NRF issues Call for Proposal for Technology Incubation Scheme

It’s finally here – just over an hour ago, the National Research Foundation of Singapore issued a call for proposal for a new initiative termed the “Technology Incubation Scheme”.  Read more about it in the issued document below.

The Technology Incubation Scheme (TIS) is a scheme under NFIE where the National Research Foundation (NRF) will co-invest in Singapore-based high-tech startups accommodated in a number of selected technology incubators. An option will be given to the incubators to buy out NRF’s equity share…It is similar in principle to the Israel’s Technological Incubator Programme.

Terms

• Only high-tech start-up companies based in Singapore would be eligible (for this investment instrument). Understandably so.
• Co-investment of up to 85% of total investment into each company, up to a maximum of S$500,000 per investment from NRF.  The incubator manager should provide at least 15% of the investment into the company. Assuming an incubator wants to maximize this without going beyond 15%, the largest round this scheme can accomodate would be approximately US$400,000.
• NRF and the incubator manager will take equity in the company according to their respective investments, with NRF portion as convertible bond I wonder what happens if the incubator does not buy NRF’s share out…does NRF write it off or require payback by companies (as unlikely as that may be at that stage)
• Buy-out option granted to incubator manager at 1.1 times capital in first 2 years and 1.15 times capital in the 3rd year kickass…incubators will be able to cherry-pick their best companies and rebalance their portfolio at some point within the 1st 3 years.
• Investment in company should not dilute founders’ share of company to less than 50% as a general rule

Caveats

• At least 1 full-time incubator manager to provide active mentoring to incubated companies
• Incubators need to have link to a Singapore institute of higher learning (iHL) i.e. NUS, NTU, SMU, and possibly the polytechnics (verification needed)
  
• Incubator is expected to provide suitable physical space to house incubatees
• Operating expenses will not be provided by scheme; incubators should demonstrate ability to cover operating expenses. I wonder if a winning incubator would be accused of double-dipping or be penalized during the evaluation phase if they also tapped on SPRING Singapore’s Incubator Development Programme (IDP).

Predictions

My hunch tells me there’ll be 3 winners, all with varying ‘flavours’ so that they don’t quite compete entirely against each other.  I’d imagine the incubators are also expected to make some form of financial commitment, i.e. raise a fund or put aside some money to invest.  Although some experienced entrepreneurs may comment that very few highly successful companies have come out of incubators, this is still a very positive development for the local entrepreneurial ecosystem.  I only hope NRF is actively attracting smart money to participate in this Call for Proposal!

Related posts:

1. Why NRF’s TIS may be the Fix that Singapore’s Tech Ecosystem needs
2. Six winners for NRF Early Stage Venture Fund
3. NRF awards S$4m to 16 Proof-of-Concept projects
4. Neoteny Labs selected for NRF TIS
5. Of Lee Kai-Fu’s new US$115m Investment Fund and NRF’s TIS

Tagged as: convertible, incubator, mentoring, NRF, proposal, TIS