Angel investors play an important role in helping fledgling life sciences companies get off the ground. Long-time angel investor, Mr Francis Chua, shares some of his observations on the life sciences startup scene in Singapore and offers a few fund raising tips.
What are some things that have changed in the life sciences startup scene over the years?
Let’s narrow it down to R&D funding for life sciences startups because this was sorely lacking in the early days. I think there has been good progress since the time when the Biomedical Sciences initiative first started back in 2000. The government has invested more money and resources into R&D. Our public research institutions are well funded and more importantly, they are increasingly focused on industrial collaborations, rather than just pure academic research. These industrial collaborations represent a major step forward in translating research into marketable products and services. The collaborations also benefit their industry partners, providing them with access to funding, technologies and expertise, just to name a few. For example, in the past, startup life sciences companies had to rely on various government grants, which were not really suitable for the purpose. Nowadays, they can work with suitable public research institutions to tap on public R&D dollars. I think this is moving in the right direction.
I think the government must continue to find ways to help support commercially oriented R&D within our research institutes and then channel the fruits to companies and startup firms. We need to bring the scientists and entrepreneurs together to work their magic more frequently.
Is it still difficult for life sciences startups in Singapore to raise funds?
Yes it is, especially for startup companies working in very specialised areas, such as cancer research and other drug therapies. The big investment funds that have the expertise to evaluate more complex life sciences projects tend to only look at those of a certain size. So many of these smaller biotech startups simply do not fit their criteria. On the other hand, there are individual investors, but they usually stay clear of life sciences projects because they lack the expertise or are put off by the perceived high risk and long gestation period. However, medtech startups in Singapore tend to do better in attracting investors compared to biotech ones because of the same reasons – their technologies and products are easier for the investors to understand and they usually have a shorter time-to-market.
What about rich doctors? There must be plenty of those that entrepreneurs can approach.
For startups working on new drug therapies for instance, the pool of potential angel investors is very small. Even some doctors may not understand the subtlety in the science that goes into the new technology. For example, I am involved with a company that is developing a new therapy for treating cancer. Unless the investors are like me and has an interest in the field, reads a lot and is up-to-date in its development, they may not be able to fully appreciate the medical impact of the new therapy and the value that the company is bringing to the market. The situation is slightly better for medtech projects because the concepts and technologies may be easier for investors to grasp and understand.
The problem I see with private investors here is that they have other easier ways to grow their wealth. They are willing to punt some stocks and shares, or buy a few properties, but if you ask them to put down a million dollars into a life sciences startup and wait for 5 years or more, they will say “no thanks”. It takes an investor who has a passion for this field, who is sufficiently knowledgeable in the subject, and who has the holding power to want to invest in life sciences projects. I think it will take more time for the pool of such investors in Singapore to grow.
Do we have some good success stories?
A quick Google search will show that the number of successful Singapore biotech or pharma startups are few and far between. But I think it is important to remember that life sciences projects have long gestation periods and many startup firms will fail along the way. That is the nature of the industry. It usually takes over a decade to bring a new drug to market, therefore we still have a long way to go.
However, the good news is that we are still in the game. Although many pharma, biotech and medtech startup companies in Singapore have come and gone over the years, there are still startup companies working hard to find success. I understand that one of our local biotech startup raised over a hundred million dollars and recently completed recruiting patients for their Phase 3 trial. That is something to cheer about.
Where can entrepreneurs find potential investors for their medtech projects and what do angel investors here look for?
There are a few avenues for medtech entrepreneurs to link up with early stage investors. We have a business angel network called BANSEA (www.bansea.org) through which they can reach individual business angels. They can also approach government agencies like SPRING Singapore who may be able to point them to some investors. In addition, there are a number of VCs that invest in medtech startups, including funds that are supported by the government through its Early Stage Venture Fund scheme and the National Research Foundation (NRF)’s Technology Incubation Scheme.
As an angel investor, I usually invest only in areas where I have a strong interest and am very familiar. As a general rule, I like to see projects that are ground breaking in nature, a first of its kind and have global potential. If it piques my interest, I will check with friends and colleagues who may know more, and do additional research on the technology, the company, and the people. If a startup is just creating something that is an improvement over an existing technology or product, I will usually turn it down. By the way, angel investors in Singapore typically fork out 50,000 to 300,000 SGD on each projects.
What can be done to improve the business environment to encourage enterprise creation?
Investing in life sciences startups is a long term play that is fraught with many risks. There are few private investors in Singapore or even around the region that are confident and ready to take on such a challenge. If Singapore wants to create a sustainable life sciences startup ecosystem, it cannot wait for the private sector. I think this is where the government can step in and play the role of a long term investor. It has the resources, and all it needs is the strategic intent and the commitment to invest for the long run. It must look at such investments as laying the foundation for enterprise creation.
The regulatory environment can also be improved. Our regulatory authorities have the responsibility to ensure product safety and therefore have to be cautious. However, I feel that they can learn more from their counterparts in other more developed economies, for example, on how to look at and evaluate risks more objectively so that we do not end up stopping or delaying promising projects unnecessarily.
On people wanting to become entrepreneurs, I think this has improved significantly over the years. Today, I am seeing more young people wanting to become entrepreneurs. This is a good sign. Many will fail of course but at least they get to try. I am also seeing more 2nd generation entrepreneurs who are taking over their parents’ businesses and modernizing them. What I hope to see is for these next generation of entrepreneurs to succeed and give back to society by investing in future generations of entrepreneurs. That will be ideal.