Singapore Technologies Engineering Ventures

There has always been a probable debate between employing proper allocation of resources towards Research & Development(R&D) or accelerating the former process through the deployment of a corporate venture capital fund. Will the cost savings be worth the extended time period for innovation, or will time be of greatest essence to spur future growth of the company?

Although such a dilemma has always been existent throughout the strategic planning process of a company’s vision, empirical research has calculated that since the unprecedented boom of corporate venture during the 1990s , every dollar invested in a venture was three or four times as potent in stimulating innovating as a dollar a company would invest in its internal R&D. [1]

An Instrumental Variable(IV) regression was conducted where the eventual potency of stimulated innovation was regressed against the investment of venture funding, R&D expenditure and various control factors. As mentioned above, the potency had a statistically significant result at 1% level, affirming the hypothesis that perhaps in one way or another, corporate venture capital could provide a significant edge for innovation to:

  • Strategically orientate the company towards higher financial returns through its investment
  • Acquire highly promising technology to incorporate in the company’s products/services, which these acquisitions will help to plug in the gaps in longer wait of innovation through internal R&D
  • Hedge against rival, future technologies that have the capability to knock off the current business model of the company

As a result, corporate venture capital funds have been slowly increasing in its deal numbers and its fund size over the past couple of years (Table 1).

Table 1: Global Corporate Venture Capital Activity, 2013–2018

With an exponential increase in total value of investments and finalised deals [2], it is without a doubt many of the largest firms globally have been investing in the lucrative industry to reap specific benefits.

Bringing back a global trend into a more localised context, ST Engineering has always proposed itself as a forefront towards technology and innovation in a heart of a vibrant engineering field — comprising of aerospace, electronics, land systems and marine products & solutions. With an ever constant need to bring in innovation so as to be a step ahead in the market, ST Engineering birthed another brainchild of a long term strategy : Singapore Technologies Engineering Ventures(STEV).

Having a sizeable fund of US$150 million, the newly comprised arm in ST Engineering will be ‘scouts’ [3] of the company, sourcing for potential start-ups to invest/collaborate with. However, apart from the pure financial returns that embodies the mandate of most VCs/CVCs, CFO Cedric Foo has stressed certain key points in order for the the company to consider an investment to be made. This indicates a minimum criteria of:

Further, with the start-up’s developing technology that the company is lacking in, this enables the company to stay ahead of the curve, and minimise the impact of disruption over the long run.

STEV will look for promising technology in the fields of:

Since its inception in late 2017 to date, STEV has made key investment to their portfolio and has been constantly keeping a constant eye on key market trends alongside valuable studies with valid & sound business proposition.

Fig 1: Sectors that STEV will look into

With that, here I embark on the 12 weeks with ST Engineering Ventures and to enjoy everyone moment of it! It has been a dream to work and learn in a VC and I have finally realised my dreams!!

Sources:

[1] Kortum, S. (2000). Assessing the contribution of venture capital and innovation. Retrieved 19 May 2020, from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.321.7594&rep=rep1&type=pdf

[2] CB Insights. (2020). The 2018 Global Corporate Venture Capital Report. Retrieved 19 May 2020, from https://www.cbinsights.com/research/report/corporate-venture-capital-trends-2018/

[3] Yang, B. (2019). Unlocking Corporate Venture Capital [Ebook].

Always interested over topics on venture capital, start-ups, macroeconomic outlook & equity research on different sectors.

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