Fourth Cradle Coach & Grow clinic sees discussion on how to get grants and bank loans
Sharing session also talks about middlemen and need for transparency in grant and fund disbursements
“DON’T go down that route because it will come back and bite you years later,” warned Nicholas Shariff, business development manager at Codemasters Malaysia.
Shariff was answering a question about the temptation for entrepreneurs to use middlemen who ask for a cut of the funding in return for helping them get access to public or even private funds, such as from banks. Codemasters is a UK-based gaming company, with an MSC-status subsidiary.
He was part of a panel discussion (click pic above to enlarge) organized by Cradle Fund Sdn Bhd’s Coach & Grow Program. The fourth in the series of clinics, as Cradle describes it, was on the topic of Funding Peer Group Sharing, held on Sept 27 in Kuala Lumpur.
Other panelists were Koh Lee Ching, the CEO of Calms Technologies which got a loan from the Malaysian Technology Development Corporation’s Business Growth Fund (BGF); Hasnizam Zaki, co-founder of the Urban Village which received a grant from 1MDB Dana Belia; Patrick Raj, executive director of Nasmech Technology, which received commercial bank loans; and Tham Keng Yew, the CEO of SocialWalk, which received a seed grant from the Multimedia Development Corporation (MDeC) in 2008, and then venture funding in 2011.
Codemasters, on the other hand, received two rounds of loans from Malaysian Debt Ventures with the first one at RM44 million (US$14.4 million) back in 2006 followed by a second one in 2009 for RM36 million (US$11.8 million).
The panelists were candid in their views and open in sharing their experiences.
Raj, who got a loan from a commercial bank, said he had not come across any situation where a kickback was insinuated or openly asked for, and felt that as long as the entrepreneur has the proper paperwork and knows his stuff, all should go well.
Koh felt that as long as the entrepreneur really knows his business and where he wants to get to, there is no need to go the middleman route.
Koh, who also sits on the approval committees of some grants, points out that the process for approval has been structured in such a manner, with various layers, that it is actually really difficult for any middleman to make claim they can influence funding decisions. “They are probably playing on the chance that you will actually get money!”
But Shariff made a pertinent observation when he noted that they are just so many grants and loans available in Malaysia that it gives middlemen an opportunity to claim that they can help entrepreneurs ‘short-cut’ the maze and get straight to the money.
Indeed, this reporter once asked a former science minister why there was such persistent talk of middlemen going around brazenly asking entrepreneurs for a 30% cut because of the connections they claimed to have.
Amazingly, the minister showed me a text message forwarded to him with some middleman claiming to represent the minister and promising to help entrepreneurs secure government funding in return for a 30% commission.
“Look at what some people are doing,” he said. “I don’t even know who this is.”
I asked the minister to lodge a complaint with the police, but he did not respond to my suggestion.
Meanwhile, Shariff felt that the funds should be consolidated into industry verticals with full transparency in how they operate. “Make sure they are run by professionals and pay them a good wage. I feel there needs to be consolidation in this sector,” he said.
He cited cites the time he was with Halal Development Corporation in 2010 and on doing some research, discovered to his amazement there were 75 programs with grants targeted at small and medium enterprises (SMEs).
As the panel moderator Dr V. Sivapalan noted wryly, “That consolidation has already started – as the agencies run out of funds.”
Tham of SocialWalk said he has not had any experience with middlemen beyond one person acting as a broker for an acquisition offer he received, which is not unusual, the other panelists noted.
He also gave the most interesting reply when the panel was asked if they would do anything different if they were staring out the business today, armed with what they know now.
“I would have done everything differently, from recruiting to selling to positioning the business to understanding my responsibility to my staff. I made so many mistakes in the first three years,” he said, noting that SocialWalk is his first start-up.
Interestingly, Tham also shared that his business started taking off when he gained ‘clarity.’ During the Q&A with the audience, he was asked if he would teach how one could get this clarity of purpose and the business.
His response? “It comes from the process of writing your business plan hundreds of times until it gives you confidence that you can achieve what you have set out to do on paper.”
He elaborated that this writing and rewriting of the business plan is also reflective of evolution of the idea he initially had. [Note that in Silicon Valley, this process would be called ‘iteration’, ‘fail fast’ or ‘pivot’ -- take your pick]
To him, clarity was achieved when it became very clear to him “who pays me money and why”.
“I know what industries and countries I am strong in” and “I know what to answer when venture capitalists ask me what my business is all about.”
Incidentally, Tham received RM1 million venture capitalist funding in 2011 from a Singapore-based firm called Crystal Horse Investments. Before that, he got RM150,000 from a 2008 MDeC seed grant. [RM1 = US$0.33].
Koh also used the term ‘clarity’ to describe how she found enough sense of purpose of her start-up to actually list it down in her business plan.
She started without a business plan. Naturally the document was “rewritten many many times” but it eventually gave her the confidence to start pitching for grant funding once she had her game plan down on paper.
But it took her a lot of legwork (including trips to the United States and some Asian countries) to understand the niche and the action plan for her company Calms Technologies, which offers leading edge card payment solutions, especially in multiple smartcard and terminal applications.
In his summing up the highlights of the discussion, Dr Sivapalan noted that entrepreneurs will be hard pressed to find a better financial ecosystem in the world.
“There are so many grants, loans, venture capital funding and even angels for companies here. If in such an environment, you cannot raise money, it is not about the environment then but your business -- and you probably need to relook it.”
That’s food for thought.
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