Investment firm Temasek Holdings is looking to spur local innovation and is backing it up with some serious cash.
The Singaporean investment company plans to inject S$1 billion a year into deep technology sectors such as advanced manufacturing, disruptive materials, and life sciences, to name a few.
These investments will strengthen Singapore’s position in the global technology supply chain and help it to stay competitive.
Temasek International’s deputy CEO Chia Song Hwee has clarified that this amount is an annual allocation that seeks to spur innovation.
Previously, the company had made direct investments into deep-tech firms in areas such as energy, food, water, and urban development.
A quick check at Temasek’s website shows that the investment firm has around 21% of its portfolio value of US$381 billion invested in technology, telecommunications and media businesses as of 31 March 2021.
Among its shareholders are companies such as Airbnb Inc (NASDAQ: ABNB), Roblox Corporation (NYSE: RBLX), and Tencent Holdings (SEHK: 0700).
One recently-listed Singapore company, Nanofilm Technologies (SGX: MZH), has benefitted immensely from such deep-tech investments.
Investors may be wondering: what are the implications for other companies? Can they go on to do as well as Nanofilm?
A longer pathway needed
Unlike traditional technology companies, those in deep tech tend to require a longer gestation period.
The process takes longer due to the many years it takes to research, discover, and then come up with a viable commercial product.
Many startups encounter the “valley of death” — the inability to launch a successful new product to market before running out of cash.
Nanofilm Technologies was founded in 1999 and took a total of two decades before it came to market last year.
The local firm’s success was due to the hard work of founder Shi Xu while he was an associate professor at Nanyang Technological University.
Hence, patient capital is needed to nurture the growth of promising startups that could remain cash-flow negative for many years.
Investors can look forward to more of such deep tech companies heading for IPOs in the coming years once they pass the required gestation period.
A leader in the molecular space
Nanofilm provides a range of nanotechnology solutions and has three main business units — advanced materials, nanofabrication, and industrial equipment.
The group chalked up a strong debut during its IPO, closing at S$2.91, up 12.4% from its IPO price of S$2.59.
With Singapore having fewer technology companies with cutting-edge capabilities, Nanofilm’s debit provided a much-welcome breath of fresh air for the local bourse.
Nanofilm recently announced the appointment of a new CEO, Gary Ho, who will take up the top seat come 1 January 2022.
It also provided a quick business update for its fiscal 2021 third quarter where the firm enjoyed continued strong demand but faced short-term supply chain issues due to the pandemic.
Along with recent joint ventures such as Sydrogen with Temasek and the acquisition of Miller Technologies, the group looks poised to continue doing well.
More catalysts to revitalise the tech space
Last month, the government had announced a slew of measures to support high-growth companies in raising capital.
These measures are set to benefit Singapore Exchange Limited (SGX: S68), or SGX, as it will boost equity market participation, help bring more companies to market, and advance equity research to enable investors to make more informed investment decisions.
In particular, the Anchor Fund @ 65, a S$1.5 billion co-investment fund established by Temasek and the government, is looking to help catalyst more listings here.
The fund’s job is to back high-growth companies to enable them to eventually launch an IPO, and it may invest in these companies’ pre-IPO rounds or as a cornerstone or institutional investor.
The fund is also open to investing in companies that go public via a merger with a SPAC, a new initiative that was announced by SGX just last month.
All this news should be music to investors’ ears as it will allow for a wider variety of investment choices in the future.
The backing of exciting new trends and technologies should also alter investors’ perception of SGX being a dull market with poor liquidity.
Get Smart: Changes are afoot
Investors can probably feel the winds of change coming.
Positive changes are coming soon to the local bourse that has been blessed by the Singapore government and Temasek Holdings
Nanofilm Technologies is poised to be just the first of many other success stories in time to come.
And investors will cheer the many opportunities they will have to invest in up-and-coming technologies.
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Disclaimer: Royston Yang owns shares of Singapore Exchange Limited.
