How Singapore’s oldest angel investment group is gearing up for deep tech and alternative exits

How Singapore’s oldest angel investment group is gearing up for deep tech and alternative exits

Chairman of BANSEA, James Tan, elaborates on the platform’s mission, and how it is embracing deep tech investments and alternative exit instruments

The tech ecosystem in Southeast Asia is maturing at an exhilarating pace. The rise of cutting-edge technology sectors such as deep tech and one of its subsets, blockchain, has broadened investment opportunities for investors. Many government bodies and private corporations are actively tapping into this nascent technology, which promises to fundamentally transform society at every level.

One such organisation is Singapore-based angel investment network BANSEA (Business Angel Network of Southeast Asia). Founded in 2001, its goal is to help early-stage investors make sound investments.

BANSEA has a secret sauce that has allowed it to stay relevant for nearly two decades: a diverse member base. It comprises experts who hail from a range of verticals such as e-commerce, healthtech, and logistics. Chairman of the group, James Tan, says this diversity in expertise gives the organisation its strength and helps it to stand out from other angel investment groups, which tend to have an industry or vertical-focused mission.
By possessing an exhaustive breadth of knowledge, BANSEA’s pool of investors can leverage fresh opportunities in a complex field like deep tech.

“With one of the most number of members with PhDs in any angel investor network, BANSEA members have a good understanding of deep tech deals. In addition, partnerships with organisations such as ACE (Action Community for Entrepreneurship) and A*STAR (Agency for Science, Technology and Research) also help,” says Tan. BANSEA also taps into research institutions from other countries.

But while BANSEA may be able to cut deals with deep tech startups, Tan cautions that finding exit opportunities for these companies will be a hurdle. He believes it will take time before the market cultivates a healthy appetite for deep tech platforms.

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“Deep tech products require a longer gestation period before they can find product/market fit,” explains Tan, adding that one problem with deep tech companies is that they tend to be a repackaging of some older form of technology. For example, many artificial intelligence (AI) startups are simply a repackaging of data analytics and something else.

“We are definitely seeing more development of authentic deep tech now. But assuming they pass the test of being ‘true’ deep tech, the next thing we need to ask is: does the market want it? We are not seeing that. And so, for all the buzz deep tech is creating, at BANSEA we want to focus on whether the market has a need for it,” he adds.

But the creation of deep tech systems like blockchain has also enabled new financial instruments to flourish, and this can help investors diversify their assets and seek alternative exit opportunities.

Take for example digital assets: the proliferation of blockchain technology across global ecosystems have enabled digital tokens to flourish due to its high security and unalterable recordkeeping protocols. Many investors of BANSEA have thus flocked to this asset class, which yield the promise of significant dividends.

“We are definitely open to digital assets and Initial Coin Offerings (ICOs). BANSEA’s Vice Chairman, Dr Rex Yeap, is pretty knowledgeable in this field; he has dabbled in crypto projects and many members of our network look up to him for advice,” he says.

“We think these tokenised events are definitely a good avenue for companies to fundraise and for us to gather good returns,” he says, adding that other BANSEA members have personally invested in Ethereum-based projects as well as Bitcoins.

Digital exchanges also give investors alternative outlets to cash out: they can offload the tokens to secondary investors. But Tan cautions companies to manage the allocation and mechanics of their digital assets. For example, “you do not want your employees to sell off all their digital assets, and by doing so, lose any skin in the game […] disincentivising them to work for the company. So this has to be managed,” says Tan.

For companies that want to launch digital assets or digital exchanges in Singapore, it helps that the country’s central bank, the Monetary Authority of Singapore (MAS), employs a light touch to the regulation, by providing guidelines rather than enforcing laws to the digital assets market. This allows the industry to evolve naturally without too many restrictions, and lets it iron out its own kinks along the way.

“I believe that the government wants to let the market feel its way around. We are certain that regulations will be tightened soon because the reputation of the digital assets landscape in Singapore, as well as the entire reputation of Singapore as a financial hub, is at stake. We cannot afford to have bad actors in the digital assets space corrupt our ecosystem,” he says.

But while deep tech is proving to be an exciting area to watch for those within the tech industry, it is also important to help the public embrace these concepts – especially those who work in more traditional, non-tech heavy industries. After all, Singapore is embarking on a Smart Nation drive to ratchet up the nation’s tech readiness; and so, it needs the participation of all stakeholders – tech workers and ordinary citizens alike.

Tan says that major industry events like SWITCH (Singapore Week of Innovation and TeCHnology) can help spread or “amplify” news in the industry. He adds that this is important because it helps to distill the topic of deep tech into a form that is more palatable to the general public and enables experts and the masses to debate topics meaningfully in an open platform.

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“This year’s SWITCH blended in-depth industry updates as well as easy-to-understand forms of tech, such as lifestyle wearables. Over the years, SWITCH has evolved to become a grounds-up event as opposed to a top-down industry function, certainly a good development as the ecosystem takes on a life of its own,” he concludes.

James Tan was a speaker at the Asia Early Stage Investment Summit, a partner event of the Singapore Week of Innovation and TeCHnology 2018.

Disclosure: This article was written by the e27 content marketing team, in collaboration with SWITCH.

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