A recent United Nations climate change report warned that the window of opportunity to tackle rising global temperatures is rapidly closing. The speed of global warming is exceeding efforts to protect billions of people as unavoidable climate risks become more severe. “Climate change impacts and risks are becoming increasingly complex and more difficult to manage,” the report cautioned.
Complex problems will need complex answers. Deep-technology—encompassing artificial intelligence, advanced materials, biotechnology, blockchain, robotics and drones, photonics and electronics, and quantum computing— holds the promise to solving many of the world’s problems, from cancer to poverty to food insecurity.
Representing a slither of start-ups but making an outsize impact, most (97 per cent) of deep-tech ventures globally contribute to at least one of the United Nations Sustainable Development Goals which act as a blueprint to achieve a better future for all.
In biotech, the research and investment poured into mRNA vaccines research long before Covid-19 hit paid off huge dividends in both time and money. The mRNA-based vaccines (Pfizer/Biontech’s Comirnaty and Moderna’s mRNA-1273) were developed and commercialised in record time. This was largely due to long-term investment which meant that existing technology could be tweaked and adapted relatively cheaply.
Likewise, venture capital investment can scale-up existing deep-tech specifically designed to reduce greenhouse gas (GHG) emissions. While these technological solutions are difficult to achieve, we are increasingly relying on deep-tech to increase efficiencies of everyday functions.
For instance, the advancement in technology can help arrest the rapid growth of the carbon footprint created by logistics which produces an estimated annual 3.5 billion tonnes of carbon emissions a year, according to consumer data company, Statista. This equates to between eight and 10 per cent of total global GHG emissions.
In food and agriculture, deep-tech has the potential to reduce planet-warming emissions by optimising farming and reducing food waste. Other tech firms analyse the DNA of soil that can help farmers enhance bio-fertility, prevent pests and diseases and apply fertilisers more precisely.
Satellite and Earth observation is being enhanced by new analytics and precise forecasts are made possible by advancements in computing power. The integration of geospatial data into a host of innovative solutions is helping global agriculture work smarter and more sustainably.
Graveyard of ideas
Investors have not missed out on the opportunity to do well by doing good. Globally, investment in deep-tech startups quadrupled from US$15 billion in 2016 to US$60 billion in 2020, according to the World Economic Forum.
Singapore represents the lion’s share of cash for deep-tech in Asia as the sector matures and continues to attract investors. Disclosed investments in deep-tech start-ups surged from US$324 million in September 2020 to US$861 million in September 2021, with deal count rising 44 per cent year-on-year to 131.
The government’s Startup SG Equity scheme helps entrepreneurial scientists build their deep-tech start-ups with investment of S$1 (US$0.73) for every S$1 invested by private investors, up to an investment cap of S$4 million (US$3 million). Research, Innovation and Enterprise 2025 (RIE2025) has a hefty S$25 billion (US$18 billion) committed to it through to 2025, covering what are deemed ‘strategic’ sectors such as healthcare, sustainability and manufacturing.
Despite markets being flush with trillions of dollars of investment, it is proving difficult to match the money with nascent and high-risk solutions. Venture capitalists and commercial investors tend to run with ideas that are proven to work and where they can apply their investment in bringing the idea to a wider consumer market.
By their nature, deep-tech in its early stages is complex, time consuming to develop and are largely unproven. Unlike start-ups in digital or software-based sectors, the path to scale for deep-tech companies to reach market-ready maturity takes longer and requires significant cash and patient risk capital according to the Singapore Deep-Tech Alliance (SDTA), a privately held venture builder that brings together a range of stakeholders to support start-ups to address large-scale environmental issues.
“Given that deep-tech startups are associated with high risks, the key barrier to their collaborations with corporates is risk aversion. Building deep-tech startups is dauntingly hard,” according to Clara Chen, co-founding managing partner at SDTA.
A lack of access to resources, talent and limited avenues to partner with the private sector are just some of the challenges facing the deep-tech sector, added Chen.
Many ideas are left on the shelf with deep-tech innovators struggling to muster the cash for experimentation, creating a backlog of technologies that never reach commercialisation stage.
“While start-ups are the best primed to commercialise their environmentally friendly ideas, it is difficult for them to raise capital from investors who may be looking for immediate returns or do not fully understand the technology and its intent,” said Nigel Lee, country general manager for tech firm, Lenovo Singapore, which is supporting the SDTA’s flagship event next month.
“Lenovo has been supporters of Singapore’s start-up ecosystem, and with partners like Microsoft, we’ve been able to enable better collaboration to help resolve challenges related to talent and resources,” Lee said.
SDTA nine-month venture builder
According to the IEA, half the technologies that we will need to achieve net-zero emissions haven’t been invented. There are plenty of compelling technologies in the pipeline that could potentially beat back climate change, but meaningful partnerships are needed to ensure that these solutions can be developed and brought to market.
In a bid to overcome a lack of meaningful ways to partner with each other, the SDTA is aiming to combine the know-how of seasoned entrepreneurs, technical experts, research institutes with corporates and investors that have access to market.
“A countermeasure to managing this risk for our corporate partners is assigning different risk profiles to the mechanisms within our venture builder. For instance, while venture building in itself is high risk, other mechanisms conducted by us—such as problem scoping, technology assessment, and founder due diligence—helps all parties involved to lessen the overall risk,” said Luuk Eliens, co-managing partner at SDTA.
The programme is split into three phases over nine-months. Each phase is structured with deliverables including building a product roadmap; project strategy and alignment with sustainability metrics and team development and partnership acquisition. Efforts will culminate in a showcase by the SDTA22 venture building programme at SDTA’s inaugural flagship event, “Sustainable Innovation Asia 2022”, on 7 April 2022.
The event will bring together public and private sector stakeholders to discuss the deep-tech macro trends accelerating sustainability in Asia with the support of tech firms: Microsoft, TÜV SÜD, Avnet, Omron, National Health Innovation Centre and A*StartCentral.
“Limitless possibilities can be sparked when sustainable innovation has the ability to be disruptive, collaborative and is driven by a bigger purpose than economic performance,” said Lee.
“This is increasingly pronounced in emerging economies such as Vietnam, Indonesia, and Philippines, as they begin to priotise investments in technology to build powerhouses that propel growth, as well as innovations that boosts productivity and addresses social divides.”
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