Exclusive: Malaysia’s Cradle Fund to start direct equity investments next year
Published 18 October, 2016
DealStreetAsia: October 16, 2016 – Armed with almost two years of experience as an investor, Malaysian early-stage tech startup influencer Cradle Fund Sdn Bhd is now looking at making direct equity investments next year, a step further from its current role of a co-investor, it had taken in 2014.
The government-backed agency currently has a co-investment partnership programme where it matches the funds raised by co-investors. It has partnered with 28 co-investors till now with a cumulative investment figure that has reached $171.2 million, Cradle Fund Sdn Bhd CEO Nazrin Hassan told DEALSRTEETASIA recently.
“Next year, we have good indication that we will be starting a direct equity programme where we do not have to wait for the co-investor to lead the round and we can directly lead the round…Right now we are in the active investments phase,” he told this portal in an interaction.
Malaysia has witnessed a surge in the number of startups, and when it comes to the availability of funding, its government has been trying to play a role to encourange it. Cradle, particularly, has interest in startups catering to e-commerce, mobile applications and software.
“We will just do slight tweaking of both our grant and equity programmes to suit current market conditions and to support the governments stance on reducing dependence on grants and moving towards more market based instruments,” Nazrin said.
As part of the co-investment programme, Cradle had announced deals where it invested a combined $550,000 in MauKerja.my and SyncMedia with OSK Ventures International and a $500,000 deal with Singapore’s KK Fund in Be Malas.
Cradle is targeting its co-investment to reach $50.92 million (MYR200 million) this year. In 2015, the fund launched the Cradle Seed Ventures to provide seed funding for local tech startups.
“The key now is finding teams that can execute on their business plans. I find these days, the teams are more polished as far as their presentations are concerned but the execution ability is a concern so we need to be a bit more scrutinising to see if the management teams can execute the promises,” he said.
Further noting that the regional slowdown had an impact on the funding and investment climate in Malaysia too, Cradle said that there were still enough deals for the fund to deploy the $7.14 million (MYR30 million) it gets from the government each year.
In fact, the fund believes that it does not need to deploy the entire funds only to meet the target if there are insufficient quality deal flows. “Right now there are still sufficient quality deal-flows. We have no issues in funding them. Only that with the regional slowdown we have to think of the ways that our startups will raise their next round of funding. It is bit of a challenge when the regional side slows down,” Nazrin said.
Recently, Silicon Valley venture capital firm 500 Startups announced the launch of a new $50 million fund — 500 Durians II– for Southeast Asia with a mandate to invest in about 200 seed-stage companies in the region. It will fund seed-stage companies with $50,000 to $150,000 and will also invest $500,000 additional capital in those that show exceptional progress,
“With that (500 Durians II) new fund, we can be looking at the seed level investments continuing in the region. So, I believe KL will have the spillover benefits of this fund,” he said.