30 Oct 2020
Singapore - Southeast Asia's Silicon Valley
Singapore is a leading global innovation ecosystem, surpassing the U.S. in IMD's 2020 Global Digital Competitiveness Ranking1 and ranked within the top 20 of Genome's Global Startup Ecosystem Ranking2 . For many startups, Singapore is a hub for acquiring capital, talent and partners. It also serves as a gateway to the burgeoning economies in Southeast Asia.
There are four key factors driving its growth:  a world class funding environment,  deep technical talent pool,  active and dense innovation communities,  forward looking and execution-focused government and  strong intellectual property protection environment.
 World-class Funding Environment
Singapore's reputation as a leading global innovation hub is underpinned by a healthy and vibrant startup and Venture Capital (VC) ecosystem. In the 1990s’, the National Science and Technology Board established multiple incentive schemes for VCs and investment funds which triggered the development. In particular, the Technopreneurship Investment Fund in 1999 played an important role in attracting foreign VCs and cultivating local VCs.
In 2010, Southeast Asia as a whole received less than USD 150M in VC investment, most of which was in Singapore. In 2019, it grew by over 58 times to more than USD 8.6B with increasing investments in other Southeast Asian countries, including Indonesia.
Vertex Holdings (“Vertex”) started in 1988 as the Corporate Venture Capital (CVC) of Singapore Technologies, and subsequently reorganized as the VC arm of Temasek Holdings. It was re-started in 2008 focusing on investing in key innovation hubs globally. Since 2015, Vertex was further transformed into a network of VC partnerships with Vertex Holdings as anchor investor and each partnership raising money from global investors.
Today, we are amongst the leading VC investors in Southeast Asia and globally manage assets over USD 3.5B. To support these startup ecosystems, we provide anchor funding and operational support to a global platform of venture capital partnerships and funds in key innovation hubs around the world.
Each Vertex network fund operates independently with separate, local investment teams of over 95 members spread across major cities like Shanghai, Beijing, Shenzhen, Jakarta, Bangalore, Singapore, Tel Aviv, Palo Alto and San Francisco.
Our Vertex family of funds invests in technology and healthcare opportunities in the early and growth stages, with over 200 active portfolio companies today, and a track record of growing disruptive, transformational companies into global champions3.
 Deep STEM Talent Pool and global human resource hub
For startups, human capital is just as important as financial capital. Singapore has been highly rated in the aforementioned IMD rankings, including being the world's top talent destination for six consecutive years since 2015. Reviewing this ranking, it is evident that Singapore is highly regarded for its supply of high-level STEM talents and highly skilled global human resources.
Singapore's education system is ultra-competitive, and the country's focus on IT, science and mathematics education has resulted in a rich STEM talent being trained through its education curriculum. Regarding the global resources, the country is safe, with excellent living conditions, a world-class educational system, and global connectivity that makes it attractive to top talents around the world.
 Active and Dense Innovation Communities
Community - the glue that binds capital and talent together is also important. Incubation facilities such as JTC [email protected] (formerly Block 71) and VC-led community activities are also active. A case in point is the 11-part Technopreneur webinar series that Vertex is hosting to help aspiring founders and startups understand the basics of Technopreneurship4.
One of the key infrastructures underpinning the above is social network services such as LinkedIn and WhatsApp. There is a high degree of mobility of human resources in the region and a universal need to expand networks and experience. It is quite common to receive “friend” requests from strangers on LinkedIn, and you will frequently learn of useful events and news on the platform. The culture is such that if you have a phone number, you can be instantly connected via WhatsApp, so it is actually natural to exchange business cards, then proceed to a group chat to discuss business collaboration. Most entrepreneurs prefer WhatsApp to email.
 Forward Looking and Execution-Focused Government
The Singapore government plays an instrumental role in leading various initiatives to achieve the aforementioned advantages and in shaping the innovation ecosystem in the region. Government agencies including Enterprise Singapore (ESG), Economic Development Board (EDB), the Monetary Authority of Singapore (MAS), Infocomm Media Development Authority (IMDA), SGInnovate and A*STAR which all share a common vision of "Smart Nation" and are working together to create the next generation of infrastructure and businesses by leveraging technology. They’re proactively engaging startups and academic institutions.
For example, SGInnovate has been promoting deep tech. In recent years, it has also actively invested in autonomous driving startups like Hertzwell5 - its technology combines AI with all-weather, high-resolution radar. IMDA has established “SG Digital6” program to help local startups implement solutions agile. Kryon5, an Israeli company that developed the first Full-cycle Automation and also has a presence in Singapore, is one of the few RPA companies to have received government accreditation, helping it gain increasing traction in Singapore. In addition, Validus Capital5, Singapore's No. 1 SME lending platform, has partnered with GeBiz to provide fully online, unsecured loans to over 7,000 registered SME suppliers.
 Strong IP Protection environment
Initiatives such as attracting innovation centers by EDB and creating a robust framework for intellectual property protection also play an important role in ecosystem development. In particular, Singapore has created an environment for intellectual property protection that is ranked second globally according to the World Economic Forum Global Competitiveness Report 20197.
In response to COVID-19, there have been challenges in fundraising and employment (especially in the tech sector) across the globe. However, if you look at this nation, Singapore has all the important elements that underpin a resilient ecosystem in the post-pandemic world, including capital and talent concentration, government commitment, and the degree of transition to online communities.
In terms of sectors, we see potential growth in the B2B space, particularly in deep tech, AI, big data, next generation manufacturing, robotics, agritech, innovative foods, and blockchain as a generator of intellectual property, which the government is focusing on (on 20 February 2020, the government announced that it will provide support to the deep tech sector with an additional SGD 300M budget through the Startup SG Equity scheme8).
In terms of the IPO environment, there is a lot of room for development (IPOs account for less than 10% of all exits in Southeast Asia9). For the time being, M&A will continue to be the primary exit pathway, which can be a positive from a Japanese company's perspective.
At Vertex, we continue to play a prime role in connecting promising start-ups with leading Japanese companies.
This content was created based on an article published in Keidanren Monthly Magazine "月刊経団連" Oct 2020.
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In these times I like to reference one of my favorite books — The Hitchhiker’s Guide to the Galaxy by Douglas Adams — because the phrase “Don’t Panic” is emblazoned on the cover of the Guide in large calming font. After the heady ride up in 2020 and 2021, the current downturn in public biotech indices, which are down between 30-40% (BTK or XBI) since their peak, has had a knock-on effect for private biotech companies trying to fundraise. With valuations decreasing and companies struggling to raise their next round of financing, it’s a good to heed those words and not panic.