Inside CVC: Dr. Tan Sian Wee on Singapore's Innovation Edge, Europe's Capital Gap, and the Global AI Race

Dr. Tan Sian Wee has built companies in Silicon Valley, lived and worked in Germany, and now sits inside Singapore's innovation engine at the National University of Singapore, where he manages a S$150 million venture fund. 

In this conversation with Philipp and Steve, Sian lays out why Germany's welfare state now discourages full-time work, why Europe allocates just 0.01% of its $9 trillion in pension assets to venture capital, and why that single number is quietly handing 50% of Europe's best follow-on rounds to the US. 

He explains what makes Singapore's innovation "flywheel" turn when Europe's 27 jurisdictions can't, why leadership and not talent is Europe's real constraint, and where a Southeast Asia-Europe corridor in AI and biotech could offset America's compute advantage and China's manufacturing scale. 

He also details how Chinese labs are shipping near frontier AI models at a fraction of US cost, and how automation is compressing drug development timelines from six years to three. If you sit on a board or run capital allocation in Europe, this conversation reframes what's actually broken, and what leadership would need to look like to fix it. 

Transcript

Inside CVC w Tan Sian Wee

 Welcome to inside CVC, the podcast that brings together leaders in innovation and capital investment to explore the trends shaping the business of corporate venture capital. I'm your host, Steve Schmith and together with Philip Willigmann we're speaking with corporate investors, entrepreneurs and ecosystem builders. Driving the Future of Innovation inside CVC is brought to you by Parth Advisors, helping corporations and startups unlock sustainable growth through strategic partnerships. To learn more, visit upphone dot com. That's the letter U dash path dot com. And to catch up on all of our episodes, search inside CVC on your favorite podcast platform or visit uptodate dot com forward slash podcast. In this episode, we sit down with Doctor Tan Sian Wee, a Singapore based investor, founder and academic who has spent time building and operating in Silicon Valley, Germany and Singapore. In this conversation, we talk about why Germany's productivity trend, not its current output, is the real warning sign for Europe. How Singapore built an innovation flywheel that Europe's twenty seven fragmented jurisdictions can't replicate, why the world's AI capital is on track to consolidate almost entirely in the U.S. and China. And what a third path built on Singapore, Europe, collaboration and biotech and applied AI could look like. We close on what it actually takes to build a leadership class willing to make hard, unpopular calls. Here's our conversation with Doctor Tan Sian Wee.

Welcome to inside CVC. How are you doing today? Thanks. Excellent. Thank you very much for having me. Absolutely. Very interesting and timely conversation. As regions around the world are grappling with AI capital investment, we're going to talk about all of that today. Why don't we give folks a bit of a background? Start today's conversation. You've been on stages around the world, most recently some stages in Europe. What are you saying to European leaders right now that you really want them to hear? The most difficult and which has long term consequences, right? Thing that I'm telling them is that it's more a state of the German people point, right, when it comes to the will to work. Right. Right now, I mean, German workers averaged a record of nineteen point four sick days, right, in twenty twenty three, what's called the technical techniker krankenkasse. Right. And so that's roughly three to four times, right. The UK's right at five point seven. It didn't fall back after the pandemic. And, you know, the it's costing the German taxpayers twenty six to eighty two billion per year, right? And so if you think about it, right, everybody's basically like, you know, not really wanting to, to work because there are, it's possible to not basically have a full time job and still rely on the welfare state and the burden, right, that it's costing the German taxpayer is getting even more and more and more now, right? Yes, there are steps being made because people have realized that it's unsustainable. And although right, the German output, right per hour in terms of productivity is roughly the same as the US and it's ahead of most of Europe, the level is fine, but the trend is the thing that's worrying, right? Between late twenty nineteen and twenty twenty four, the The productivity per hour rose about six point seven percent in the US and only zero point nine percent in the entire eurozone. Right? And did this divergence is concentrated in the compounding sectors, right. Digital technology, professional services right where the US firms right. Pulled clearly ahead. Right. And I think, you know the the recognition has to be, uh, that and this is really a political and cultural question, right. The case that, uh, I'm sure trying to show them is about the trajectory and the intensity. And this is not a claim that Germans are unproductive today. Heavens, no. Right. But it's really about the trends right now, which are really worrying. Right. That's on the social front. But you know, the trouble, I think at a fundamental level that Europe is dealing with right now is that it only allocates, right, zero point zero one percent of the nine trillion dollars right, that it holds in European pension funds to venture capital, with the effect that the follow on rounds, right. Fifty percent of them are taken by the US and eventually forty percent right of the later stage companies that are financed by this redomicile. Right. So so those are two things that that, you know, I'm trying to put front and center. So yeah, and it's a pleasure to have you on the show and great to meet you earlier this, this month in, in Germany, what you, what you just said resonates very much with me. Um, also coming in with a US background. But if you look at the latest numbers, I was quite hopeful to read that Germany is currently ranking the third largest economy in the world and overtook some some other countries, including obviously the UK and India. Um, and with that kind of positive notion, what are your thoughts on this? What what do Germany and ultimately Europe do to turn the corner, um, around these downward trajectories you just laid out? I think, you know, at the end of it, and with my understanding of German culture also because, you know, I've lived there for a while and I'm fluent in German. I think it boils down to leadership, right? A leadership and an honest recognition of, okay, um, this is where we are. This is what we need to do and let's go ahead and do that. Right. Unfortunately, you know, even though, you know, the current federal German government, right, and especially the chancellor and his party wants to do that. There are so many layers, right? Of, for lack of a better word, bureaucracy that is preventing right. The policies to actually go through that need to go through. This is my observation as a private citizen. So when when you sit in Singapore right now, um, an ecosystem, uh, where, where we travel a lot and I'm always fascinated on how Singapore is able to create that vision and then actually execute it. What are some of the lessons learned you can share? And also maybe pointing out some of the big gaps, not only pointing, saying it's all regulation and too much bureaucracy, but what are some of the things you you have seen work you would love to highlight so that German and European leaders are starting to maybe change their perspective on how to really execute some of these big, big plans we have to execute. I was actually asked a question right some some while back as to why Singapore's innovation flywheel works right. And why Europe's doesn't. Right. And, uh, I had a good answer to that because a flywheel has one axis of rotation, right. And whereas in Europe, right, you've got twenty seven, right. Different jurisdictions. You've got no synchronized system and real concentration, right, of mass. Yes. There are individual efforts, you know, in AI and quantum, but they're spread out all over the place. Right? So so there is no concentration of all these efforts plus the ecosystems necessary to drive all these efforts. Right. So in the case of Singapore, talent research, capital and entrepreneurship are coupled right in one jurisdiction. We have one regulator, one tax code, one strategic plan. Right. So all of us right. Understand right. How to move right in in that one body, right. And, uh, so, you know, in terms of density also, right. I mean, in our small little island, right. You know, four hundred, almost five hundred square kilometers, right? We've got six thousand AI professionals and more than eighty of the world's top one hundred tech firms within, sorry, seven hundred and thirty square kilometers. Right. My mistake. I always do the transcription, uh, a little bit differently. So founders, researchers, and investors physically run into each other. And we have other challenges, right? That we need to, that we need to take care of. Um, but, you know, at least it's in one, uh, contiguous zone, right? And in Europe. Right. There are treaty constraints, unanimity rules, twenty seven finance ministries that all have to agree. Right? So therefore, right. Without, without concentrating in the way that Silicon Valley does it, right for everything, uh, what Boston does also for biotech, right? It's very difficult to get that kind of a concentrated mass to work. I fully, I fully agree with you. And I, for me, um, who is spending more and more time in Europe but still living in the States, it's mind boggling also to see that there's all the things are here. You have the capital, we have the talent in Europe, but there is not the will to say we have to double down in certain areas. But if we take policy out for a moment, what is your perspective on the mittelstand, the family businesses, the big corporations? Because I feel like they they have a responsibility to make all the things happen. You just said, right? I mean, we build really strong deep tech companies were then suddenly struggling to get capital in Europe and have to go to the US. While there are major corporations who could easily back them and easily support their rounds, why do you think they are not feeling the motivation? They are not feeling the the urge to take responsibility and step in and create an ecosystem in Europe? Well, I think, you know, it's partly a cultural issue because. Right, uh, it's basically conservatism, right. At the end of the day, and you're asking a, you're asking organizations to take bets right now. The Furman right might be able to do that. But they have to understand right. And want to do it. Um, but you know currently right. The tax incentives right are actually quite high because, you know, the effective tax rate is about twenty nine percent. And you know more than that, right? If you are founder, right. And you sell your company, uh, you, you will be taxed, right? In Germany, for example, uh, if you move out heavily, right? Because it's based on the notional value of your shares, right, that you have in the company. So, so therefore, right. People just decide, you know. All right. Redomicile. Right. It's a lot easier, right kind of thing. Um, can they do it? Yes. Does it take a national will to do that. Yes. Right. And I think at the end of the day, uh, again, it boils down to leadership, Right. If the leadership wants to do it and take those chances, Germany or actually the whole of Europe produces, right. More PhDs per year than America, starting the companies right in Europe is definitely not a problem. Right? All the deep tech companies, uh, start. Right. The problem is in the scaling up, right? Because Atomico, I think, uh, said it best, right? They, they estimate that, uh, Europe has underfunded its growth companies by about three hundred and seventy five billion dollars over the past decade. Right. And that's why, you know, you have the companies leaving, right. And even the Draghi report, right from September twenty twenty four called the situation an existential challenge and quantified the need for eight hundred billion right per year, which is equivalent to four to five percent of EU GDP. This is the largest peacetime investment house in history, but you know, only about eleven percent or so, right, of the recommendations have been meaningfully implemented. Right. And in contrast. Right. Other economies again. Right. This is where Singapore's size, right. Um, take shape. Right. Uh, and has an advantage. We turn a white paper into a funded program in twelve to eighteen months. And this is with government, right? And even in a university, right. The small fund that we manage of one hundred and fifty million Singapore dollars, right. Uh, this went from concept to commitment with the board, right. In roughly a year. Right. So, so I think, you know, it's, it's really, it really boils down to leadership to be able to convince people and make the right incentives for the mittelstand or the, or the large corporates to do that. Sam. I have one follow up before I hand back to Steve. It is really interesting observation that you just shared from a white paper to actually actions in twelve months. We are doing these roundtables with senior leaders of of big corporations in the US, and started also to do them in Europe and in the US. We have senior leaders come be there for a day, day and a half, really pull up their sleeves and work whiteboard. We, we write white papers together and there is real action happening afterwards. So people are doing things together. Co-investing and I observed here in Europe when we did this the first time, and I'm seeing it in the preparation for the next session. Again, the willingness to pull up their sleeves and do something is very, very hard for people to even be there full time and say, I'm going to spend a day to actually think through how can we create a new energy resilient system? How can we think about sovereignty around data and data centers, which are all very important? Things seem not to be important enough for corporates to say, I'm going to really invest and spend, and I'm willing to build something together in a trusted environment. So one hundred percent agreed on that. Any thoughts on what we could do or what what motivation there might be to get them to do that? Does it need to be even get worse? Um, I honestly don't know what the decision cycles are within, uh, these corporations and what they think. I suspect, right, that, you know, the margins are shrinking and therefore. Right, they have less money to spend right on some things. And, uh, plus also all the rest of the difficulties, right? That an average, uh, company, uh, or mittelstand. Right, you know, has so these are the things that, uh, these are the things that I think are really concerning them. I think at the end of the day. Right. Um. Knowing how, knowing how important leadership is, right. In any society, I think Germany just really has to back the right leaders, whether it's politically or whether it's, you know, in industry and drive it. I mean, I really take my hat off to, uh, Frau Susanna Klatten, right. And what she's done with Unternehmen because it's stupendous. Right? I mean, what they've been able to do is a beacon of how an innovation center, right? Uh, that is next to a university should be run. And, uh, that's something that, uh, should be emulated right throughout Germany. And at the end of the day, right. Uh, if you manage to turn out like in their case, they did over twenty three years, right? Twenty Unicorns one to Decacorn. Maybe even the second decacorn now. I mean, that's basically real progress, right? Absolutely. Three sort of buckets I'd like to maybe bring together based on what you've said so far. So allow me to set this up a moment. Recently, I've heard analysts say in a couple of things related but in different environments. One, that when it comes to AI investment, capital investment, the world is going to split and have to make a choice between American AI and Chinese AI. Two. That coming out of World War Two, the United States represented about forty percent of the world's capital investment venture capital over the next several years. That likely would rise to seventy or eighty percent with the big AI companies, SpaceX, etc. could as much get to ninety percent of the world's venture capital would flow through the United States. And specifically, it said, you look at Europe, there's maybe one or two companies to invest in. And for investors, you know, that doesn't offer a lot of returns in the, in the, in the, in the foreseeable future. I'm curious. And then the third bucket is, as you've talked about, is government, right? I think you've mentioned very specifically some of the challenge within European government, German government. I think a lot of those things can be applied to U.S. government administration, at least right now. And so with that setup, I'm curious what you think about those those sound bites. And if you think there is a third path between a Singapore European partnership to create a third opportunity, specifically around AI investment, capital investment, etc.. Yes. The short answer is yes. And the, uh, I think, you know, what I'd like to to actually point out to right now is that it is AI is now actually becoming a sovereign economic and possibly, uh, defense issue, right. Because, you know, if you, if you actually see what modern AI systems can do now, and, uh, look at the, the investments that are being made into sovereign AI, right? Which are, which is, uh, decoupled right from the cloud and into each, uh, uh, geographical zone. Right. I think that's going to be hugely important, uh, because you'll be able to, the economy will be able to perform right so much faster than the other competitor. Right? And you know who's going to win the order first, write an AI system that is basically able to produce a quote, right? In order to close the business in five minutes, or do you want to wait for a human and wait five days? Right. So the binding constraint right now is money and compute. Right now, AI investment in the US, right hit one hundred and nine billion in twenty twenty four. China's in twenty twenty four was nine point three billion and a fraction of even nine point three billion in Europe. Right. In in, um, twenty twenty four, in pure numbers, the US holds roughly nine times Chinese compute and seventeen times Europe's right. And as we pointed out just now, um talent is not the issue right. Talent is global nowadays. Right. And is the world bifurcating? Yes. But, uh, is there a way from which we can benefit from that? Well, yes, because if you take a look right at the Chinese models, right, they're operating at anywhere from a quarter to a third, right? The energy consumption of an equivalent US model, right? So that means you can use less expensive architectures to actually progress that. And by the way, all the Chinese models are basically given out for free. All of them are open source. Even their scientific ones are open source. Right. And so they are now shipping near frontier models, right at roughly one quarter to one sixth the cost, right of US systems. Right. And that's a study by being done by Rand. So so I think there is an opportunity to do that because, you know, some countries are just not going to be able to afford, right, that amount of energy consumption just for pure compute. Right. and they will find ways to license these models, right. And to localize them and make them more sovereign, but still run them right at a fraction of the cost. Right? It would it would take right compared to a US model. So when you think about a third potential, right. What does a third option of a of a Southeast Asia, Singapore specifically European Union collaboration. What does that offer to investors and what would it take to build that that that sort of corridor of applied innovation? I think, right, you have to break it down into three parts. Right. The first part, and I'm just purposely doing it and not not mixing all three. The first part is, is it software based? And the second part is does it require hardware? And the third part is, is it something in biotech right now? I think. Right. There are if I take a look at what's happening in China right now, what they are doing in terms of their advances in biotechnology development is, quite frankly, astounding. Right. And, uh, and I think there's an opportunity for European companies in biotechnology to work with Singapore so that we can help the biotechnology companies access right. What's going on in Shanghai, for example, because they have automated systems for doing drug discovery as well as development at a level that is, quite frankly, astounding because there are already using AI and all all that somebody has to do is just drop a test tube right of what you want tested, and the machines on the floor will literally take care of the rest, right? And it's an adaptive system. And they will learn, uh, from all the things that they do and they will reorient. Right. So right now, state of the art in terms of drug development right now from concept to market is probably around the five or six year time frame, right? I believe with the automation and the sheer scale of what they're able to do right now in China, they'll cut that down to probably three years, right? But, you know, we are being shown stuff now where the cost of development for stem cell therapies, right, for leukemia and so forth. Right. Car T cells can be made at a tenth the current production cost using these automated techniques. Right. So what does that mean for a biotechnology company? If my cost of development right is going to be super low. Right. That means for every dollar that I put in, right, I could have maybe two tests, right done for phase one trials as opposed to just one, right. If you follow the current Western model, right. Because it's cheaper, right? It's as simple as that. So it means effectively, right. You double the probability of a successful outcome. And so so I think that's the cleanest example that I can give you right now that isn't potentially dual use. And, uh, you know, there, there are countless others, right? You can work in certain to make, um, to make, uh, really interesting consumer products. Right? I visited one of the head engineers at DJI and, uh, he proudly showed me right his product that L'Oreal in France, right, is selling as the Air Light Pro, and it's a hair dryer that actually beats Dyson's top of the line, because one of its primary mechanisms of drying the hair is using photons light, right? And so, so, you know, you've got, you've got all these potential opportunities to collaborate, right? And I think, you know, Europe should, owes itself, right to try to learn. Right. And when you want to learn effectively, you have to come with an open mind and, uh, be, be receptive. Right. And if I, if I may say so, also just swallowing your ego, right? Because you're going to see some stuff there, right? That, that you'll, that you'll be shocked at. Right. And, and, you know, automation, for example. Right. Germany was the world leader in automation technologies as well as the equipment for it. The skill right, is still a lot there. But, you know, if if you look at where like you, like you said at the start of our conversation. Philipp. Right. Germany's share of world GDP, right. In nineteen eighty, Germany had seven percent, right. In twenty twenty five it's now two point nine percent. Right. And I think right, if you think that the eighties was the peak of this and I think now, right, maybe some cooperation, right. Intelligent cooperation between Asia and Europe, right. Could actually bear fruit. And Singapore's policy is that for us, we are neutral. right to what happens right now. We just want innovations, whether it's from the east or the west, right. To, to, um, come to Singapore, work together and, you know, access the world right from it, whether it's, you know, from east to west or west to east. So, so for us, right. That's our, uh, philosophy right now. Most times when I come back from Singapore and I've been there this year three times already, I'm always fascinated. And I was like, wow, there's so many great examples. Um, we should learn from. Um, but then when I come to Europe, people are saying, oh, you know what? I don't want to be like Singapore, you know, Singapore, you know, decisions are kind of like driven by a very small group of people. Do we really want that? Is it really democracy? Um, I don't want to open that side, but from your perspective, you know, you have lived in Silicon Valley, you have lived in in Europe, in Germany, you were a founder, you know, you were an investor. Now you are on the academia side. What do you think is kind of like really the two or three strong learnings, some some region like Europe should take from Singapore without really, you know, we don't want to copy Singapore, but what are the things you see with this a pedigree we should take a serious look at and then think about what could be a European way to that. I think, you know, the first thing that you need to do is to build a leadership class, right? Um, especially in politics, right. Where you take the brightest brains that you have in Europe, you dedicate this manpower through scholarships and all, which is our adaptation of the Chinese, uh, scholarly system that's been around for a few thousand years. But then. Right, you give the best and brightest, right? The opportunity to run policy in this country. Now, that doesn't guarantee that there's no mistakes, right? But at least every single policy is going to be made on a rational basis and not necessarily on an ideological basis. Right? So if you have a group of people, small could be larger, um. That are in, right. You know, our system in Singapore, um, they are extremely smart people. They are very well traveled. They understand at a, at a very, very deep level what makes every single place tick. And I can give you an example, right? One of our, uh, one of our ministers proudly showed an app that he that he wrote right using Claude Cowork. And he got, he got, um, open Claude to actually do stuff for him. Right. And he was proud to actually show that. Right. And by the way, he's a doctor, right? A medical doctor by profession. So you need people at that caliber to run a country so that, you know, it's not driven by purely political gains. There is rationality to it. Right. And, uh, so, so you need that rationality, uh, within the leadership class in order to make sure all the right policies, right, get actually done. Right. Not that there are no smart people in European politics, but at least if you have an entire cadre of people, both at the political level and the execution level of that policy, right? Then, you know, things, things start to move a lot differently. So therefore, there's an onus, right, of making sure we do things right. What you describe smarter candidates willingness to serve one hundred percent agree on all of that. My sense is this is not a Main Street issue, at least here in the West. This is not a voter issue. What you're describing is not one that says when, when, when my neighbor here in middle America goes into the voting booth, that they're going to vote on that on these opportunities that you're describing, not right. How do you square that? How do you cross that bridge to get those people more qualified? Less political aspirations, etc., etc.. How do you bridge this to a Main street everyday voter issue, to get those people within the corridors of influence that we need them in. I think at the end of the day, you'll need to find people in power that are true believers, right, in making this kind of a radical change. They need to push this policy through, which requires radical reform, right, both in the civil service of every single country as well as, you know, the, the. HR or legal right aspects of that sort of thing. Right. If you can't have that and people don't want the change to happen right, then it's going to be very difficult to, to set that through. So, so I think, right, you really need to find people who really want to do this and are serious about doing this. I mean, a mentor of mine always said, right, you know, um, always watch what people do and never listen to what they say. Right? So you have to find those doers, right? And, uh, they have to drive this change, right? And if they, if, if it doesn't, right, then it, you know, the whole equation just falls apart. 

That's it for this week's episode of inside CVC. Thank you for Doctor Tan Sian Wee for such a candid conversation. 

If today's discussion on leadership and capital got you thinking, check out our special series Boardrooms in Transition. For more on how capital leaders are navigating this shift. You can find it at https://boardroomsintransition.u-path.com. Subscribe to inside CVC wherever you get your podcasts, and if you enjoyed this, be sure to subscribe, like, and share. 

We'll see you next week on inside CVC.