Ozempic gained widespread attention in 2023 when Hollywood celebrities attributed their dramatic weight loss to the drug, sparking global demand for this miracle diet remedy and causing supply shortages.
The success of Ozempic even resulted in Denmark — where the pharmaceutical company was founded — forecasting a 2.1% expansion of the economy from a year of zero growth in 2023.
But the process of inventing a multimillion-dollar drug designed as a medication to suppress hunger did not happen by chance.
Drug researchers and developers need to use an intellectual patent and innovation database, which has a comprehensive collection of patents across many countries.
This puts them at the forefront of the next breakthrough innovation, which could be an economic boon to a nation. R&D has often been seen as an essential driver of economic growth, with global spending hitting US$2.5 trillion in 2022. And, one Singaporean start-up has won itself a large share of the pie.
Patent and innovation database company Patsnap, founded by then-undergraduate Jeffrey Tiong in 2007, most recently reached a valuation of over US$1 billion in 2021 after its series E funding round. It saw participation from some of the biggest investor names — Softbank and Tencent — which understood the importance of having skin in the patent innovation game.
Punching above its weight
Patsnap may be one of the lesser-known Singaporean unicorns. However, the platform has data that spans over 140 countries, which can be crucial in a pharmaceutical company’s discovery of blockbuster drugs like Ozempic.
Precedence Research says that the global drug discovery market was worth US$55.5 billion in 2022 and is predicted to grow more than twice that to US$133 billion ($178 billion) by 2032 and Patsnap’s co-founder and Asia-Pacific general manager Guan Dian confirms that the pharmaceutical industry is one of its highest-spending customers.
See also: Prudential launches global AI Lab in Singapore to accelerate innovation
Other firms eager to spend big on patent R&D include producers of electric vehicle (EV) parts such as lithium and hydrogen batteries. Recently, these companies have found themselves at the centre of fierce global competition to commercialise EVs.
Patsnap’s founder Tiong said in an interview with Bloomberg that the company has benefitted from a surge in R&D spending amid trade tensions between the US and China, both of whom are fighting for an edge over technology and innovation.
The US and China are part of five major jurisdictions for intellectual property (IP) rights. Yet, American and Chinese companies make up some of the most important clientele of Patsnap. For years, Nasa, Huawei, Spotify and Xiaomi have been paying customers of Patsnap.
Patsnap, which also provides analysis of patents, scientific papers, litigation, government R&D grants, and start-up funding news, says that it adheres to strict data protection rules.
“We never analyse our users’ search behaviours. This is to protect their trade secrets,” says Guan. Only by cooperating with the data regulation requirements of each jurisdiction can they be allowed to operate.
In China and Germany for example, Patsnap works with data centres and cloud providers who adhere to strict data sovereignty rules which require data to be physically housed within the country.
Some of Patsnap’s non-Chinese clients have raised eyebrows over the fact that the start-up has most of its R&D operations in China. But Guan says they have managed to alleviate concerns by explaining to clients how its infrastructure is set up. “We’ve [been able to] give them the conviction [and] enough evidence that their data is secure with us,” she says.
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Blasé about superstar investor names
In mid-2021, Patsnap grabbed headlines when it announced a series E fresh funding round of US$300 million with SoftBank Vision Fund 2 and Tencent Investment, joining Beijing-headquartered private equity firm CPE Industrial Fund and existing investors Sequoia China, Shunwei Capital and Singapore’s Vertex Ventures as investors.
Back then, Patsnap said it would use the funds to develop new products and expand its sales presence. However, Guan says the company has not used much of the funding. “We’re pretty much self-sustainable without touching that money,” she says.
Instead, the company’s primary business model of charging a subscription fee that ranges between US$20,000 and US$30,000 a year — or in some cases up to US$500,000 a year — has helped it achieve profitability.
This is a far cry from its first year of operations when the founding team had to operate with a funding amount roughly the figure of the income from one paying customer today. In the late 2000s, the team was granted just $55,000 from today’s Infocomm Media Development Authority (IMDA) to get started.
Patsnap’s co-founder Tiong explored ways to run a cost-effective business to stretch that dollar. These included building up a team in China where labour was considerably cheaper. With just a handful of employees, Tiong and his team created a prototype that caught the attention of a few pioneer investors in Singapore.
The investors eventually created a fund called Accel X with capital injections from the Singapore Economic Development Board (EDB) and Brunei EDB. In 2010, they invested $1 million in seed capital in Patsnap.
That was when the challenges began to mount. For one, the manual work of aggregating patent information was a big entry barrier. Although inventors’ patented information is published and made available to the public at large, different countries were at different stages of digitalisation, which led to a labour crunch for the Patsnap team.
“We didn’t know it was so difficult. If we knew it, we probably would have never started,” says Guan. “We had to be very resourceful [to the point of] finding vendors and going to patent offices to get the file papers to scan and digitise it.”
Four years and a hoard of IP data later, Patsnap grew a pool of 100 global customers, including big names like the Massachusetts Institute of Technology. The endorsement of Patsnap’s product by leading innovators around the world likely convinced Vertex Ventures, a Temasek Holdings subsidiary, to invest in 2014, says Guan.
With a group of other investors, Patsnap raised US$3.6 million in series A in 2014. That unlocked a series of high-value investments.
The following year, Patsnap raised US$11 million in its series B funding led by Summit Partners and in 2016 they closed their series C for an undisclosed amount.
Guan recalls that the company funnelled most of this funding into expanding its global commercial team, having already found a product market fit. “Because once you find it, you want to replicate it as quickly as possible, so our go-to-market was mostly sales-driven,” she says.
From 2014 until 2018, Patsnap recorded a period of solid growth. The company’s revenue doubled every year, according to Guan, and it continued to attract more investors from venture capital firms in the US and Japan.
Then in 2018, Patsnap raised US$38 million from Sequoia and Shunwei Capital, and by the time 2021 rolled around, Guan and her co-founders had already become so used to speaking with some of the biggest investors in the world.
“When we first got [funded by] Sequoia, it was quite exciting,” she says. “But we have done so many rounds of fundraising that over the years, it has become just one important event for the company’s financing.”
Shifting focus to AI
Not even pitching to Softbank’s Masayoshi Son fazed the Patsnap team, who admitted it was “exciting to pitch” to the Japanese billionaire investor famed for his early investment in Alibaba Group Holdings.
Guan recounts the Softbank founder talking about his belief in AI. “He said very humbly: ‘I had small success in the internet with Alibaba but I think the future is AI and I want to have bigger success in the AI wave.’”
“That part very much matches his media image as a very big thinking, bold, visionary investor … and he also tried to get us to take more of his money,” Guan adds.
Today, with two main product portfolios under its belt, Patsnap has shifted much of its resources into generative AI. Like many companies, Guan and her team believe that the ability of a company to integrate AI into its business will define its success in the coming years.
Guan says while the team does not have concrete plans for an initial public offering, it remains a near-term objective for them as entrepreneurs and their stakeholders.
As for whether the company will consider a listing on its home turf, Guan says the republic may not be best suited for the listing of a software-as-a-service business like Patsnap. Instead, it is eyeing the US market although she does not rule out the possibility of a dual-listing here.
