SE Asia is being recognised on the global stage for its deep tech potential

This interview originally appeared in the DealStreetAsia DATA VANTAGE report SE Asia VC Funds: H2 2024 Review.

In October 2024, Singapore-based venture capital firm Elev8.vc secured the final close of a $30 million fund aimed at early-stage investments in deep tech startups.

The fund— which targets sectors such as AI, medtech, robotics, and advanced manufacturing—has already backed companies including Aevice, Auristone, CoNEX, Equatorial Space, Gush, KABAM Robotics, Moon Technologies, N&E Innovations, and Polybee.

Limited Partners (LPs) with a long-term horizon, including sovereign funds, corporate venture arms, and deep tech-focused LPs, remain committed to the deep tech sector, said Aditya Mathur, managing director at Elev8.vc, in an interview for the DealStreetAsia DATA VANTAGE report SE Asia VC Funds: H2 2024 Review.

“They [the LPs] recognise that deep tech is where fundamental breakthroughs happen—whether in AI, robotics, or advanced materials—and that these breakthroughs drive not just financial returns but also technological and industrial competitiveness,” Mathur said.

The interest in Southeast Asia’s, particularly Singapore’s, deeptech sector is being driven by both domestic and global LPs. They now view Singapore as an innovation hub, rather than just a centre of consumer-driven growth. “Historically, local investors were the primary backers of deep tech funds in the region. However, international LPs are now actively looking at Southeast Asia as a key emerging market for technological innovation,” said Mathur.

He cited two tailwinds for the global interest—1) a maturing research and talent pool—Singapore, in particular, has positioned itself as a deep tech hub through strong R&D investments, attracting world-class scientists and engineers, and (2) the strategic importance of Southeast Asia.

Elev8.vc’s deeptech vehicle was among the 14 Southeast Asia-based VC funds that closed in 2024, according to the report. They raised a combined $2.15 billion in capital. This paled in comparison to the previous year when 32 funds had hit final closes, securing $6.77 billion. The 2024 figures marked a four-year low in both volume of VC fund closes and amount raised from final closes.

Edited excerpts of the interview with Mathur:

Elev8.vc recently closed a $30 million fund. Could you share insights into the fundraising process? Were there any unexpected challenges or notable shifts in LPs’ expectations compared to previous funds?

Raising a deep tech-focused fund requires a unique approach, as it differs significantly from generalist venture capital fundraising. LPs today are looking for more targeted investment strategies, clear differentiation, and strong evidence of the fund’s ability to support deep tech startups through long development and sales cycles. They are also looking for the underlying ecosystem to be able to support investee companies, and on this front, Singapore shines. One of the most notable shifts we observed was the increasing interest from corporates and successful founders who understand the strategic importance of deep tech innovation. These investors are deeply aligned with the long-term vision of deep tech and are keen to play an active role in fostering innovation and industrial transformation.

“Patient capital, combined with the right network and ecosystem support, can drive deep tech success.”

While macroeconomic uncertainties posed some challenges, the strong support from institutions like AppWorks, and visionary founders such as Steve Chen (YouTube) and Abhishek Gupta (Circles.Life) reinforced confidence in our strategy. Overall, the process validated our thesis that patient capital, combined with the right network and ecosystem support, can drive deep tech success.

Did macroeconomic conditions or shifts in global capital flows impact your fundraising timeline or target allocation? How are LPs currently viewing deep tech as an asset class in today’s investment climate?

Raising capital for venture capital (VC) funds has become significantly more challenging, especially in emerging markets, due to a combination of macroeconomic shifts, investor caution, and evolving LP expectations. Increasing interest rates, and prolonged exit cycles have made LPs understandably wary.

“LPs now see Singapore as an innovation hub, rather than just a centre of a consumer-driven growth.”

While some have become more cautious, those with a long-term horizon, including sovereign funds, corporate venture arms, and deep tech-focused LPs, remain committed to the sector. They recognise that deep tech is where fundamental breakthroughs happen—whether in AI, robotics, or advanced materials—and that these breakthroughs drive not just financial returns but also technological and industrial competitiveness. LPs are increasingly backing specialist funds with strong operators. We’ve also noticed a shift in allocation strategies: LPs are now actively seeing Singapore as an innovation hub, rather than just the centre of a consumer-driven growth market.

Are international LPs showing increased interest in Southeast Asian deep tech startups, or do local investors remain the primary backers?

There is a clear increase in international LP interest in Singapore and Southeast Asia’s deep tech ecosystem. Historically, local investors were the primary backers of deep tech funds in the region. However, international LPs are now actively looking at Southeast Asia as a key emerging market for technological innovation. Two factors are driving this: (1) Maturing research and talent pool—Singapore, in particular, has positioned itself as a deep tech hub through strong R&D investments, attracting world-class scientists and engineers, and (2) Strategic importance—as global supply chains shift, deep tech innovations in semiconductors, AI, robotics, and space technology are becoming critical, making Southeast Asia an attractive investment destination. Our inclusion in institutional and corporate investment networks is a strong signal that Southeast Asia is being recognised on the global stage for its deep tech potential.

“Southeast Asia is being recognised on the global stage for its deep tech potential.”

Given the growing confidence in Singapore’s deep tech sector, are you seeing a shift in LP allocations towards more specialised funds like Elev8.vc, or is capital still flowing predominantly to generalist venture capital firms?

There is an increasing allocation towards specialised deep tech funds like Elev8.vc. Generalist funds still receive the bulk of venture capital allocations, but institutional investors and family offices are diversifying their portfolios with sector-specific investments in deep tech.

“Institutional investors and family offices are diversifying their portfolios with sector-specific investments in deep tech.”

This shift is driven by two key trends: (1) Government backing and incentives—programmes like Singapore’s RIE 2025 Plan and the new S$440 million deep tech fund encourage both public and private investors to commit capital to this space and (2) De-risking deep tech—more success stories in deep tech (e.g., quantum computing, synthetic biology, space tech) are proving that patient capital yields transformative returns, making LPs more comfortable with long-term investments.

Singapore’s strategic push to lead in deep tech commercialisation is accelerating this trend, and we anticipate further LP interest in specialised funds like ours.

What role does Singapore’s RIE 2025 Plan and the government’s additional S$440 million ($332 million) deep tech fund play in shaping your investment decisions and portfolio strategy?

The RIE 2025 Plan and the government’s new deep tech fund are significant catalysts for innovation, and they complement our investment strategy in several ways: (1) Bridging research to commercialisation: Singapore has world-class research, but startups often struggle to transition from lab to market. These initiatives help accelerate that process; (2) Co-investment opportunities: Government-backed funding helps de-risk early-stage deep tech investments, making it easier for VCs like us to support high-potential startups; and (3) Strengthening the talent pipeline: Policies that attract top scientists, engineers, and entrepreneurs to Singapore increase the quality of deep tech startups, making it an even more attractive market for investment. For Elev8.vc, these initiatives reinforce our confidence in building and scaling globally competitive deep tech companies from Singapore.

Deep tech startups often require longer gestation periods before commercialisation. How does Elev8.vc balance the need for patient capital with LP expectations regarding returns and exit timelines?

Deep tech requires longer development cycles, but we structure our investments to balance long-term impact with tangible milestones that demonstrate progress. Our approach includes: (1) Investing early, but selectively: We back startups with clear commercialisation pathways and help them secure industry partnerships early; (2) Providing follow-on support: We actively support companies through multiple funding rounds, helping them scale with the right capital and strategic guidance; and (3) Diversified exit strategies: While IPOs take time, acquisitions by global corporations, joint ventures, and technology licensing provide early liquidity options for LPs.

By maintaining a disciplined investment thesis and working closely with our startups, we ensure that deep tech remains an attractive and viable asset class for our LPs.

“We structure our investments to balance long-term impact with tangible milestones that demonstrate progress.”

How do you view the exit environment for deep tech startups in Southeast Asia? Are you seeing growing interest from global acquirers or institutional investors in this space?

The global exit environment for deep tech startups, including for those in Southeast Asia, is improving, with several key trends shaping the landscape: (1) Increased M&A activity: Large corporations in semiconductors, AI, and advanced manufacturing are actively acquiring deep tech startups to stay ahead in innovation; (2) Strategic investments from global players: US, European, and Japanese companies have corporate venture arms that are playing an increasingly important partnership role with Southeast Asian deep tech firms. Large global institutional VCs have recently signed up with Enterprise Singapore (SEEDS Capital) to bring their expertise and capital to Singaporean deep tech companies; and (3) Growing secondary markets: More secondary transactions are allowing early investors and LPs to realise returns before traditional IPO timelines.

We see a strong trajectory for deep tech exits and anticipate even more institutional capital entering this space.

“The global exit environment for deep tech startups, including for those in SE Asia, is improving.”

How do you expect President Donald Trump’s new executive order on advancing US AI leadership globally to impact your investment strategy and partnerships in deep tech across Southeast Asia?

While it’s too early to assess the full impact, we see both opportunities and challenges: (1) More funding and partnerships: If the US prioritises global AI leadership, we expect increased investment, research collaborations, and acquisition interest in Southeast Asia; and (2) Tighter regulations on cross-border AI investments: This could mean more scrutiny on AI deals, but also opportunities for startups to build regional AI hubs in more neutral zones such as Southeast Asia. Our investment strategy remains focused on supporting the best deep tech founders, regardless of geopolitical shifts, while ensuring our portfolio companies navigate regulatory landscapes effectively.

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