Technology

Five questions with Venturecraft

Mr Ong Jeong Shing, investment director of venture capital firm Venturecraft, says Singapore requires a strong pipeline of deals, financing, people who know how to finance these companies and how to advise them, as well as a talent pool, for more hom
Mr Ong Jeong Shing, investment director of venture capital firm Venturecraft, says Singapore requires a strong pipeline of deals, financing, people who know how to finance these companies and how to advise them, as well as a talent pool, for more home-grown medtech and biotech firms to develop.ST PHOTO: LIM SIN THAI

Venture capital firm Venturecraft started out with the aim of helping start-ups break into China and has since carved out a niche as an investor in the medical technology, biotech and healthcare space as well. It has been investing in progressively larger deals and is now raising its third fund, expected to be at least $100 million in size. Chia Yan Min talks to Venturecraft investment director Ong Jeong Shing about the firm's growth plans.

Q Could you give a brief rundown of Venturecraft's background?

A We started out as a cluster of family offices managing the wealth of high-net-worth individuals. We wanted to become a strategic investor to help companies expand in Asia, especially China and Taiwan.

Our investors are split into two categories - firstly, technopreneurs from China who have made money from the Internet sector.

The other category is business owners in traditional manufacturing industries such as food, apparel and semiconductors. They invest in healthcare to diversify beyond their core businesses.

We also started a collaboration with the Singapore-MIT Alliance for Research and Technology (Smart), which helps researchers commercialise their products. We came in with an initiative to become the first institutional investors for projects spun off from Smart. That was our first $5 million fund, Venturecraft I. We invested up to $500,000 per company from that fund.

We closed our second fund last year; it has a value of $50 million. The second fund, Venturecraft II, focused more on growth-stage opportunities in medical devices and healthcare, investing up to $5 million per company.

We are in the process of raising our third fund and are aiming for a first close by the year end. We are targeting to raise funds of $100 million and up, and have secured a commitment from our first anchor investor. The upcoming fund will focus on later-stage companies and larger deals - possibly above $10 million. Our focus will again mainly be on healthcare and medical technology. With more firepower and resources we can start investing in biotechnology and biopharmaceuticals.

THINK BIGGER

The concept of us being a test-bedding centre is actually counterproductive and causes Singaporeans to be very myopic and to focus too much on the small Singapore market.''

VENTURECRAFT INVESTMENT DIRECTOR ONG JEONG SHING

Q Are there enough deals here in the biotech and medtech space?

A In the healthcare space, we've seen most, if not all, of the opportunities - it doesn't take too long to look at all the opportunities in Singapore.

Last year, we looked at 300 to 400 projects and out of those we invested in one: diagnostic test developer MiRXES.

The scene has definitely grown. But quantity is one thing and quality is another. The quality of firms here still needs to mature and develop.

Singapore has done well in the research space, making a big push into biomedical sciences. But the gestation period for biomed is long.

From the early 2000s, we had a period of creating and generating intellectual property (IP). From 2010 to 2015, we had a period of consolidation, clustering the IP together to generate more value.

The next five years will be more focused on translation and commercialisation, which will be interesting.

We should have a more vibrant ecosystem in five to 10 years.

Besides Singapore companies, we also look overseas. In February, we made our first investment into a Boston-based biotech company in the area of microbiome therapeutics.

Q What else needs to be done to develop more home-grown medtech and biotech companies?

A We need a few key elements for the ecosystem to mature: a strong pipeline of deals, financing, people who know how to finance these companies and how to advise them, as well as a talent pool.

We are seeing some of these gain traction. International venture capital (VC) firms like Blackstone are coming into Singapore to establish a presence. More talent is also coming up in this space, as well as more exits and home-grown success stories. One example is medical device maker Biosensors. These success stories are coming out, starting ventures of their own and contributing positively to the ecosystem.

In addition, we need a mature capital market. The market in Singapore is not yet mature enough. Singapore is losing listings to other markets like Hong Kong. Taiwan is also up and coming as a favourite hot spot for medtech and biotech listings.

Many retail investors here are not ready to invest in high-risk, high-reward counters... They don't know how to value biotech companies or companies which are not yet generating revenue. We need the entire investor ecosystem and community to mature - it's a bit of a chicken- and-egg issue. It's still early days for Singapore - compared to the US and China, we're definitely way behind.

Q What advice would you give a Singapore medtech or biotech company looking to go global?

A Start-ups really need to be focused from the get-go and do what is needed to be able to grow overseas.

Healthcare is a highly regulated space - if you design a medical device here targeted at the Singapore population, when you want to export the same thing to China, all the clinical validation studies you've done as well as the entire regulatory process has to be repeated.

Usually our advice for the start-ups is to set up an office in China from day one. Get your foot in the door, understand the regulatory requirements and tailor your product accordingly.

Other economies similar to us - small, isolated, surrounded by hostile nations - such as Israel and Taiwan often look to large markets like the US and China as their hinterland.

From the get-go, they right-size their products and technologies to these markets. That's a strategy that Singapore has to adopt as well. The concept of us being a test-bedding centre is actually counterproductive and causes Singaporeans to be very myopic and to focus too much on the small Singapore market.

Instead of importing experience and proven talent and technologies, we can export our local aspiring talent and tech overseas and get them to succeed there before bringing them back.

Q What are your plans for the coming years?

A In the next five to 10 years, the old traditional VC model will be challenged. Investors are getting more sophisticated so they can start making their own investments and bypass VCs - that's one challenge.

Another challenge is the rise of artificial intelligence (AI). Some of the things that we do will slowly be replaced by robotic analysts.

In order to protect our position and add value to our investors, we need to do three things.

Firstly, we need to become subject matter experts and acquire deep expertise in specific verticals that AI cannot replicate. In our case, we're a subject matter expert in biotech in Asia.

The second thing VCs can do is create their own proprietary deal flow. They can do this by setting up incubators or accelerators to incubate their own companies, or establishing a proprietary and exclusive relationship with top venture funds in overseas markets.

That's what we're trying to do - establish ourselves as the preferred Asian partner for top biotech funds in the US. In doing so, we get access to their top deals which most others won't have access to.

The third thing VCs can do is start their own ventures. We are learning this model from biotech VCs in the US. After making successful investments, they started to comb the ecosystem and start their own companies to develop their own technologies from scratch.

That's another direction we're heading towards - creating our own start-ups from scratch.

We are already working on something in this space and will share more in due course.

A version of this article appeared in the print edition of The Straits Times on August 01, 2017, with the headline 'Five questions with Venturecraft'. Print Edition | Subscribe