimes with the Singaporean governments bid to boost sectors like e-commerce and food tech. A notable highlight is its involvement in a US$4 billion private investment in public equity (PIPE) transaction for ride-hailing app Grab which was backed by Temasek, as well as Abu Dhabi sovereign wealth fund Mubadala, among an array of global investors. The Singaporean firm is set to be valued at approximately US$40 billion and go public on NASDAQ by the year-end, following a merger with special purpose acquisition company Altimeter Capital. It will be the largest ever US equity offering to take place in Southeast Asia, and the largest special purpose acquisition company (SPAC) merger in history.
Founded in 2012, Grab provides a range of services including online food, grocery and package delivery, digital payments and financial services in 428 cities across eight countries. By backing the superapp, Temasek helps nurture and bolster the role of home-grown tech companies in the global economy.
The US$215 billion investor is always on the lookout for the next big thing emerging from Singapore’s entrepreneurial milieu, including seed funding in Singaporean plant-based food startup NextGen, backing Big Ideas Ventures’ New Protein Fund 1 as it strives to develop alternatives to meat and a joint venture deal with Nanofilm Technologies to create Sydrogen Energy, which will market parts used in the production of fuel cells and electrolyser systems in hydrogen production.
Temasek’s drive to support domestic VC is accompanied by the government’s bid to support local startups. As the pandemic started to bite last year, the Singapore government committed an extra S$285 million (US$200 million) to increase an existing scheme, SG Equity, to boost tech startups, adding to the S$300 million it had already deployed. Sectors targeted include biopharmaceuticals, medtech, advanced manufacturing and agri-food tech. This program offers a co-investment ratio of 70:30 (up to S$250,000) and for up to S$2 million a ratio of 50:50 applies. For deep tech investments, there is a co-investment ratio of 70:30 (up to S$500,000) while the ratio of 50:50 applies for investments of up to S$4 million.
Nevertheless, Singapore is increasingly in competition with Southeast Asian competitors, notably Indonesia where e-commerce is flourishing, spurring growth in data centers. It is also facing limitations in local skills, requiring a significant investment in human capital and attracting foreigners to join the workforce.