Cradle Fund Sdn Bhd, an early stage startup influencer in Malaysia, had announced their most recent investment product that keeps in line with their vision of building up the startup ecosystem.
The Cradle Investment Programme 300 (CIP300) is a revamped version of their previous two products known as CIP Catalyst (a pre-seed funding that funds product development up to RM150,000) and CIP500 (a seed type funding for commercialisation purposes of up to RM500,000).
Along with their recent launch of Direct Equity 800 (DEQ800), Cradle takes these two products as step into weaning entrepreneurs off grants. The lower amount given through CIP300 is to encourage startups to plan and opt for other options of funding such as equity crowdfunding and angel funding to improve commercialisation and growth outcomes.
Moving Away From Grants
Similar to their previous CIP programme, the CIP300 is a pre-seed programme that provides financial and value added assistance up to RM300,000. The funding is aimed to help entrepreneurs kick-start their innovative technology-based business ventures with CIP300 aiding to develop and commercialise their products in the early stages.
“DEQ800 and CIP300 bring together a range of funding and value added benefits to create a more coherent framework to allow startups to grow and do business locally and regionally. This gives our local startups the opportunity in starting and scaling up a company with the help from the government and private sector,” said Nazrin Hassan, Group CEO of Cradle during his speech at the launch yesterday.
Besides that, CIP300 addresses the funding gap that most early stage businesses face during their ideation stage and early commercialisation of products. When asked why he believes this funding gap exists, Nazrin mentioned that most investors prefer to look for ventures with a solid track record and a product that is worth investing into.
A key feature of the CIP300 is that it will have an added range of value added support that each recipient will benefit from. These services will help to nurture, develop and prepare them for the challenges of building a tech startup. Some of the support includes:
Enhanced coaching and mentoring programme provided by Proficio throughout the funding period.
Opportunity to be matched with potential investors.
Match making with Cradle’s partners.
Internal training programme to support creation, innovation and commercialisation.
Participation in business and networking events under Cradle.
Startups that are interested in CIP300 will have to meet these criteria:
Applicants must be of 18 years of age and can apply individually or through locally incorporated companies operating less than 3 years.
Sectors that are covered include ICT, non-ICT, and other tech fields such as semi-conductors, life sciences, and clean tech.
For companies that are applying, the accumulated revenue must not be more than RM3 million.
Applicants must be a permanent resident in Malaysia.
The Cradle Investment Vice President, Xelia Tong, mentioned that the programme will see 25 recipients and the entire duration of developing the prototype will take about 18 months. Interested applicants can go to the Cradle website to find out more information.
“One of the ways we wean the market off grants is not by taking it off immediately. We lower the limit to address where the needs are in a more focused manner. We strengthen the product through our structured coaching along with the other value added benefits to ensure a more successful product,” said Nazrin to Vulcan Post.
Compared to the previous two, Cradle believes that CIP300 is a much stronger product. Based on their experience, they have now fortified the product by involving themselves more in the development process and putting in structured coaching to guide entrepreneurs the right way.
“We’re emulating what most private accelerators are doing through these value added services. We’re hoping with that, we’ll have a higher success rate of commercialisation and create more investable companies,” said Nazrin.
Keeping Up With The Tides
During an exclusive interview with Vulcan Post, Nazrin shared the shift from grants to equity was needed after being in the scene since 2003.
“There was a time when the sole dependence was just on grants but more players have come in in the past 5 years. To have a stronger ecosystem and prepare our startups better for the commercial market, we should make way for private investments. A good healthy ecosystem is led by private investments where the government should only facilitate,” said Nazrin.
So Cradle states that for grants, they’re only moving towards areas where they’re really needed which is usually at the prototype stage or the early commercialisation period.
“That’s where the money is scarce. When it comes to post revenue, there are many other options. Even when we’re weaning these grants off, only 50% of our allocation are lesser in grants so the other half is still there. It’s a gradual process. We’ll never let go in a way the market will crash. We feel like there’s enough private investments to make a mature market and a stronger ecosystem,” said Nazrin.
He said the local startup ecosystem is fairly developed and there is no lack of innovative ideas and entrepreneurial spirit in Malaysia.
“It’s heartening to see no resistance when it comes to equity. We thought startups might be hesitant giving up equity but the market has truly matured. The current generation shows that if you wanna generate a lot of money, you have to be ready to give up some equity which wasn’t the case 10 years ago,” shared Nazrin.
Other signs that show how the market has grown is that companies with only 30 to 50 people can operate in about 4 to 5 countries easily. There are also startups in Malaysia that are valued above 15 million which shows that they’re capable of standing on their own 2 feet.
“Even Mark Chang (founder of Jobstreet.com) has mentioned that an overnight success story could take up to 18 years but I believe the period now is shorter. Grab was funded by us in 2010 and they went from prototype to unicorn in about 5 years. More and more, we’re seeing fast growth companies that can scale certain heights in shorter time. Everything is more efficient. That’s a sign,” said Nazrin.