‘No-brainer’ to invest in Malaysia, says Singapore’s Quest Ventures

  • Commits US$1mil from its AsiaFund 2 that had first close of US$30mil
  • ‘The best people we imagine working with’ says James Tan on Scaleup Malaysia

James Tan of Quest Ventures (sitting, 3rd from left) with Renuka Sena (sitting, first from left) and Dr Sivapalan Vivekarajah (2nd from left) in a pic taken in 2018 in Singapore when Tan hosted some Malaysian startups making investor pitches.

Only 11 months into its founding as an accelerator aiming to identify promising startups and turbo charge their growth, ScaleUp Malaysia pulled off quite a coup last week. The opening of applications for its Cohort 2 was accompanied with the news that Singapore-based regional venture capital firm, Quest Ventures has committed to invest US$1 million from its new AsiaFund 2 that has raised US$30 million so far, into Malaysian startups from Cohort 2 that will launch next month.

Applications are currently open till 12am Sept 28 where ScaleUp Malaysia hopes to select up to 24 startups that will undergo an intensive 3-month initial programme before it picks 12 startups to invest in while continuing its engagement with them for 24-months.

To get a sense of how well ScaleUp Malaysia has done in the short period it has been in existence, you only have to hear from James Tan, founding partner of Quest Ventures and one of Singapore’s leading startup entrepreneurs, who actually cofounded an e-commerce startup in China in 2009, listed in on the Nasdaq in 2015 and exited in 2017.

Tan who founded Quest Ventures in 2011 as his vehicle for angel and corporate investments, tells DNA that his philosophy in investing is premised on the belief that the best deals in any market are ideally made by locals. “I really don’t think you can find a better team in Malaysia than the people who run ScaleUp Malaysia and that should help them attract the best startups as well,” he says, looking forward to working with StartUp Malaysia – “the best people we imagine working with.”

The core team of ScaleUp Malaysia include, Dr Sivapalan Vivekarajah, senior partner and cofounder, Renuka Sena, senior partner and cofounder, Andre Sequerah, managing partner, Tay Shan Li, managing partner, Xelia Tong, managing partner and Aaron Sarma, general partner.

While Quest Ventures has partnerships in other markets as well, Tan notes that the engagement with ScaleUp Malaysia is deeper where Quest Ventures will work with the companies from Cohort 2 for a 12 week period during the first part of the programme and for another 21 months after this period. “We really appreciate this opportunity to work closely with the startup and ScaleUp Malaysia,” he says.

That working relationship includes leveraging Quest Ventures for their regional experience, which includes a portfolio of over 50 companies throughout Southeast Asia, and access to expertise, with a focus on taking the Cohort 2 startups regional.

 

Similar investing beliefs

Both ScaleUP Malaysia and Quest Ventures have a similar belief in investing into early stage companies and working very closely with the founders to identify gaps, weaknesses, opportunities and craft strategies to accelerate growth.

While ScaleUp Malaysia calls its methodology, Pegasus, Quest Ventures calls it Capstone where it works with founding teams for 100 days to map out a one year strategy to achieve outsized growth. It even describes itself as the first and only venture firm to systematically drive enterprise performance to the next level.

“I believe there is a lot of value in working with early stage companies,” says Tan who in working with ScaleUp Malaysia has had to be flexible and creative to accommodate the lower investments ScaleUp Malaysia makes. The RM250,000 that will be invested into each of the 12 startups translates to US$60,000, a significantly lower amount that the usual US$1 million cheques Quest Ventures is used to cutting.

A realistic Tan explains, “This partnership at least helps us get into the market here and we reserve the right to invest more into them later at our normal US$500,000 or US$1 million amount.” No doubt a remark that will get many entrepreneurs excited.

Besides the value-add that Quest Ventures will bring, entrepreneurs of the next cohort will also enjoy a programme that had been enhanced from the lessons of Cohort 1.

Sharing some of those lessons Sivapalan highlights focus, execution, financial management, scale and talent.

  • “One of the things we discovered, is that most entrepreneurs are quite opportunistic, who try to grab every opportunity that comes along.” That might not be a good thing, he notes, hence making them focus and think strategically, not opportunistically. “We work with them to build a strategic plan for the longer term with focus on a quarter by quarter basis.  Making sure they focus on the most important thing, what they want to build in the long term, and execute on that.”
  • Weaknesses in executing strategy was a consistent thread across the companies. “So we have a tremendous focus on execution. Working closely on how to execute those ideas as well,” says Sivapalan.
  • Financial and cashflow management: A common issue with startups, many of the companies had difficulty managing cashflow. “This is why we believe in working closely with them and looking at their plans to manage them well. If funds are required, we will help secure those funds whether through VC or other sources,” says Sivapalan.
  • Scaling and replicating: “What we’ve learned is that most of the time, companies can build technology and most of the time, they can get into the early stage of growth – getting early customers.” Yet, repeating that and scaling in a bigger way is where companies start to struggle, he notes.
  • One of the more interesting observations was that most of the companies don’t have teams. Or, to be specific, they don’t have sufficient number of people who can help them scale. This is one of the things ScaleUp Malaysia does. “If you don’t have the team to grow, we can identify people for you that you can hire or bring on as cofounders to help grow the business,” says Sivapalan.

With the reality of a living in a Covid-19 world, nonetheless, ScaleUp Malaysia plans to have as many classes as possible, physically, pointing out that interaction and building spirit and motivation are hurt by virtual classes. But all Ministry of Health SOPs will be adhered to.

“The dynamics of people working together and being together is quite important, so those sessions will be done physical and face to face if possible. Whereas the coaching sessions, right through the MCO period, for Cohort 1, was conducted online, and I’m really happy to say that it has not stopped anyone from doing anything,” says Sivapalan.

Meanwhile, eager to get started, Tan highlights Malaysia’s track record of producing regional champions, “even if some of them end up in Singapore” and says, investing into the country’s startups is “a no-brainer”.


Tan Jee Yee contributed to this article

 

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