Star Accelerator Fund: Offers on table for four this week
By A. Asohan June 4, 2013
- Media powerhouse’s RM20-mil fund shortlists four candidates, offers on table this week
- Public-listed company declines to disclose more info, says has to abide by stock market rules
STAR Publications (M) Bhd will be putting offers on the table to four companies it has shortlisted in the first round of the Star Accelerator Fund, which the media powerhouse launched in April.
“We have our own term-sheets and these will be presented to the four companies,” Star Publications corporate services group general manager George Chan, who oversees the operations of the fund, told Digital News Asia (DNA) in a phone conversation.
“If they are agreeable, we will go to the next phase, which would include due diligence,” he added. “Just because they’ve been shortlisted, it doesn’t mean it’s a done deal. But the offers will be on the table within this week.”
Star Publications, which owns the No 1 English daily in Malaysia, The Star, as well as radio stations and a host of digital properties, launched the RM20-million (US$6.5-million) fund to help digital and technology-based entrepreneurs get started and ultimately take their ideas to market.
[Disclosure: The writer was with The Star from 1987 to 2010.]
The company will take an equity stake in the startups it funds, but described this as “not a management control issue, but rather a mentoring and support process,” adding that it wants to be “a partner in the businesses that we fund to enable growth and ensure sustainability and success.”
Star Publications also promises to leverage its media resources for the benefit of the startups it funds.
On June 3, the company announced that four applicants had been shortlisted, according to an article in The Star’s business section which named the entrepreneurs but not their startups. However, these are widely understood to be LagiSatu, Ukuya, Geob International and Loanstreet.
Chan declined to confirm the identities of the startups, saying that no further details could be shared as Star Publications was a public-listed company and needed to seek Bursa Malaysia approval first before making further disclosures.
The Star Accelerator Fund has two categories of funding: A pre-seed fund that can go up to RM300,000 and a seed stage fund that can go up to RM1 million.
Chan said he could not disclose which company fell under which category, but confirmed that “three are in the digital technology space, and the fourth is a device maker.”
“The key fundamental for us was that they be technology companies, and we then looked at their ideas and business plans,” he said of the selection criteria.
Two of the startups Star Publications has its eyes on would be familiar to DNA readers: The first, Geob International, had created a prototype of a medical alert device for diabetes patients, called the HypoBand.
The company, which last year was awarded an RM150,000 (US$49,140) grant by Cradle Fund Sdn Bhd, failed to attract funds from venture capitalists or angel investors to take it into production stage, so attempted a crowd-funding drive on PitchIN, the Malaysian version of Kickstarter.
However, that pledge drive for US$18,000 did not make it past the 8% stage. Geob International founder and chief executive officer Geoffrey Tan told DNA that he had mixed feelings about the whole episode.
“I am sad we were not able to meet the pledge target, but am also glad this was not the end for us,” he said via email. “This has made me stronger and more determined to get the funds by other means.”
Tan said he was grateful to the PitchIN team for their support, adding that he had learned how to give speeches, handle press conferences and even do event management as part of Geob International’s crowd-funding drive.
When asked what he would have done differently, he said he now sees the value of associating with other companies – either through joint ventures or strategic alliances – that have financial, media, medical or telecommunications strengths.
“The HypoBand business is related to these aspects – leveraging on a company that already has market presence, financial stability and in the need of innovative partners, would be a plus point,” he said, adding that this is what he hopes to see from the Star Publications’ possible investment in his company.
He noted the Star Accelerator Fund’s promise that “successful applicants gain access to The Star Media Group's branding, marketing and media resources.” “This would be a bonus for us,” said Tan, adding that Geob International qualified under the Fund’s seed stage category.
Meanwhile, Loanstreet is an online loan aggregation portal and consultative call centre for those seeking guidance on financial loans, the company had earlier told DNA.
It also qualified under the seed or commercialisation stage, its founder Jared Lim (pic) told DNA on June 3. “I am not sure how much they’re willing to fund us and for what stake, but that’s what the next round of discussions would be.”
He said that the additional funds would go into a combination of capex and opex (capital and operational expenditure). “We will use it to hire, build and train our team, and about 40% will go into marketing.”
Lim said that Loanstreet did not spend much money on marketing previously. “For us, we felt that where the investment has to go in at the start is in building a solid product and making sure we deliver the value,” he said.
But the Star Accelerator Fund, if it goes through, will come in at an opportune moment. “They bring with them a lot of marketing collateral and branding, plus all that clout they have with their host of digital properties, including their various portals. We see a lot of possible synergy here,” said Lim.
The Loanstreet team now is five-strong, with an additional three interns helping in a variety of roles, including product and research, technology as well as on the operations side. There is no grand plan to expand its team using the potential additional funds.
“We’re a little bit different in that we are limited as to how far we can scale because we do have the human touch involved in many of our processes,” said Lim, referring to the company’s loans expertise and guidance it provides users.
The third company is LagiSatu.com, a hotel meta-search engine that also helps Muslim travellers make online bookings with hotels that meet their halal or kosher requirements. [Note: DNA will profile the company in greater detail soon.]
“Since we've already developed our product, we qualified for the seed funding,” said its chief executive officer Faeez Fadhlillah (pic).
“We are seeking to raise RM1 million from The Star in exchange for a 20% stake in our company,” he said, adding that the additional funds would go into marketing and increasing the strength of LagiSatu’s technical team.
However, Faeez said that he sees the value The Star bringing to the table in terms of its marketing as far outweighing the monetary value.
“What we look for in a partner is more than monetary value and personally I think The Star can bring together its amazing brand value, top it up with its experience and its expertise in marketing.
“Generally, if a business model works on the micro scale, it should be able to be scaled up following the same principle. Together with The Star, we intend to dominate the local market, and use the knowledge which we would gain to bring it to the regional level,” he added.
Finally, the fourth entrepreneur profiled in the StarBiz article above is one Weng Lin, which the paper described as “having formulated a way for corporations and specific-purpose organisations to commune online.”
He did not respond to DNA’s request for further information, but it is believed that the startup in question is Ukuya, which says it provides “connective and associative tools for users and administrators, combined with rich multimedia, to enable relevant crowd-connections and engagements.”
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