I’m an old-fashioned guy: Tony Fernandes on investments
By Goh Thean Eu April 15, 2015
- Believes in conventional business models, but prepared to consider on individual basis
- Was approached by MyTeksi in its early days, but Fernandes wasn’t ready then
EXPECT a difficult time when trying to convince Tony Fernandes (pic) to invest in a startup if it doesn’t have a conventional business model, where the near to medium-term priority may not be about generating cash-flow or growing your bottom-line.
Many startups, especially in recent years, have been building their business by focusing mainly on growing their user base and market share. Facebook, WhatsApp and Uber managed to successfully raise funds in their early days, despite operating at a loss.
Their investors, comprising venture capital firms, angel investors and technology companies, believed that monetisation would not be a major issue once their investee companies had built a strong base of users.
“I am an old-fashioned guy – I like things to be cash-flow positive within a certain period,” Fernandes told the media at the launch of Tune Labs in Kuala Lumpur last week.
“Personally, I don't believe in that kind of a business model. I think you do have to be profitable – but, you know, we have to look at each individual case,” said the cofounder and group chief executive officer of budget carrier AirAsia Bhd, a subsidiary of the Tune Group.
Although Fernandes, also the cofounder of startup incubator and accelerator Tune Labs, may be seen as a new player in the technology space, he is no stranger when it comes to investing in new businesses.
In fact, some of the businesses he or Tune Group – which he also cofounded – has invested in came as a result of entrepreneurs pitching their ideas to him.
“Tune Talk was not my idea. It was Jason Lo’s idea. We funded him. He created Tune Talk,” said Fernandes. “Over the years, we have created a lot of entrepreneurs.”
Lo is chief executive officer of Tune Talk, one of the largest mobile virtual network operators or MVNOs in Malaysia when it comes to number of subscribers.
Tune Group itself has diversified businesses. Besides Tune Talk, it also has investments in Tune Hotel, Tune Money, Tune Ins, Tune Studios, Tune Box, AirAsia, and others.
For now, Tune Labs, also backed by AirAsia cofounder Kamarudin Meranun and ECM Libra cofounder Lim Kian Onn, is not funded by Tune Group directly.
However, should Tune Labs need additional funds, Fernandes had said he may consider getting Tune Group or AirAsia to participate. “That will be something to be discussed by the board of directors.”
Despite his entrepreneurial pedigree, Fernandes understands that funding and growing technology or digital startups is a different ball game.
“It's not like setting up a financial services or telecommunications company,” he said. “You need to make sure that the platform is ready.”
Tune Labs would need to make sure that the successful startups from its incubator programme have the necessary support to turn their ideas into commercially viable products. This includes support in the form of office space, funding, administrative tasks, and legal resources.
While Fernandes said that the motivation for launching Tune Labs was mainly the three cofounders’ desire to see more successful entrepreneurs emerging from South-East Asia, one can’t help but wonder if it was also spurred by a missed opportunity.
“If we have been a bit earlier …,” Fernandes said. “For instance, MyTeksi approached us, but we weren’t ready for that.
“We weren’t a venture capital fund and we didn’t have the infrastructure, so we missed out on that,” he said at the Tune Labs launch last week. “MyTeksi would have been a perfect partnership.”
Malaysian-founded MyTeksi, now known as GrabTaxi, has since secured a total of about US$340 million in funding, and recently launched a research and development (R&D) centre in Singapore, where its holding company is now based.
It said it would be investing US$100 million in the R&D centre in the next two to three years.
Although Fernandes may have missed out on the MyTeksi partnership, he is nevertheless optimistic about “unleashing the full potential of South-East Asian entrepreneurs.”
“When I travel around South-East Asia, I notice a tremendous amount of entrepreneurial zest in the region – so I don’t think we [the region] will be short of ideas,” he said.
Different from the pack
Many startup incubators and accelerators have recently mushroomed in South-East Asia.
In Malaysia alone, these include such ventures by MAD Incubator, Malaysian Technology Development Corp, 1337 Accelerator, Technology Park Malaysia Corp, the Malaysian Global Innovation and Creativity Centre (MaGIC), and many more.
But Fernandes believes that there is space for Tune Labs to play a role in the regional ecosystem. “I don’t think there is ever enough. Compared with the United States, we are nothing,” he said.
He believes that Tune Labs will still be able to attract talented entrepreneurs because it brings something different to the table – after all, Tune Labs’ tagline is ‘For Entrepreneurs, By Entrepreneurs.’
“The key difference is the [Tune Group or AirAsia] ecosystem,” Fernandes said.
“Most incubators and accelerators … promise [essentially] the same thing – office space, access to capital, and a support system. But if you look at the challenge most startups face, it is how to get the product out to customers quickly, efficiently, and cost-effectively.
“With [our] ecosystem – whether it is 50 million passengers, the people who are staying at the 45 Tune Hotels worldwide, or those who buy travel insurance – we can reach out to them, and market to them almost immediately,” he declared.
“That’s our big differentiation.”
Tune Labs entrepreneurs will also have the opportunity to tap into the three cofounders’ networks, Fernandes said.
“Because AirAsia and Tune Group have a lot of partners, we have built strong relationships with many companies.
“So if [entrepreneurs] come to me and say that they want to see ‘someone,’ they have a better chance of seeing that ‘someone’ through us than by themselves. It’s just one phone call or one email away.
“We can open many doors to [our] entrepreneurs,” he declared.
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