THE number of funding deals has remained fairly constant between 2022 and 2023 in Singapore’s emerging tech ecosystem, but funding is concentrated on a few companies.

A report by emerging-tech ecosystem builder, SGInnovate, showed that 2023 saw 49 funding deals, just slightly above 2022’s 48 deals. Funding, however, was skewed by two big deals in the advanced manufacturing space, with Silicon Box’s US$156 million funding accounting for the bulk of the US$402 million raised in 2023.

Seed rounds have grown amid the current funding winter, with 1.5 times the number of seed-stage deals in 2023 (30) compared with 2022 (20). In other stages, funding continues to be scarce with a 60 per cent drop in the number of startups raising funds after the seed stage.

The decline in the number of startups raising intermediate rounds could be due to the firms having raised enough money in their previous round or opting to cut costs or utilising alternative funding sources such as venture debt to extend their cash runway.

Exits remain few and far between, with only two merger and acquisition deals in 2023.

The number of emerging tech startups being incorporated appears to be at a five-year low, with 25 startups incorporated in 2023. But SGInnovate anticipates that the actual number will increase as the visibility of the companies becomes clearer in the ecosystem over time as startups exit stealth mode, secure funding or start marketing after developing a minimum viable product.

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Advanced manufacturing appears to have suffered, with not as many startups being founded in 2023. However, SGInnovate executive director Tong Hsien-Hui noted that founders have reclassified their startups to be in the sustainability sector to garner more investment interest.

Reclassifying is not necessarily a bad thing, said Tong, as it could be a pragmatic move to ensure that the startup survives.

“What would be bad is that they would end up jumping on the hype bandwagon, spending a lot of time building the hype versus building the product or building the market.”

About 9 per cent of companies incorporated between 2019 and 2023 have been struck off, with about 50 per cent of them in the health and biomedical space. Two-thirds of the 15 health and biomedical sciences companies that were struck off fell under the platform tech or medical devices categories, which face higher upfront capital requirements and regulatory hurdles.

An increased number of strike-offs in a particular sector could also be due to the end of a hype cycle. When the hype dies down, resources get concentrated into fewer companies, which results in fewer strike-offs after the initial wave, as these companies would be more committed.

While it would be ideal to have as many startups as possible, Tong notes that Singapore is a resource-constrained space. Resources will be spread thin supporting a large number of emerging tech startups.

A smaller number of quality startups with founders who are more committed to building a long-term company is preferable to those just jumping on the bandwagon, according to SGInnovate. The “spray and pray” method of seeding multiple startups, so that there is a possibility of at least one of the startups making it, may not be the best strategy in Singapore.

“We are looking at it from that perspective; it’s all about quality versus quantity,” added Tong.

Looking ahead, Tong is positive about where 2024 is heading, despite the uncertainty in geopolitical tensions and interest rates. Developments in the biotech and agri-tech space are among some areas that are looking exciting in the coming months.

“I think we’re not short of areas of interest. Now the question is if we have the necessary research or companies being incorporated to take advantage of these opportunities,” said Tong.