Startups, don’t knock the competition if you want Khazanah’s money

  • Will also invest in companies that can show clear path to profitability
  • Best entrepreneurs are those with clear vision of what they want … yet flexible
Startups, don’t knock the competition if you want Khazanah’s money

 
MALAYSIA’S sovereign wealth fund Khazanah Nasional Bhd has been making a slew of investments in late-stage companies, and there are reasons why, according to its executive director Azmil Zahruddin Aziz (pic above).
 
It is not about Khazanah investing in already profitable companies, but in those that can also show a clear path to profitability, he said in one of his rare public appearances at a conference not organised by his own company.
 
“At this late stage, the company would have been around, with a management team that we can gauge the quality of,” he said during a panel discussion on the first day of the Wild Digital conference organised by Catcha Group.
 
“And, while it may not be profitable, there is a proven business in its space. Key for us to invest is our confidence that the company can build a winning business, with a clear idea of the competition and how to beat them,” he added.
 
It also helps if the company spends less time knocking its competitors, and more on its own strengths.
 
“We met a company that Patrick Grove thinks can be a unicorn, but for the first 45 minutes they were just talking about how poor their competitors were,” said Azmil.
 
“It was a put-off for us,” he told the 400+ audience during the panel discussion on What Are Big Ticket Investors Looking At?, which included Sequoia Capital venture partner Yinglan Tan and Singaporean sovereign wealth fund Temasek Holding’s managing director Mukul Chawla.
 
The session was moderated by Jan Metzger, managing director and head of Citi’s Telecommunications, Media and Technology operations in Asia Pacific.
 
Khazanah usually gets in on the Series C, D and E stage, and has already made a number of high profile investments this year.
 
These include UK-based travel search engine Skyscanner; Singapore-based Garena Interactive; US-based artificial intelligence startup Blippar; and most recently, in India-based data analytics company Fractal Analytics.
 
Passion also ranked high among the traits Khazanah looks for, said Azmil, who has been leading its technology investment arm for the past five years.
 
“The best entrepreneurs are those with a clear vision of what they want, yet are also flexible when times have changed – they can demonstrate an agility to turn the business around,” he said.
 
As for entrepreneurs whose passion lies in getting that big payout, “if it’s just about the money, then it typically will not work out,” he added.
 
A geek at heart, Azmil also said he has to be very careful to separate the founders from the technology and the business of the companies he looks at, as it can be a problem when making investment decisions.
 
“At the end of the day, we must be confident that the investment can give us the returns commensurate with the risk we have taken. We get this stated right up front,” he added.
 
Asked about valuating businesses, Azmil said that even when it comes to those that may have three to four products, Khazanah will look at the company in its entirety and not just focus on the profitable units.
 
“It could make for a poor investment vehicle. It is not important for all the units to make money, but they must have a path to profitability,” he said.
 
Azmil, who sees the shift from offline straight to online specifically through mobile being a key trend in South-East Asia, was asked about his thoughts on the region and whether he saw it as many markets, or a cluster of markets with commonalities.
 
“I do see a lot of commonalities,” he said, but stressed that South-East Asia is also characterised by different languages and cultures.
 
“I think the key to obtaining synergy is by recognising the differences and leveraging on the similarities in culture and language.
 
“And if you look at some of the Internet companies already in the region, those that recognise this and adapt their business model and services to country and culture, will be the ones to succeed,” he declared.
 
Other Wild Digital Stories:
 
We completely f**ked up in our first 8yrs: Catcha’s Patrick Grove
 
Unicorns: Not quite mythical, but a rarity in South-East Asia
 
 
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