deep tech startups

The challenges associated with deep tech companies essentially stem from the complexities of the technology commercialisation process.

They can be placed into four broad categories: prolonged development timelines, complex value chains, limited availability of social and physical infrastructure, and high capital demand.

For Singaporean deep tech startups, this is no different. Every founder in the Little Red Dot also factors in the specifics of the local ecosystem, displaying both outstanding strengths — the quality of science, modern infrastructure, efficient government— and a fair share of shortcomings — small domestic market, limited depth of the local B2B market, large science to commercialisation gap.

If local entrepreneurs encountered barriers on all four fronts of building their venture (i.e. customers, value chain, talent availability and capital), then their chances to build a worldwide success story and win over competition would dwindle quickly.

For those Singapore-based founders embracing the arduous deep tech path, there is no choice but to build themselves a central position in a deeply interconnected mesh of global players.

Such a global mindset quickly becomes an asset by going after the most promising markets and forming strategic partnerships with world-class technology partners — rather than the “best in my own backyard” types.

In the US, EU, China or India, looking at an international presence early on may be seen as a risk of defocus by investors and advisors alike. But in many other cases — basically, the rest of the world — being competitive equates crossing national borders and target a major economy on at least one side of the business, be it go-to-market, hiring talents, or raising funds.

The challenges of building capabilities and doing business across borders are familiar to many venture founders chasing expansion and growth, starting with the last generation of key digital players, from the GAFA to regional unicorns such as Grab in Southeast Asia or Revolut in Europe.

In the case of hard tech, framing an international strategy is driven by market sizing, timing and scalability. The successive steps of the deep tech entrepreneurial journey require both short-term, dynamic, and medium-term, trust-building types of interactions with top-in-class industrial players looking for an entry ticket to the adequate spot on the value chain.

Because of the complexities of the productisation tasks at hand and the deep scientific background needed, the barriers to entry, maturation and scalability are extremely high — and the associated rewards in the case of a successful go-to-market equally attractive.

The risks inherent to developing or combining high technologies can be methodically and systematically mitigated by founders who are successful at striking those key cross-border partnerships: finding the right equipment manufacturer, prototyping workshop or international distributor, and developing long-standing collaborations.

While framed as client-supplier relationships, these collaborations are more complex and rarely purely commercial. The amount, typology and aggregated know-how of those industrial key players often hint towards North America, Europe and Japan as Tier 1 targets, together with Israel, South Korea, China and India as contenders.

Also Read: How early-stage deep-tech startups can attract and retain the right talent

While leapfrogging at tremendous speed — even leading in selected niche markets — Southeast Asia as a whole is still structurally considered as Tier 2 with regard to hard tech intensity, depth and maturity.

While the global technological and economic maps may be totally different in one to two decades, the scarcity of mature deep tech players in the region requires that young ventures focus on developing abroad early on.

Strategy amidst chaos

Deciphering those cross-border value chains constitutes both a strategic necessity and a schizophrenic element. In order to successfully create impact, founders need to navigate a moving network of stakeholder relationships. They must constantly assess and understand the ultimate users of their startup’s product or service as well as the intermediaries.

Decisions about how much time, energy, and resources they want to spend then drive how they approach the intermediaries — e.g., asset managers, corporate sponsors, advisors or investors — who sit between their venture and the future customers or partners. While intermediaries are a bridge, they can also create barriers. The expertise and willingness of an intermediary to work with the founders on the creation and evolution of a startup strategy can be critical for its success.

This very strategic mindset and the associated cross-border processes go hand-in-hand with better control of development timelines, go-to-market and funding in the long run.

Obviously, obstacles and pitfalls encountered during this cross-border journey are numerous. It means different legal systems to master, challenges to identify the right partners to initiate the dynamics, eventual push-back from the original entrepreneurial ecosystem or the local government.

The idea that national distances affect the conduct and performance of businesses operating across borders has been at the core of entrepreneurship for decades.

Here are three practical tips that founders can take to overcome some of those pitfalls:

Being default global vs default local

Future international success starts as soon as the venture is incorporated. Globalising a company doesn’t happen overseas at the beginning, but at the founders’ desks: they need to identify the right support in advanced economies, large markets and top industrial ecosystems, then convince them to be involved.

Without the founders’ quasi-obsession to build a global player, the future expansion is at risk. Mistiming of the internationalisation strategy, forgetting the root causes of global success, hiring the wrong leaders and over-delegation of the international developments by the founders are typical mistakes to be avoided.

Also Read: Meet the new batch of 8 Vietnamese startups joining VSV Capital’s accelerator programme

Capitalising on international play books

The path to becoming a cross-border firm is a series of iterations and humbling experiences. Obviously, each business model requires a different playbook.

Founders should spend some time preparing their own version that serves as the single source of truth, covering the latest learning on how their venture can grow effectively at the global scale.

The reality is that few Singapore-born deep tech organisations are actually multi-geography, therefore not that many people have been actually confronted with the challenges of growing a business across borders. As a result, that knowledge is a scarce resource because so few people have been there, and so it’s difficult to seek expertise when you decide to go down that road.

Empowering the right executives

When a deep tech company hires an executive, the business essentially hires the executive’s network. Great executives will staff a team quickly. The converse is also true: executives with weak networks burn time to build their teams.

In the first years of work, deep tech ventures mostly need to find a Sherpa working with the core team, someone who knows the market very well and has a pre-built international network. This Sherpa will allow gaining knowledge about markets, prospects, the capacity of competitors at a global level.

Over time, the founders can bring in more and more talented professionals, a winning combination being to combine senior local hires in targeted markets with long-time company employees.

Hiring the right persons is the first step, setting them up for success is the next: the organisational structure of the venture is to be adapted continuously to give key executives the freedom to operate efficiently.

This article was originally published in a longer form on Medium on July 30, 2021 and is accessible here.

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Image credit: monsitj

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