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. NRF reopens TIS, opens floodgate on early-stage tech investments in Singapore
2. Why NRF’s TIS may be the Fix that Singapore’s Tech Ecosystem needs
3. Six winners for NRF Early Stage Venture Fund
4. Singapore’s Uncoordinated Initiatives for Entrepreneurs
5. Neoteny Labs selected for NRF TIS
6. Terraforming Singapore into Startup-land

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