Is Singapore a Deeptech Oasis?

Deep technology, or deeptech for short, is a term first coined by Swati Chaturvedi, founder and CEO of online investment platform Propel(x), and refers to a category of technology solutions created to address engineering and scientific challenges.

Such solutions have drawn interest in recent years due to their potential for commercialisation. While they receive less public attention because they are typically developed by small-scale spin-offs from university research programmes, their importance has been emphasized by recent phenomena, including the global pandemic.

This shift has helped unshackle deeptech from its limitations, including the lack of commercial interest. More companies are opening themselves up to the possibility of integrating deeptech solutions into their workflows and processes to improve their efficiency. Aromatec, a startup alumnus of IoT Tribe’s Deeptech Accelerator programme, attests to this with the partnerships it has recently established with several multinational conglomerates.

In addition, a by-effect of this change in perspective has taken the form of new opportunities beyond borders, with deeptech startups looking abroad for new markets to expand into, and one of the first that comes to mind is Singapore.

To support startups with promising deeptech solutions, IoT Tribe hosted an information session providing insights into the Singapore market. The session was co-organised with Enterprise Singapore, the Singapore Economic Development Board (EDB), and representatives from a slew of companies including Cargill, NCS Group, Siemens, and Vantage Venture. Startup alumni LexaTexer and WeavAir also attended the event to share their personal experiences about expanding into the Asia Pacific via Singapore.

The following is a summary of the insights shared during the event.

Deeptech Is A Problem-solving Business

A common fallacy about deeptech is its ineptness in fitting use cases that require a granular approach. One example that disproves this fallacy is South Korean startup Dot Incorporation. Its unique braille-based haptics technology has been used to provide smart accessibility services for people with visual disabilities across a wide range of scenarios. Indonesian startup Qlue offers another case example, using artificial intelligence to provide various solutions such as facial recognition and thermal scanning to fulfil specific use cases.

Likewise, deeptech companies can find success by tailoring their solutions to focus on more specific, problem-based use cases. The growing emphasis on decarbonization as part of a global push for sustainability makes for a great example. By selecting and prioritizing a specific niche, such as carbon capture, usage and storage (CCUS), or sourcing and generation of renewable energy, founders can simplify their go-to-market strategy and process to be more manageable and less resource-intensive.

The downside to deeptech solutions are its long gestation periods. Prior to full-scale commercialisation, most of such solutions are not mature enough to penetrate their target markets independently. Thus, they are reliant on partnerships and collaborations to support their initial breakthrough. Corporate companies, for one, are now more willing to partner with deeptech companies to integrate their solutions. Sunil Kumar Yadav, head of building performance and sustainability at Siemens, cited the task of reducing energy usage as an example. This task entails three components: reduce, produce and procure, while deeptech solutions in this field are generally designed to each focus on one of these components. Therefore, integrations can help produce a more comprehensive solution.

Resilience Is Key

While deeptech solutions generally have long gestation periods, these are expected to shorten over time as such solutions evolve to focus on more specific use cases. By prioritizing a niche, in tandem with continual advancements in technology, bringing a deeptech solution from lab to market will take significantly less time than before.

For this reason, deeptech solutions have drawn the interest of not only corporate companies, but investors as well. While deal flow has slowed amid the new normal, ample funds remain available in the Asia Pacific, with over 200 venture capitalists based in Singapore that are ready to invest in companies that meet their criteria.

What has changed, however, is the rigorousness of due diligence. According to Eddie Ler, partner at Vantage Venture, founders should expect more thorough assessments by potential investors not only in terms of their proactiveness to address problems and contingencies, but also how they fine-tune their business models accordingly. Investors are also more likely to back companies with solutions with unique value propositions that are less affected by extraneous factors, such as the ongoing pandemic.

One Region, Multiple Markets

Since deeptech is problem-driven, new entrants into the Asia Pacific market should be cautious of the differences between the nations within in terms of their needs, culture, market maturity, regulations, among others.  When targeting larger countries such as Indonesia, intra-diversity also needs to be considered—differences within national borders.

When drawing up development plans, deeptech companies should look beyond assessments of their total accessible market (TAM). Devising a strategy with a sizeable TAM is important, but considerations regarding the specific markets to target and the order of expansion should also be made.

Specific to the Asia Pacific, learning the local “terrain” beforehand can be helpful in assessing the value of deeptech solutions. According to Yvonne Chou, director and 5G AIoT innovation lead at NCS Group, Singapore—unlike several other countries in the Asia Pacific—may offer more robust technology infrastructure such as 5G to facilitate certain types of proof-of-concepts and pilots efficiently.

Here in Germany, our customer base is mostly in manufacturing. If you look at the markets from a very high level, what you see is that in the next 15 to 20 years, Asia will contribute to over 50% of the global GDP. There is a lot of growth to be expected in Asia and particularly Singapore, which has established itself as a hub.

Covid-19 has put some constraints on our expansion. We were thinking about coming to Singapore earlier this year, though now it is going to be August or September, depending on the situation. But again, Singapore has made clear that they are very helpful. In terms of setting up operations, much can be done remotely, and IoT Tribe has also helped us to filter out these variables upfront and remotely, which has greatly accelerated the speed at which we evaluated the market and got things established. So, I can only recommend trying to get into IoT Tribe and for that matter, the programme that gives you access to the local ecosystem.

IoT Tribe has been essential for us to get in contact with locals and potential customers, and with that, gives us attraction locally to evaluate and make more informed decisions.

– Günther Hoffmann, founder and CEO, LexaTexer and MedaPlus

An Oasis Of Calm

Achieving product-market fit is critical for founders when expanding into a new region, and this process usually requires the involvement of multiple stakeholders. Singapore has proven, over time, its contention to be the regional leader in this area, having nurtured a strong and supportive ecosystem for startup and technology developments.

YC Choy, regional vice president of the Singapore EDB, shared that public-private initiatives built to support deeptech developments have grown in recent times. At a macro level, the Singaporean government has co-pledged to match 50% of all equity funding made by private investors towards deeptech companies, up to a cap of S$285m. Broader initiatives like non-dilutive capital grants as well as loans are also in place to support capacity building and capability development, including talent acquisition. Founders can tap into non-financial support, if needed, from Singapore’s extensive networks, including infrastructure, mentorship, incubation programmes and more.

The Best Don’t Work Alone

While deeptech can seem inherently complex, it is perhaps best understood as a category of solutions with the potential to revolutionise the way people live and work. Take the internet, for example, which was once regarded as a deeptech solution for enabling people to communicate in a new and more efficient way.

Specific to Singapore, Choy remarked that it is critical to structure deeptech developments using the model of an ecosystem and not a value chain. This means thinking beyond the role individual developers play to also consider how other stakeholders can feed into the overall equation. This, in his opinion, is a model that has proven to be more capable and adaptable.

Ultimately, the success of deeptech companies lies in their willingness to collaborate. To provide support in this area, Enterprise Singapore has increasingly engaged with ecosystem stakeholders to run a variety of support programmes. IoT Tribe's Deeptech Accelerator is one example, which is a 12-week programme run in partnership with Enterprise Singapore and the Singapore EDB under the Global Innovation Alliance. It is designed to support deeptech companies on their expansion into the Asia Pacific, and leverages the collective capabilities of corporate companies, public agencies, investors and mentors in Singapore’s ecosystem.

The programme will commence with a third cohort starting September this year. For more information about the programme and how to participate, visit IoT Tribe’s official website.