Lack of talent is the biggest factor holding back local start-ups that are developing hardware and deep technology capabilities.
Hardware start-ups build complex physical products and so need expertise in design, production quality and supply chain management.
They also need deep technology capabilities, which are highly innovative processes not easily reproduced or replicated.
While Singapore has a strong presence in software start-ups, it is lagging in the field of hardware design, according to industry figures at the inaugural Ventures Day organised by Applied Ventures, the venture capital arm of American multinational Applied Materials.
Mr Tony Chao, senior investment director of Applied Ventures, told The Straits Times that the importance of building hardware capabilities cannot be understated.
"If you look at Silicon Valley's origins, it was more of a deep tech, hardware scene. Over time, it graduated into a software environment because of the deep tech foundation.
"Without the processor, we can't have the mobile phone. Inflections are enabled by deep-tech advancements. For Singapore to have sustainable advantage that's longer-term, you have to invest in this foundational differentiation."
But Singapore's key challenge in building up the hardware start-up sector is talent, said Mr Edwin Chow, Spring Singapore's group director of industry development and innovation and start-ups.
Mr Chow told a panel discussion that while there is talent able to leave the research lab for commercialisation work, there were not many who did so, despite government grants of between $250,000 and $500,000.
Panellists attributed this to an aversion by Singaporeans to perceived risks in joining a start-up.
Mr Lim Chee Kean, chief executive of smart logistics firm Ascent Solutions, noted his initial difficulty in giving out scholarships and even hiring interns.
To fill the gap, Mr Chow said Spring wants to supplement local talent with foreign entrepreneurs, citing the benefits of getting successful incubators to set up shop here.
Mr Taras Wankewycz, chief executive of H3 Dynamics, a group of companies that combines energy storage, robotics and analytics, said "people in Singapore have lost the capability of working with their hands". As a result, he is re-aligning the role of Singapore in his company's strategy, preferring to build and develop products elsewhere.
Despite the challenges, Applied Ventures, which has invested US$200 million (S$274 million) in start-ups globally over the past decade, is confident about Singapore's prospects.
Applied Ventures president Omkaram Nalamasu told The Straits Times that Singapore has been very successful in translating ideas into reality.
Mr Chao concurred, saying that "the Singapore government has spent a lot of effort developing intellectual property and a talent base. So it's an environment ripe for harvesting that latent opportunity and commercialising it, turning (it) into successful start-ups".