Many VCs and angels in Malaysia still have ‘demanding’ expectations
Skin in the game, maturity and good network among what angels look for
DESPITE all the success enjoyed by many tech entrepreneurs from Malaysia, such as MOL’s Ganesh Kumar Bangah and JobStreet’s Mark Chang, the country’s tech ecosystem is still lacking 'quality' venture capitalists (VCs) and angel investors.
That was at least the feeling of CatchThatBus cofounder and chief executive officer Viren Doshi, who was a 'surprise' panellist at the DNA-TeAM Disrupt discussion held in Petaling Jaya yesterday (July 23).
Viren (pic) said that his experience with local investors, both VCs and angel investors, hadn't been entirely pleasant as the most of them had “very high expectations."
“Most of the funds or investors that we spoke to had very high expectations. Maybe it is also because [our] company was in the early stages of growth. So the reply we often got was ‘If you want the money, you have to give us a 51% stake in your company.’,” he said.
Not surprisingly, Viren and his cofounder Ashwin Jeyapalasingam did not take up such offers. Instead, they headed south to Singapore and looked for opportunities there. In the end, they managed to secure the necessary funds from Singapore-based venture capital firm Jungle Ventures.
“I think if I had taken up offers by Malaysian investors, it would have been the biggest mistake I ever made,” Viren said, adding however that his feeling is based solely on his company’s experience.
Pulse Group founder Bob Chua, who recently invested in a company specialising in drones, also argued that there are not many good VCs or angel investors in the country.
“I think you will find it difficult if I were to ask you to name 10 good VCs or 10 good angel investors in Malaysia,” he said during the panel session.
He also advised entrepreneurs not to depend only on one country to source for funds. In fact, in one of his ventures, the first VC which bought the idea and invested in the company was actually a Japanese VC.
“That was after seeing and approaching 45 VCs in Malaysia,” said Chua.
Sachin Bhatia, who also made an angel investment into CatchThatBus, said that Malaysia may need more “success stories” before the tech ecosystem will see a “change in the mindset of angel investors."
“In India, and I think this can also be applied to some parts of Asia, the mindset of angel investors and VCs can be like money-lenders. They only look at the returns.
“In the western countries, VCs and angel investors have a longer-term mindset. They are also willing to take on more risks,” he said.
What attracts the angels?
The monthly Disrupt panel discussion and networking gatherings are organised by Digital News Asia (DNA) and the Technopreneurs Association of Malaysia (TeAM). This month's event also saw public-listed big data analytics company Fusionex coming on board as sponsor.
A member of the audience asked the panellists what qualities they look for in an entrepreneur before deciding to invest in them.
Chua (pic) said there are three key things he looks for: First, the entrepreneur needs to put in money into the company.
“The entrepreneur needs to have skin in the game. It will be hard to convince me to fund it if the entrepreneur doesn’t have a vested interest in the company,” he said.
The second element Chua looks for is the level of maturity of the entrepreneur. In short, the entrepreneur needs to have had some form of experience in the business, the market or the industry.
“The third thing I look for is the network of the entrepreneurs. How wide is their network, whether they have a good rapport with other VCs or industry peers. If you have all these ingredients, the chance of success is higher,” he added.
On the level of entrepreneurs’ maturity, Sachin quickly pointed out that it does not mean that young, energetic entrepreneurs will be left out.
“It doesn’t need to be many years of working experience. I think it is a good start as long as the entrepreneurs have one or two years of relevant experience; then, at least, they have a better understanding of the market.”
Sachin also said that he prefers to invest in companies run by at least two founders, as a team this rather than an individual could give the company a much needed check-and-balance mechanism.
Of course, passion too plays an important role, but it also depends on what kind of passion.
“I think it’s more important for one to have passion to be an entrepreneur, rather than to have passion for the business itself. This is because the business can change and evolve,” said Sachin (pic).
He cited the example of India’s Snapdeal.com. Sachin said the company’s cofounders Kunal Bahl and Rohit Bansal originally started Snapdeal as a daily deal site. Some even called it the 'Groupon of India.'
However, realising that Snapdeal could do a lot more, the cofounders decided to turn Snapdeal into an online marketplace.
It now sells a wide range of products, ranging from mobile phones to televisions. US online auction powerhouse eBay Inc has taken about a 20% stake in the company for US$134 million – valuing Snapdeal at well over US$600 million.
All pictures courtesy of The Malay Mail Online
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