Cradle Fund CEO Nazrin Hassan and chief investment officer Juliana Jan (centre two) with the new co-investment partners.
June 24, 2016: Malaysian tech startup influencer Cradle Fund has roped in six other investors into its equity co-investment programme, revealing that five of the present six licensed equity crowdfunding (ECF) operators in Malaysia are on board.
The sixth investor are Crowdo, Crowdplus.asia, PitchIN, FundedByMe, and Ata Plus. Quest Ventures will be committing MYR1 million, to which Cradle will match one-to-one with another MYR1 million.
For the ECF partners, there are not set commitments as yet, as each will pool together from their own pool of angel investors an sophisticated investors for co-investment deals with Cradle. However, Cradle is prepared to inject up to MYR500,000.
The deals under the partnerships will follow Cradle's mandate – to invest in tech startups. Cradle's Chief Executive Officer of investment and relationship management, Juliana Jan said the amount was not disclosed for the ECF partners as each would be contributing different amounts depending on how much the angel investors on their platform pledge.
The ECF players, however, stated that they each will be looking for two to a maximum of 20 deals over the next 12 months. "It varies among them, but Crowdo and CrowdPlus are targeting one or two deals a month, if that would make it about 20 in that period," she said.
"We are open to other types of partners, this isn't specific to VCs only. If you look at our list of partners, we have institutional investors like Captii Ventures, which is the investment unit of Captii Limited. ECF is another domain for raising capital, and this is another way for Cradle to also support angel investments," she told DealStreetAsia, noting that Cradle's partnership could encourage angel investors to work with ECF platforms.
Group Chief Executive Officer Nazrin Hassan commented that having ECF operators in the pool of co-investment partners is a move to diversify the circle of them. "We wish to have a diversify of institutional investors in our co-investment circle and to include not only venture capitalists and institutional investors, but also bring in ECF platforms whose investors consists of sophisticated angels who are no strangers to funding early stage businesses," he said.
He noted that working with the ECF operators may give Cradle the upper hand in sourcing for disparate types of high potential deals in the market that venture capital investors may give a pass on.
Ample Funds Raised
With this announcement, Cradle now has a total of 25 equity co-investment partners. The co-investment programme began towards the end of 2014, and new groups of co-investment partners were announced every few months.
Prior to this, a total of MYR159.2 million had been raised from the previous five cycles of partnerships. The MYR2 million from Quest Ventures and Cradle will make the new total commited capital MYR161.2 million ($40.68 million).
Of that, only MYR4.025 million has been invested into three companies – Bemalas, MauKerja and SyncMedia so far.
In April, Cradle had sounded a target to raise its co-investment war chest to MYR200 million ($50.92 million) this year, with 10 more co-investment partners to come on board.
Jan commented that many of Cradle's co-investment partners have taken a step back in investing during the first six months of this year, against the backdrop of slower macroeconomics.
"Some are still very actively looking at companies, pushing deals through us to see but some are waiting (for the market)," she said, the hesitation was due to sentiment even as valuations have become more attractive.
Jan added that Cradle is hoping to close another four deals within this year.
An agency under the Ministry of Finance, Cradle's co-investment programme is part of its efforts to reduce government-linked agencies' dependence on government funding and to encourge more private investments into funding local technology startups.
Cradle is working on restructuring its funding allocation to 70 percent co-investing activities, and 30 percent direct grant by 2017.
Source from Deal Street Asia