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Long-term Singapore Temasek with internal startups

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Like most airlines, Singapore Airlines suffered during the coronavirus pandemic. But since December, airline passengers departing from Jakarta or Kuala Lumpur have benefited from a digital health tool developed by a small startup owned by Temasek, the state-owned global investment giant. .

Singapore Airlines is one of several carriers using travel pass software from Affinidi, one of Temasek’s little-known startups. The software verifies the authenticity of the flyers’ COVID-19 test results. One of its main features is that it supports different health passports, which makes it easy for airlines to screen passengers.

Temasek has been a prolific investor in technology companies. But what sets Affinidi apart from other Temasek holdings is that it is local, established by the public investor as part of an initiative to fund businesses as early as possible.

Temasek doesn’t just support promising start-ups, it also creates them.

“As an investor, we have the flexibility to invest in existing solutions or create new ones, depending on the opportunities we have identified,” said Chia Song Hwee, deputy general manager of Temasek International. Nikkei Asia.

Temasek International is the business arm of Temasek Holdings, formed to undertake investments so that its parent company can focus on managing Singapore’s reserves. This month, Temasek International is expected to reveal the performance of its portfolio over the 12 months to March.

State-backed investors typically follow the lead of venture capitalists or private equity players, supporting promising companies with the aim of collecting returns down the road. Temasek, for example, has backed companies like Grab, the Southeast Asian unicorn and superapps provider, and Chinese e-commerce giants Alibaba Group and Tencent.

According to the data platform Global SWF, Temasek was the top international technology funder among public investors last year with $ 2.3 billion, reflecting the company’s interest in the sector. .

In contrast, starting a business from scratch is rarer, as it means devoting investment capital to take the risks of starting a business from scratch.

“It would be a long-term effort,” Chia said of Temasek’s strategy. “Like all areas of significant change and progress, these have a gestation period that can stretch over years and likely come with occasional twists and turns along the way,” he added. , recognizing that the way forward may not be that simple.

Besides Affiidi, Temasek created Istari, a cybersecurity company. Established in 2019, Istari helps businesses strengthen their cybersecurity defenses, mitigating the risks posed by sophisticated hackers.

The company has dedicated units covering areas such as crypto technology, consulting and incident response, in addition to monitoring hacker activities and trends.

Tech startups like Affindi and Istari are focused on growing in developing areas like blockchain and cybersecurity, says Stephen Forshaw, head of public affairs at Temasek.

Forshaw said Temasek is not planning massive capital to start these businesses and will release capital in stages to support expansion over time. “You don’t write a big check,” he said.

Temasek has not disclosed how much it invests in startups.

Chart by Nikkei Asia.

Singapore has been keen to market itself as an Asian tech hub, with the government announcing a special work visa in November last year to attract startup founders, executives and technical experts with experience in established tech companies or fast growing. But Forshaw says it’s a coincidence that Temasek’s investment strategy matches the Singapore government’s goals. The investor simply acts where he sees opportunities.

Temasek’s model is not where the company hires entrepreneurs with ready-made ideas. On the contrary, Forshaw said, internal staff suggest opportunities, come up with plans, and seek approval and funding.

“Part of the job for these people is to get the business up and running and then bring in a professional management team,” he explained.

Forshaw said this was what happened in Affinidi’s case, with Temasek organizing a handful of his own staff to start the business with existing capital before recruiting others to complete the start-up.

Glenn Gore was hired by Temasek, who joined Affinidi as CEO after a stint as chief architect at Amazon Web Services in Seattle, the cloud computing arm of the e-commerce group.

Gore said Nikkei that the startup’s goal was to create and refine information service applications that other companies will find uses for. He said Affinidi is engaging potential partners in Southeast Asia, India and China. The company now employs around fifty people.

“To help us grow, we continue to seek out and hire quality and diverse talent based on our business needs,” said Gore, adding that he expects his teams to grow, focusing on the application of Affinidi technology to other companies.

Temasek’s creation of his own startups is “a big change,” said Abhineet Kaul, Asia-Pacific operations manager for the public sector and government council at Frost and Sullivan.

“There are significant risks, not only financial, but related to Temasek’s reputation,” he said. Nikkei. “The business model of these startups is also not tested for investment by a public investor,” Kaul said of Temasek’s Affindi business.

“Temasek’s main goal should be to increase the wealth of Singaporeans through a relatively low risk strategy,” Kaul said, stressing how accountable the investment firm is to the Singapore government as a sole shareholder.

Chart by Nikkei Asia.

Chia de Temasek acknowledged that the approach “may carry higher risks” but “would bring growth opportunities alongside companies”.

Temasek’s investments are still modest compared to its portfolio currently valued at SGD 306 billion (USD 220 billion). But they show that Temasek is increasing the prospects for his long-term future by sowing the businesses he hopes he can grow into industry giants.

The company’s diverse approach also comes against a backdrop of a struggle for decent returns. During the year ended March 31, 2020, its return was minus 2.28%, compared to 1.49% in 2019 and the worst since 2016. The net worth of the portfolio for the period decreased by approximately 2%. % to SGD 306 billion.

Temasek warned last year that the outlook for the global market remains volatile and uncertain, with COVID posing a risk to the recovery. During the fiscal year ended at the end of March 2020, Temasek invested SGD 32 billion and sold SGD 26 billion.

The company’s portfolio has its largest weighting in Asia, amounting to 66% of its exposure by underlying assets. China at 29% and Singapore at 24% are the top two countries in terms of concentration.

Temasek’s leadership transition plans also suggest a renewed focus on its business opportunities.

In February, the company announced that Ho Ching would retire in October after 16 years as CEO of Temasek Holdings, the parent group. His successor will be Dilhan Pillay Sandrasegara, CEO of Temasek International, who will also retain this role. Sandrasegara previously led the Enterprise Development Group, a unit created in 2014 to pursue business opportunities.

Temasek’s Dilhan Pillay Sandrasegara, left, will replace CEO Ho Ching, who will step down in October. Photo courtesy of Nikkei Asia.

Temasek has also entered into joint ventures to pursue business opportunities. Last year, he announced a partnership with the investment arm of German life sciences company Bayer to establish a business in vertical agriculture.

Lawrence Loh, director of the Center for Governance, Institutions and Organizations at the National University of Singapore Business School, said the startups created by Temasek place her “on the cusp of a new trend.”

“By creating startups rather than investing in them, Temasek can move on to directly generating returns rather than indirectly perceiving returns,” Loh said. Nikkei. “The approach will augment the traditional equity portfolio with a new concept: an internal ‘super-incubator’. “

He said the public investor’s decision would potentially make it a “sovereign wealth company,” transforming its business from simply holding a financial portfolio to operating more like a commercial conglomerate. The challenge, he said, will be to build the capacity of new companies internally.

Chia pointed out that the Enterprise Development Group was already targeting projects that could have longer gestation periods and potentially carry greater risks.

“We may be in a better position to address some of these challenges and gaps that we see because of our long-term vision and focus – our ability to provide capital over longer horizons and a more patient attitude towards a future. way to profitability and commercial returns for these conditions. “

This article first appeared on Nikkei Asia. It is reposted here as part of the ongoing 36Kr program partnership with Nikkei.


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