Digerati50: Old economy springboard for a tech dream

• Merged with Brick & Mortar M&E company to get customer base and relationships
• Not dwelling on past mistakes, eyes on achieving dream of billion dollar company

Digital News Asia (DNA) continues its series that profiles the 50 influencers who are helping shape Malaysia’s Digital Economy, from Digerati50 2016-2017 (Vol 2), a special print publication released in February 2016. The digital version of that publication can be downloaded from the link at the top right corner of the page thanks to the sponsorship of Telekom Malaysia Bhd, Malaysia’s convergence champion.

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AFTER seven years building his high-tech company, making a few pivots, raising over RM45 million in funding, making a bold acquisition in Silicon Valley and merging with an ‘old economy’ player, it is crunch time for Dr Gabriel Walter and Quantum Electro Opto Systems Sdn Bhd (QEOS).

Leaving the University of Illinois, Urbana-Champaign in 2008, where he was a senior research scientist, he came back to Malaysia with a dual mission.

“I didn’t just want to build a successful company but it was deeply important for me to show that Malaysia can create a successful high-tech company as well,” he said then.

Today, QEOS has over 100 patents to its name and is an optical innovations company with breakthrough technologies for the design and high-volume production of multi-gigabit-per-second, high performance, low-cost and energy-efficient optical solutions.

Recognising the difficulty of the market to absorb that mouthful, it now simply describes itself as a company in the Internet of Things (IoT) space. Predictably, it has been a painful and rocky journey, even with the amount of funding he has raised.

But now Gabriel has pulled the trigger on a deal that sees him overcome two of the biggest challenges he has faced since introducing his technology to the market: Having access to a ready customer base, and a financial track record that opens up credit lines with banks.

He has given up 3.3% of QEOS in return for a 60% stake in mechanical and electrical (M&E) company Mepcon Sdn Bhd, which has been renamed Questron Sdn Bhd.

It is arguably the first time such a merger has taken place between a high-tech company and a brick-and mortar one in Malaysia.

This is why Walter has made it back as a repeat Digerati50. He has stepped out of his comfort zone as a ‘Lab Rat’ and convinced seasoned ‘old economy’ entrepreneur Dennis Yong, who runs a stable of 10 companies, that the technology infusion from QEOS can help Mepcon, which had RM50 million in audited revenue in 2014.

To put the deal into context, despite its technological superiority, QEOS had revenue of less than US$2 million in 2015.

“Our technical expertise is already helping Mepcon improve efficiency and reduce the costs of its LED system,” says Gabriel, eyeing an aggressive early 2017 timeline for an eventual IPO (initial public offering).

Gabriel, who aspires to transform QEOS into a billion-dollar company, declares 2016 as the year to really watch his startup. “There are tremendous opportunities in Malaysia, and our only enemy is time and the money time burns,” he says.

Describing the past seven years as a continuous education, with each year bringing terrible challenges capable of destroying QEOS, the last 14 months have seen a particularly challenging localisation phase.

“Localisation is the term I use to describe the need to create company structures and product lines that local banks, private equity investors, the Security Commission and local businesses can easily understand,” he says.

He has also discovered more powerful avenues to penetrate the market, through short-term joint ventures with established players “to create short-term disruptive innovations and monopolies by combining strengths in technology, know-how, capital, people networks and go-to-market abilities.”

“While there are obviously lessons I wish I had learnt sooner, I cannot afford to dwell on past mistakes,” says Gabriel.

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