Fund will support startups by investing RM1mil to RM3mil
Cradle’s first foray into equity investment market
DURING the initial dotcom boom circa 1999, we journalists liked to ask founders if they were planning to buy a fast car on making it big; today, the question that is inevitably asked is, “Are you planning on becoming an angel investor?”
This is because it is recognised that successful entrepreneurs of startups can both accelerate and add a lot of value to the tech ecosystem by investing their time, networks and experience to the next crop who are chasing their dreams.
In Malaysia, fortunately, some of the first batch of successful Internet pioneers have already been investing their know-how and money back into the ecosystem.
Count T.S. Wong (pic) as one of the more prominent ones, especially via his listed company MyEG Services Bhd, which sponsors a startup reality show called Make The Pitch that offers RM1 million (US$315,000) in funding to the winning startup, in return for 30% equity.
He is now going to top that with the creation of a RM60-million (US$19-million) seed fund to be established by Cradle Fund Sdn Bhd, an agency under Malaysia’s Ministry of Finance. MyEG will put up RM20 million with Cradle putting in RM40 million.
Called Cradle Seed Ventures Fund 1, the fund will go into supporting startups by investing between RM1 million and RM3 million to help their businesses reach greater heights. The establishment of CSV Fund 1 and CSV Sdn Bhd will also mark Cradle’s first steps into the equity investment market.
In a way, it is an unlikely vehicle for Wong who is reticent and avoids the limelight. For instance, while we have known each other since 2000, he insisted on doing the interview via email. “I answer better with written replies,” he said.
Don’t expect verbosity though. He answered every question in one or two sentences, and even answered one question with a single-word response.
“I am just interested in working with entrepreneurs and their startups and watching their business grow (rather than shrink),” he tells Digital News Asia (DNA). “Some people enjoy tinkering with their cars, I just happen to enjoy watching entrepreneurs tweak their business until something sticks.”
Wearing his corporate hat, he says MyEG sees this as an investment that will generate decent ROI (return on investment) for its shareholders.
When reminded there is a less than 10% success rate and that he will have a tough time convincing his board to make these investments, Wong chooses to look at the bright side.
“There is a less than 10% success rate but the one successful investment more than makes up for the others. Now, where do we find that one success, that's the question,” he says.
The amount to be invested per startup clearly sends a message that Cradle and MyEG aim to bridge a Serie A funding gap in the ecosystem.
The focus of the fund, which is being officially announced today (Oct 23), is still quite unclear, with Wong promising to invest in anything that has the promise of making a good return and “has an arguably positive impact on society.”
He will personally get involved in those companies that choose to go after opportunities in market segments he is interested in himself. However, one is left wondering what these segments are as he declines to share his areas of interest.
“I am personally excited about ventures on the leading edge, so I look for entrepreneurs who are working on the next big thing where the 800-pound gorilla does not exist yet globally,” he says.
Wong acknowledges that these 'moonshots' have very low chances of success, which is why the investment committee will look for other qualities like track record, execution skills and perhaps experience.
They are not looking only for 100%-local owned companies either. Companies should either be established in Malaysia or one of the cofounders has to be Malaysian.
Some may wonder if Make The Pitch winners have an added advantage seeking funding from this new fund, but Wong explains that prior participation is a double-edged sword.
“If you participated in Make The Pitch, we will know how you started and executed your business strategy. If we are impressed, it will definitely make us feel much more comfortable investing and vice versa,” he says.
It should be noted that Cradle chief executive officer Nazrin Hassan has been a regular judge on the show over the past three seasons.
DNA asked if the idea for the seed fund germinated during the past few years while Wong and Nazrin worked together as judges.
“Definitely,” Wong says. “Sharing the set of Make The Pitch for the past three years gave us the comfort level as well as the opportunity to see how each of us viewed things.”
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