What’s Next: Pick yourself up, learn, sharpen skills
By Karamjit Singh October 12, 2015
- With backs to the wall, entrepreneurs respond, rise to the challenge
- Hardware players warned Malaysian banks don’t understand tech
THE entrepreneur panel session during the What’s Next conference on Aug 29 threw up a mix of advice ranging from “raising too much money too early can actually be harmful” and warning hardware-based tech companies about getting working capital from banks, to cautions against thinking only of maximising money from customers.
Two of the entrepreneurs have listed their companies. Wei Chuan Beng is founder and group managing director of integrated telecommunications service provider REDtone International Bhd, listed on Bursa Malaysia; while Ivan Teh is founder and managing director of UK-listed big data analytics firm Fusionex International Plc.
The third panellist, Dr Gabriel Walter, hopes to join them within the next 12-months by listing Quantum Electro Opto Systems Sdn Bhd (QEOS), his optical laser company that is now focusing on the Internet of Things (IoT).
The What’s Next: The Business Impact of Disruptive Technology conference (#WhatsNextDNA) was organised by Digital News Asia (DNA). The panel session on entrepreneurship – with the theme The Disruptors ... Caution! Dead Ends, Pot Holes & Sink Holes Ahead! – was moderated by BFM radio presenter Freda Liu.
REDtone will celebrate its 20th anniversary in 2016, and Wei (pic above) is proud of the fact that the company has no debts despite having access to funding from banks.
Paradoxically, the roots of Wei’s aversion to debt come from the time when he feels it had too much money.
It had a close shave in 2000. “The company had raised a total of RM10 million by 2000, a huge amount back then. But while Malaysia is a small market, we overspent for growth and as a result, only had six months of cash left,” recalled Wei. [RM1 = US$0.24 at current rates]
Drastic cost-cutting followed, including letting go of some of Wei’s friends from university. This was followed by instituting disciplined sales and collection targets, with painful consequences for missed targets.
“Everyone had to take a 10% pay cut if we ever missed our monthly targets,” he said.
They never had to. With their backs to the wall, the entire company aligned and pushed towards meeting the monthly top- and bottom-line targets with a single-minded focus that was missing before, when they thought things were going well.
“The momentum just built up from those six months, but we learnt some painful lessons. One was that we did not change fast enough during the economic slowdown in 2000-2001. The second was that having too much money at an early stage is not necessarily a good thing,” said Wei.
Having too much money is a problem that Walter would have welcomed for his LED optics company, which had to deliver on commitments it made to the Malaysian Government based on RM10 million in funding it was promised in 2008.
But one month after he came back to Malaysia in May 2008 to establish QEOS in Melaka, with RM2.9 million in grants committed and with another RM6 million due in venture capital funding, the venture capital company, Malaysian Venture Capital Management Bhd, changed its mind.
“I was stuck. Call it facing potholes or sinkholes, as an entrepreneur, you will face them all,” Walter (pic below) said.
With his back to the wall, Walter managed to meet all his funding deliverables to the Malaysian Government, including leveraging on his university in the United States, University of Illinois, Urbana-Champaign for its labs and facilities.
In 2009, he then managed to raise RM3.5 million from a Malaysian Government venture capital (VC) fund, Kumpulan Modal Perdana, and was on his way to raise a total of RM45 million in total – all from Malaysia.
His latest challenge was the reluctance of Malaysian banks to fund the working capital of technology companies.
“They are hopeless,” Walter said of Malaysian banks which don’t understand technology. “And they will waste your time.”
“Going into discussions with us, they already knew we had no track record; yet, after almost a year-long process, they will reject you citing your lack of track record,” he said, still angry at the experience.
But, as is the hallmark of all successful entrepreneurs, Walter found a way to get this track record that banks needed. He went out and acquired it by taking a 60% stake in a mechanical and electrical (M&E) company, Mepcon Sdn Bhd, which has a six-year profitability track record. He gave up 3% of QEOS in exchange.
“We now have the track record that banks seek,” he said, adding that he uses his tough journey to warn other hardware-based technology entrepreneurs that they will face similar challenges.
Next Page: Maximising profits from customers not the way to ‘big success’