It’s almost 2 years since the National Research Foundation (NRF) picked Neoteny Labs as one of the 7 technology incubators with access to the S$50 million it had set aside under the Technology Incubation Scheme (TIS). NRF would co-invest up to the lower of S$500,000 or 85% of the incubator’s investment in a qualifying company, and grant the incubator the call option to buy over its investment at 1.1x before the 2nd year, and 1.15x between the 2nd and 3rd year. NRF has done a good job of balancing their generous leverage by optimizing the TIS against moral hazards, i.e. preventing scenarios where incubators “live off” the funding leverage by charging their investments all sorts of funky fees, and structuring their co-investment such that incubators would not be able to draw management fees on NRF’s co-investment. The additional leverage is strictly meant as working capital for startups supported under the TIS.
The TIS has a shelf life of 5 years, which means the initiative still has another 3 good years to go. Little surprise then, when NRF announced recently that it would be adopting an open application process for the TIS, which means anyone with a good plan can apply to become a TIS incubator.
NRF reported that its 7 incubators have made an aggregate of 31 investments since August 2009. This translates into an average of 4.42 investments per incubator. I’ve been told by others that Neoteny Labs has been one of (if not the) most active NRF TIS incubators on the block, with the other 2 being Small World Group and ClearBridge Accelerator. As of the press release, we had already tapped on the TIS for 6 investments, with in-principal approvals for another 2 investments. By the time we’re done closing all the deals we have on hand, Neoteny Labs would have made a total of 10 investments under the TIS since May 2010. Small World Group’s website shows 8 investments, with an estimated 2 more before the end of 2011. ClearBridge’s website shows 4 investments. If you add up the numbers between Neoteny Labs, Small World Group and ClearBridge Accelerator, you’ll get 24 out of the 30-odd investments, or ~66% of all TIS investments made.
It is never easy to design and implement such initiatives, so kudos to NRF for sticking to their guns in an effort to encourage early-stage tech investing in Singapore. NRF has been a great partner thus far, barring some operational hiccups along the way. My fly-on-the-wall tells me prospective applications for the TIS open call now stand at 3-figures (>100), which is mind-boggling but not surprising. I’m glad we got into this early and am personally excited to welcome even more early-stage investors into the ecosystem.