It’s the new kid on the block in the world of startups and investing. In a nutshell, a venture builder brings together the right resources to create new companies before the company is created. Leveraging its network and resources, a venture builder quickly develops, launches, and scales fully-fledged businesses that complete a comprehensive business-building program.
We have invited Mr. Luuk Eliens, the Chief Commercial Officer at XNode, and Ms. Clara Chen, General Manager at XNode Singapore, to share their insights about the venture building from both China and Singapore aspects.
The essence of venture building is to create the company before it exists. So you get involved in venture building before the company creation. That’s different from traditional accelerators, where often funds exist already. In this case, you go one step earlier - start from technology or people and then create the company from scratch. For a venture builder, more risk is assumed since it is difficult to predict if new ventures will be successful or not. That’s why Venture Builders, typically take more equity as compared to normal accelerators. In a normal accelerator, typically 2-8% equity is reserved for accelerators, whereas venture builders can take up to 20% equity.
There are many different kinds of venture builders and their approaches are different. We are focusing on building companies from deep-tech. Deep-tech also has different meanings. In Singapore, we focus on technologies from research institutions that have the potential to solve societal challenges. We have all these technologies from Singapore that we try to commercialize. And when we find technologies that can solve pinpoints, we take them out from the research institutions and build teams around these technologies to take them to the market.
Our focus is aligned with our experience and the strengths of the ecosystem in Singapore. We focus on finding technology that has the potential to contribute materially to the UN SDG’s with a distinct focus on Smart Manufacturing.
1. Abundance of diverse commercialisable IP and tech talent
2. Strong governmental support
3. Increasing presence and inflow of deep-tech investors is improving the conservative investment climate
From a China perspective, if you look into the deep-tech, China is still not where it wants to be. The main players are from the US and Europe. China is trying to catch up, but it’s still difficult because it requires consistent investments and lots of considerations specifically on Intellectual Property Rights. The Chinese government tries to find ways to mature the deep-tech industry in China. One of the ways to do so is by incentivizing foreign companies that have a differentiating value proposition specifically around deep-tech to China.
Singapore’s biggest foreign investment comes from the US. Likewise, Singapore is one of the largest foreign investors in China and Vietnam. That’s where Singapore will go in, build resources, and commercialize these technologies.
We need to find good quality companies as funding teams. For deep-tech, it becomes even more important as it needs specific expertise to be able to build ventures successfully.
Normally, deep-tech ventures need much more capital and the return of investment is much longer. The likelihood of failure is higher because of high technology, market and team risk.
We need to involve companies that add real value and knowledge to this industry. And we need to tackle lots of issues to find ways to bring those industry partners on board.
It is hard for deep-tech to scale in general. For Chinese companies, they usually focus on the Chinese market first because it is such a big market But an increasing number of companies are planning to expand globally and asking us for help. European companies are often not ambitious enough to expand globally. We see much more ambition in general from Chinese and US entrepreneurs.
From a Singapore angle, in nature, Singapore is a city-state and quite different from other ecosystems. We don’t have domestic markets and have to build a global company from the get-go. We have lots of early-stage support from the government, however, there is still a growth stage funding gap. That’s one of the challenges. Establishing a company in high-cost environment like Singapore to capitalize on talent, productivity and capital is feasible, but there are lots of challenges to manage the impact of costs – and the devil’s in the details.