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Earlier this week, Malaysia-based media house The Star announced its latest US$6.59 million dollar fund to invest in technology startups. Other than the new accelerator fund, Cradle Fund is another Malaysia government linked technology investor.
Cradle started in 2003 under the purview of the Malaysia Ministry of Finance to address the lack of early stage funding in Malaysia. 10 years on, Cradle has helped provide funding and various training programmes to startups through the Coach and Grow Program. Over the years, Cradle has also played a very important role of helping grow the private sector participation through the lobbying of the angel tax incentives and also angel investors locally.
We have also been keen to find out more about the investment activities in Malaysia. For that, we speak to Johnathan Lee, the VP of Commercialisation & Ventures for Cradle Fund.
Could you share a bit on the fund size and how does a startup qualify for the Cradle fund?
At Cradle, we offer two funding options – CIP Catalyst (Pre-Seed) and CIP 500 (Seed). As the names suggest the two options target different stages of an entrepreneurial journey. CIP Catalyst funds technology development and prototyping projects to the tune of up to RM150 000. CIP 500 offers up to RM500 000 in funding for commercialisation and growth of young startups with less than 3 years track record. While the two funding options are catering to quite different stages, the eligibility criteria are also quite different.
What are some of the startups Cradle has funded and among them, which one do you personally think has the highest potential?
To date, Cradle has funded over 450 CIP Catalyst projects and over 120 startups. We always believe that all of our funded recipients has the potential to be extremely successful.
In a nutshell of the 450 CIP Catalyst projects, around 280 are completed and out of that 58 percent are successfully commercialised in the marketplace, or, the technology was licensed or sold, or, some securing further rounds of investments. A bulk of these would be small to medium size startups catering to the marketplace, which are fine. However, from time to time, we would get some being invested in by a large VC or being acquired by larger companies. The latest one being Tribehired; a recruitment site that leverages off Facebook’s large social network. They recently received over US$500 000 investment from TNF Ventures and a couple of angel investors – Ben Ball and Ben Chew. A couple of years ago, another CIP Catalyst recipient in the Content Delivery Network – Aflexi, was acquired by the UK based OnApp. You’ve probably heard of MyTeksi, a mobile app that allows taxi ordering in a jiffy. Since launching late last year, MyTeksi is now connected with over 600 taxis in and around Klang Valley area and they are now looking beyond this geographical space.
In our CIP 500, one of our bigger successes was Carlist.my – currently the largest online car listing site in Malaysia. They were acquired by Catcha Group and subsequently listed as part of a regional grouping of car listing portals called iCar Asia in the Australian Stock Exchange. Another one to watch out for is Perfectsen – these guys are the pioneer of the Personal Finance Management who are currently servicing Malaysia’s largest bank – Maybank. Contrary to popular sentiment, Cradle has also funded non-Information Communication Technology (ICT) startups. One such example is AseaCyte, a biotech startup that offers services to drug discovery companies to help them understand about the biological properties of their potential drug before embarking on the expensive animal or clinical testing.
Many startups complain about the lack of funding in Malaysia. What are your thoughts on this?
I believe that this complains are also echoed in many places even in developed markets like Singapore, and also parts of the US. I personally don’t think that there is lack of funding. The funding is there. It is about finding the right funders for your startup.
Just because a startup has failed to raise money, it doesn’t mean that there is no funding. It could just mean that the startup is not ready for the funding or worst, it just isn’t good enough to get the funding. The reality is that all investors wants to invest in the best startups, the cream-de-la-crem, the top dog, the winning horse – No one likes to bet on the weakest one. Early stage investment is already a very risky space even if the startups has a high growth potential. If your startup is not ready (market, team, product) then be prepared to be bypassed by investors.
In the local ecosystem, there are a number of new Venture Capital setting up in Malaysia. The latest one was launched last week by Malaysia’s largest news media company – The Star Publications, called the Star Accelerator Fund. By the end of this year, there should be a couple more being announced, my fingers are crossed. On top of these, there is a spurt in local angel investors with the advent of the Angel Tax Incentives that was launched this year. The Angel Tax Incentive is currently being managed by Cradle. It is never been a better time to “startup” literally with all the support from the Government and private sector initiatives. The question remains, are the startups good enough to get the funding?
What do you think is the main challenge startups in Malaysia face? Do you think the next Facebook will come from Malaysia?
I would believe that the Malaysian startups would face similar challenges as their regional counterpart. The following would briefly cover some of the these concerns:
- Technology – How unique/innovative is it? Will anyone pay or use it? How fast can I develop and launch? Costs?
- Market – Is it attractive or large enough? Is it growing? What are the barriers to entry and market adoption rate?
- Team – Is the team capable or well rounded? Is the team passionate and committed to delivering success?
Rather than having the next Facebook coming from Malaysia, I think Malaysian startup would do well to play to its strength and having successes that will rival that of FB but not necessarily in the same space. In that sense, I am eternally hopeful that the next big success will come from Malaysia. As mentioned, there are already many successful tech companies here that are on the way up – MOL, Jobstreet, MyEG, iProperty, Catcha Media, Nuffnang and many more.