R&D in Singapore

This is quite a favorite topic of mine. Those who have discovered this blog and know who I am would know why.

It is a well known fact that Singapore has commited S$ 5 B over the next 5 years on R&D alone. THis is split among the National Research Foundation, A*STAR and the Ministry of Education. The main thrusts of the R&D effort is on biomedical, water and energy and new media (ie animation)

While the funding is being lauded almost universally worldwide, I do wonder how much is this effort is spent on commercializing the resulting technologies? How much effort has gone into the thinking process of what to do post-project?

Those who are well versed with the R&D scene in the past will know that there was a time when technopreneurship was supported and encouraged among the research centers in Singapore. Now this was during the last technology bubble and if the stats of Silicon Valley can be transported to Singapore, I can assure that many of the companies spun off during the bubble days are either dead or dormant or zombie'fied. THis is sadly the world of capitalism and free markets.

Now the situation has improved and companies spun off during that time who are still surviving are thriving, but that lesson (of the high mortality rates of start-ups) have caused the pendulum to swing to the other extreme.

But moving foward, especially with the new leadership about to take over the A*STAR organization, perhaps it is time for the incoming Chairman to think about various models that promote entrepreneurship among the researchers.

Do we encourage researcher to become entrepreneurs? Are they the best entrepreneurs? Would they then spend more time priming their research topics that will make good business? Or will they stick to the true cause of research: extending and expanding the general body of knowledge? Will they seek to enrich themselves at the expense of Singapore?

I think this are all worthy questions, but it is a minefield. One can discuss the pros and cons of such a move until the cows come home without resolve.

However, one radical (or not) approach that I can think off is .... outsourcing.

Outsourcing of early stage investment to a VC firm. This model has been successfully proven in the University of Chicago by ARCH Ventures, and now being replicated in many areas.

What is the benefit of outsourcing this effort?
1) The team who receives the funding will comprise of people who have previously done it. They could do it on their own, or partner with overseas VC firms. But bottom line, the managing partners would very likely be people who have done venture investment.

2) These folks would have their own network of investors, both locally and overseas, thus projects being championed and funded by them would stand a higher chance of being funded until the start-up is either acquired or IPO.

3) These folks would also have the ability to manage the fund as they see fit, and not be ruled by bureaucracy. These folks could opt to invest 0.5 M at the start to kick start the team, and then upon successful milestone, opt to syndicate or lead a new round and invest a further 1 M or so, carefully calculating the risk-reward between further investment and dilution.

4) Foremost, the public servants must acknowledge the fact that these guys are in it for the money. The sooner they realize this, the better it will be for everyone. There is no altruisic goals behind it. It is purely for the money, and so you have gotta trust that these guys will be professional enough to manage your money for you. Therefore you cannot run it like another stat board or government arm. They get paid well (most of these guys do anyways.. or at least the good ones), and when they get a successful exit, they will get their carry.

5) There will be good deals, bad deals, sour deals, and deals that you kick yourself for missing. Again, the sooner the public servants realize this fact, the happier they will be. Take for instance, the investors of Google.com would most likely be sitting of a huge pile of cash. Whereas the investors of... excite.com would most probably be happy just to get some money back. Both are search engines, both got their start just before the bubble and both have catchy names. Sometimes, it's the technology but most investors would tell you, success is a combination of doing due-diligence and luck.

6) You may loose all your money. To be honest, you most probably won't loose all of it if you're smart (commit, call, liquidate etc). But it would be foolish to peg an unreasonable ROI on the scheme.

But after poking around, I firmly believe this model is needed. THe government can choose to go with the many foreign VC firms that "specialize" in such venture investment activities, or it can take a chance and look for home grown talent.

But prior to giving the money away for someone to run, it is common sense to have competitive bidding, include management fee, carry interest and perhaps more importantly, making sure these guys know the current state of R&D in Singapore, the challenges faced by start-up companies, and a plan to bridge both of these chasm. Oh yes, plus also their CV to make sure you don't give the farm away to someone who has no experience doing venture investments.

C'mon Uncle Lee (referring to the PM), c'mon uncle Tony (referring to the head of the NRF), c'mon Uncle Lim (referring to Minister of Trade and Industry), put 1% of your % B into a competitive bid for VC firms/partnerships to manage it on behalf of the government's effort to translate the R&D effort into some sort of economic after-effect that could benefit all everyone (be it the researchers that conceived the technology, to the managers who run the company, to the workers to man the company).

Virgin Post

Well this is my virgin post.... well perhaps not exactly. I also blog under another pseudonym, and good luck to you if you can find it.

In essence, this blog is my candid view of the Singapore economy, and perhaps the world in general. I felt the need to produce a dichotomy of myself, one as a serious viewer of the economy and investments, and the other, a naughtier part of myself.

For today's post, I would like to pick on the article that was written on The Edge Singapore about 2 weeks back on the Singapore economy and the need to perhaps restructure the economy now rather than wait for another bubble or correction to happen.

The article (I shall have to come back with the title and the name of the author) rightly pointed out that the Singapore economy has not had it so good in the past 5-6 years, and may not see such good times perhaps for awhile.

All this while, the government has been harping on the ever growing divide between the have's and have not's and the sacred cow is that of some sort of welfare. This I will leave for another time.

The point I wanted to stress on was the point that much of the Singapore GDP is reliant on MNCs and GLCs and a few successful private enterprise. While GLCs are ever reliant to be anchored in Singapore, I can't say that much for MNCs. It is and will always be a business decision on whether to stay rooted in Singapore or to move to a lower cost country.

THe fallacy of the MNC approach and how it benefits the Singapore economy is that the MNC is, if you will, at the top of the food chain pyramid. In the second tier there are suppliers to these MNCs. Some of these will be MNCs themselves (ie, Applied Materials, KNS,etc) and some will be local players. Of late, we have been seeing the local suppliers having a good run on the SGX, like MMI and Jurong Tech, who supply to MNCs such as Seagate and Motorola.

What would happen if Seagate or Motorola were suddently up and relocation to another country? These companies would certainly have to move with them as their lifelines depend on the MNCs? And so what becomes of the Singapore economy? Jobs would naturally be lost and the impact would be felt on the lower income group people.

Instead, I think not enough attention has been put to develop our own companies that market to the world, instead of just to MNCs. These guys chase dollars whever the dollars may be. These guys bring Singapore's cutting edge to the world.

Prior to the bubble of 2000, there were dreams of making Singapore into another Silicon Valley with the TIF Venture FoF, etc etc. Lately it seems that it has all be quiet on this front. Even with the latest announcement by EDB on the Business Angels Scheme, I'm amazed at what is termed as business angels in this context.

THe manager of one such scheme has stated that he'd like to see some revenue as part of the consideration for investment. THen it defeats the purpose of angels as angels are people that entrepreneurs turn to when Venture Capitalists (VCs) fear to tread.

In Singapore, there is a lack of such risk taking angels, with most VCs preferring to invest in Series A or expansion stage companies. I know a friend who has tried to raise an early stage fund to no avail. There are some early stage VCs such as Upstream, but these are too few and far in between.

What is the use of spending all those billions of hard earned money on R&D where commercialization or future economic impact of these R&D projects are an afterthought? There are foreign VCs that specializes in helping technopreneurs develop their companies from such an early stage and I think there are opportunities for Singaporeans or locals to develop such a niche and prosper. But beware, it may take a few cycles of losing ones pants before striking it rich. And the investment value chain needs to be beefed up.

VCs tell me there is a dearth of good investible projects in Singapore, but as I see it, technopreneurs have a hard time getting into the radar scope of such VCs when they can't get access to early money.

TO be continued....