Syazwan Majid of Arus Oil has stared into the abyss… and survived
By Karamjit Singh July 20, 2023
- Undisclosed 7-figure investment from Shell Malaysia a fillip to ambitions
- One time neighbourhood environment activist gunning for UCO mkt share
[Ed: An earlier version of the caption wrongly identified Dr Chatichai and Louis.]
Syazwan Majid the CEO of co-founder of My Protech Sdn Bhd, which operates in the Malaysian market under the brand Arus Oil, hit a major milestone in his entrepreneurial journey when Shell Malaysia announced on July 13th that it had invested an undisclosed amount into the startup.
Arus Oil specialises in collecting, pre-treating and lab testing used cooking oil (UCO) that is then sold to biorefineries in Holland and the UK to be converted into biofuels. “The unit economics just make sense,” he said on the rationale for selling it overseas instead of to biofuel refiners in Malaysia.
In her LinkedIn post sharing the news, Siti Sulaiman, Shell Country Chair & Senior VP Upstream said the investment “will help us to supply low carbon fuels to customers in hard-to-decarbonise sectors like aviation and commercial road transport.”
While the investment amount was not disclosed, DNA has learnt that it is in the low 7-digit figure, valuing the company in the single digit millions. Clearly the self described “environmental activist” who used to spend his weekend mornings in the neighbourhood field partnering with the Rukun Tetangga (a community based policing scheme common in Malaysia), collecting UCO, e-waste, plastics, glass and paper has come a long way in his journey to make a make a meaningful difference, and has survived looking into the abyss (more on this later).
Unfulfilled in his professional job as a management accountant, Wan as he is known, always had a passion for the environment and wanted to do more than just ensure his household was environmentally responsible. But he wasn’t sure what exactly. His three years doing “market research and validation” as he describes his 2017 to 2019 weekend job as a collector of recyclables showed him the clear path forward.
“I found that UCO had the best margins,” he said.
Using the recycling industry standard vehicle of a 1 metric tonne truck/lorry to collect recyclables, about 200kg of plastics fills up the entire lorry against two metric tonne of UCO which gets him around RM6,000 versus RM200 for the plastics. It was a no-brainer on which market segment to focus on.
E-waste was also financially rewarding but the bar to get proper certification was too high for a bootstrapped business like his. “You need a partial or full recovery licence from the Dept of Environment which is super tough to get and hire a consultant to audit your separation facility, which is expensive.”
Having decided on where he hoped to make a difference within the sustainable environment ecosystem, in early 2020 Wan applied to be licensed with the Malaysian Palm Oil Board which oversees the collection of UCO and conducts monthly audits on licensees. Despite the pandemic hitting he received approval in Oct 2020 and Arus Oil was ready to do business as collecting and separating UCO was deemed an essential service.
By then he was not alone anymore as his childhood friend Chatichai Chong came onboard as co-founder. A doctor with a strong sense of community service, Chai quit practicing medicine in 2018 as the deputy medical director of a district hospital in Sarawak to be part of the founding team of an edutech startup focused on improving the level of literacy among disadvantaged youth. With his focus on Arus Oil, Chai has since stepped back from the edutech startup.
Chai introduced Louis Ong, who ran his own software house, to Wan as they needed software expertise to build an app that was to be the key link between Arus Oil and the market they wanted to serve. Buying into the mission of Arus Oil, Louis joined as co-founder instead of being their outsourced tech provider.
Of bootstrapping and dark days
With the market validation done, the licensing needed, in hand, and founding team in place, it was all systems go with optimism and excitement over future possibilities, powering the trio. Starting operations in Jan 2021 in the time honored startup style, they bootstrapped, using Chai’s 4 by 4 truck, with no one taking a salary and using their savings to purchase the UCO from customers.
These customers are mainly business premises which use cooking oil (70%) and individual consumers who live in developments where Arus Oil has struck up partnerships with the property developers who then promote Arus Oil services to their residents and organise convenient pick-up points from where the UCO is collected by Wan and his team.
Because they could not afford to set up a factory to act as a collection point and to pre- process the UCO in the early days, Arus Oil acted as a straight up middleman, selling the UCO to existing processing factories in Selangor which tended to pay within three working days. Arus Oil, on the other hand, had to pay customers on collection.
This meant they were always operating under severe cash flow stress, even after raising their first US$22,000 (RM100,000) which came about from their first big break in June 2021 when they were one of the two winners of 1337 Ventures Sdn Bhd’s Alpha Startups™ Digital Accelerator (ASDA) 2021, Cohort 36, earning RM50,000 in funding and attracting the interest of palm oil leader, IOI Plantations Bhd, which gave them a RM50,000 grant.
[RM1 = US$0.220]
As a major exporter into developed nations, major Malaysian palm oil exporters are under pressure to show their ESG (Environment Social Governance) compliance and the IOI grant to Arus Oil helped IOI in this regard, especially for its sustainability reporting. This ESG push is also a key motivator behind Shell Malaysia's decision to invest in Arus Oil.
This double win allowed Arus Oil to launch their app that same month, which boosted their market penetration in Selangor. They were also able to purchase their first asset, a one metric tonne lorry in Sept 2021 and hire two full time staff but with Wan and Chai still running their daily route, which, according to Wan, helped them better understand the challenges their drivers face and how to overcome them.
Dec 2021 saw more progress when they managed to lock in a small round of angel investment from Peter Tam, a seasoned technologist who has had stints with some of the largest technology companies in the world and now mentors and invests in promising startups.
Despite the funding cushion in 2021 it is still tough going with a lot of physical hard work involved, said Wan. Today, the headcount is very lean at eight full time (which includes the three founders) with Wan and Chai still in the thick of things, collecting UCO and helping out unloading the UCO at their factory, which they were finally able to afford in June 2022. No surprise then when asked about the journey so far, Wan immediately shares a quote that resonates with him.
“It's been very tiring. And there is this saying that running a business is like staring into the abyss and eating glass. It is certainly not easy and you can get burned out.”
Wan lists cash flow management as a key lesson learnt with his darkest days being when the founders had to further dig into their own savings to pay staff whenever “cashflow was close to zero. Our staff have families to feed and they rely on us,” he said.
Merely scratching the surface of the market
Another key milestone for the company was when it achieved its International Sustainability & Carbon Certification (ISCC) in Jan 2023 that enhanced its positioning as a sustainable business. This was a key point for Shell as well with Shell Country Chair Siti stressing this point in her LinkedIN post.
The investment from Shell has certainly given Arus Oil a major fillip with Shell not only becoming a buyer, non-exclusive, for their pre-treated UCO but with the cash injection going towards working capital (no more forking out their own savings) at 50%, marketing (20%) and capex (30%) to expand their fleet of vehicles and upgrade the capacity at their factory from 60 metric tonnes to around 120 metric tonnes while targeting to start operations in Negri Sembilan and Perak around 2024 by which time, “we will need to raise another round of funding,” said Wan who nonetheless projects the company will be cash flow positive by Q4.
The expansion will help them grab a larger share of the UCO market in Malaysia. While there is no independent domestic source that tracks the market size, Wan uses global data market data for UCO, estimated at US$6 billion in 2021 and puts the Malaysian market at between 3% to 7%, meaning it is worth between US$180 million to US$420 million or RM819 million to RM1.9 billion. At RM3,000 a metric tonne (MT), that puts the market size at between 273,000MT to 633,333MT.With its target of hitting 3,000MT this year, Arus Oil is just scratching the surface of the market which Wan projects will witness a 5% CAGR up to 2028.
Which there are many traditional players in the space and at least one UCO association, a key differentiator for Arus Oil moving forward will be its data driven approach with Wan stressing the importance of their app.
While creating greater market awareness of UCO is a shared industry challenge, for Wan another key challenge is to keep a tight lid on costs and controlling their carbon emissions so they are not operating as a carbon negative business. “Our app plays a key role here as it will allow us to plan our routing and logistics, especially once we have scale, and keep costs down.”
Despite the runaway the Shell investment has given them, there is no time to celebrate for Wan who adopts a top down management approach to ensure the company adopts a hard driving culture. There is too much market opportunity to capture, says the CEO, who will still be unloading UCO drums at the factory with his team, while driven by the fear that the abyss is never far off.