A $12 million incubator fund has been launched to help Singapore-based start-ups that offer highly innovative products find their feet.
The Incubator for Disruptive Enterprise And Start-ups (IDEAS) fund leverages on the research of Harvard academic Clayton Christensen to identify companies that are developing products which are not only cheaper and simpler, but can potentially create new markets.
This is defined as 'disruptive innovation', and a prime example is 'the mobile phone which disrupted the existing fixed-line industry,' says Prof Christensen, who is chairing the fund's investment committee.
His research has shown start-ups have a significantly higher chance of success if they follow strategies consistent with 'disruptive innovation'.
The fund will therefore screen start-ups along these lines and consider factors such as management's experience and understanding of customer needs, among other things.
In all, IDEAS hopes to incubate 25 start-up companies over the next three years, with each investment in the range of $200,000 to $600,000.
Subsequent rounds of funding will come from other venture capitalists, and the investment horizon is expected to be about eight or nine years.
'This fund is the first early-stage venture fund in the world to focus exclusively on disruptive innovation principles as the core of its investment thesis,' said Pete Bonee, a partner at Innosight Ventures, which collaborated with the National Research Foundation to set up IDEAS.
'Our goal is to demonstrate that this approach leads to successful companies and superior financial returns,' he said. 'We believe that among the early-stage Singapore companies we incubate, some of tomorrow's industry leaders will emerge.'
IDEAS has made its maiden investment in Versonic which is developing a new line of audio mixing products for the mass market. Versonic's founder James Miller, who started the company two years ago, said existing audio mixing products are priced beyond the reach of the average consumer, and his company will develop a simpler version meant for the low-end market such as houses of worship and schools. These customers buy more than $1 billion of such equipment annually.
IDEAS is an initiative under the National Framework for Innovation and Enterprise 1, announced by Prime Minister Lee Hsien Loong in March last year to spur the formation of start-up companies. More information is available at www.innosightventures.com.
