By Saheli roy Choudhury for CNBC
Singapore’s start-up scene received a boost on Thursday, after the government said it will provide funds to four large local enterprises to match their investments in fledgling local companies.
Vivian Balakrishnan , Singapore’s minister of Foreign Affairs announced the National Research Foundation (NRF), a department within the Prime Minister’s Office, will commit 40 million Singapore dollars ($29.28 million) in total to match the investments made by each of the four companies: Property giant CapitaLand, agribusiness group Wilmar International, tech company DeClout and logistics player YCH Group.
The funds form the third installment of the NRF’s Early Stage Venture Fund (ESVFIII), announced in September 2015.
The ESVF program was first launched in 2008, with the aim to translate public research into viable products, services and businesses. The NRF invests on a 1-to-1 match basis, of up to S$10 million per fund, to venture capital funds that invest only in early-stage local high-tech start-ups.
In the first two rounds of the ESVF funds, the funding from the NRF mostly went to venture capital funds, while in this round, the investors are all large, local enterprises. The presence of large corporations has both pros and cons, the NRF’s chief executive officer, Low Teck Seng, told the media.
“If I’m a start-up looking to partner large local enterprises, I can look forward to the infrastructure support they can provide me. I can look forward to the networks they can bring along with them, either from the supply chain angle as well as the market angle. That’s very important. Often, as a start-up, I’m looking to see how I can scale up as quickly as possible, if I have already proven my worth,” said Low.
On the flip side, Low said companies may face challenges if the product or service competes with what’s already in existence.
The four local enterprises said they were looking to invest in tech start-ups existing in a wide spectrum of industries, from internet of things, to fintech and property to plantation management.
While the NRF does not explicitly dictate the type of start-ups these enterprises can investment in, a spokesperson said they are given broad guidelines to follow – such as the start-up must be located in Singapore. The companies are required to undertake five years of active investments and another five years of holding their investment, with the total amount of funding amounting to at least S$80 million. The NRF spokesperson added that companies are able to put in additional capital into their investment.
The ESVFIII is part of a string of broader announcements that Minister Balakrishnan made in his opening remarks at InnovFest UnBound 2016, a digital technology conference organized in the country. Others include an ambitious plan to create a national operating system database for 100 million smart objects in the next five years, to collect the vast amount of data generated by smartphones, sensors, cameras and even lamp posts and traffic lights.
“It’ll create a huge range of opportunities for application developers, service providers, companies and enterprises to leverage on … and is a worthwhile challenge,” Balakrishnan said.