The Future of Food: What makes Singapore an attractive destination for AgriFoodTech start-ups?
This article is produced by CMS Holborn Asia, a Formal Law Alliance between CMS Singapore and Holborn Law LLC.
Introduction
Singapore has a burgeoning AgriFoodTech ecosystem. As the first country globally to approve the sale of cultured meat that is derived from laboratory cultured cells, Singapore is paving the way for companies that are keen to tap into new frontiers in the AgriFoodTech sector.
According to the 2021 AgriFoodTech Investment Report produced by AgFunder[1], startups in the AgriFoodTech sector raised $26.1 billion in 2020, a 15.5% increase year-on-year. The actual investment quantum is however expected to be more than $30 billion as additional 2020 deals come to light, which would represent growth of 34.5% vs 2019.
Southeast Asia received approximately $700 million of AgriFoodTech-related investment in 2020, a material proportion of which was Singapore-led. Investment in Asia has also demonstrated a solid upward trajectory, with a 7% increase in 2020 activity vs 2019. With notable developments in the Innovative Foods category, including investments in Shiok Meats and TurtleTree Labs amongst others, bolstered by the Singapore government’s keen interest in backing stakeholders in the AgriFoodTech ecosystem, evidenced by the approximately $5 billion reportedly invested by Temasek Holdings in the AgriFoodTech sector over a number of years.[2], these trends are expected to continue.
Setting up in Singapore
Setting up a Singapore company is relatively straightforward. The process involves a name reservation application and a company incorporation application, each of which can be approved within 24 hours, unless the application has to be referred to an agency for further review. The minimum share capital for a Singapore company is a nominal sum of S$1.
Advantages of establishing in Singapore
In addition to the relative ease of doing business in Singapore, the availability of numerous grants and incentives offered by the government and other stakeholders make Singapore an ideal destination. One example is SEEDS Capital, an investment arm of Enterprise Singapore (“ESG”) that co-invests with third party investors into start-ups across industry sectors. Some of the qualifying criteria include the requirement to have core activities based in Singapore, be incorporated for less than 5 years, and have a paid-up capital of at least S$50,000[3]. Seven co-investment partners have been appointed, catalysing the investment of more than S$90m into AgriFoodTech start-ups.
Other relevant grants and incentives include:
- Tech@SG, launched by the Economic and Development Board and ESG, which provides endorsements for eligible companies to assist in their employment pass applications[4].
- Startup SG Tech, which provides grants for qualifying projects (proof-of-concept or proof-of-value) upon the completion of set milestones to ease cashflow requirements. Eligible food science and technology projects include food packaging technologies, food testing solutions, food safety and traceability solutions, novel processing technologies, for example bio-transformation, AgTech, food waste valorization and novel products in thematic areas such as elderly nutrition, functional food and protein/meat alternatives[5].
- The Enterprise Development Grant, which provides financial support for qualifying project costs, namely third-party consultancy fees, software and equipment, and internal manpower costs[6].
- Tax incentives, including a potential tax exemption of up to 100% for qualifying start-ups on the first S$100,000 of taxable income and an exemption of up to 50% on the next S$200,000 for the 2019 year of assessment as well as attractive exemptions for subsequent years[7].
Legal and regulatory framework
In addition to the stability that Singapore provides from an operational and intellectual property protection perspective, its transparent regulatory framework provides much needed certainty and clarity to FoodTech players.
The Singapore Food Agency (“SFA”) has, for example, published the Requirements for the Safety Assessment of Novel Foods[8]. Novel foods are considered to be foods and ingredients that do not have a history of safe use and may also include compounds that are chemically identical to naturally-occurring substances, but are produced through advances in technology. Different types of information are required by the SFA in its safety assessment for (1) novel food and food ingredients in general; (2) novel foods that are chemically identical to naturally-occurring substances but produced by unconventional processes; and (3) cultured meat.
Additionally, intellectual property protection, specifically patents or trade secrets, may be accorded to FoodTech inventions. Patent protection for meatless food products may be possible in respect of (1) the extraction and assembly process in relation to raw materials; (2) the manufacturing method; (3) food composition during the various stages of its manufacturing phase; and (4) the end food product itself. Confidential information and proprietary technologies that were applied in the innovation of the FoodTech products may be protected if they qualify as a trade secret.
Future outlook
With significant year-on-year investment growth, the opportunities and incentives for entrepreneurs and new technologies to enter the burgeoning AgriFoodTech industry in Singapore are aplenty. Singapore government incentives and a regulatory framework that is ready to nurture disruptive innovation at all stages of the value chain have fertilised the AgriFoodTech sector, providing an environment for revolutionary technologies to thrive.
[1]2021 AgFunder AgriFoodTech Investment Report | AgFunder
[2]https://agfundernews.com/how-singapore-is-building-a-foodtech-startup-ecosystem.html
[4]https://www.edb.gov.sg/en/how-we-help/incentives-and-schemes/tech-sg.html
[5]https://www.startupsg.gov.sg/programmes/4897/startup-sg-tech
