Malaysian technopreneurs need better pitching skills

MALAYSIA--The local technopreneur landscape has made good strides in the past decade with more startups sprouting in the market, but technopreneurs today face different kinds of challenges that may impede the nation's hopes of producing regional and global champions, industry watchers say.

According to Cradle Fund CEO Nazrin Hassan, Malaysia has a vibrant talent pool, many of whom would like to strike out on their own with the aim of making it big.

In an interview with ZDNet Asia, the former entrepreneur-turned-fund manager noted that over the last seven to eight years, many new startups have emerged, obtained pre-seed funding and come through quite well in the market.

"But the challenges are different for these players when compared to those faced 10 years ago," he said. "Ten years ago, there wasn't very much money available for startups to create prototypes, let alone to help with the commercialization of products." Cradle Fund is a government-funded company established to manage the Cradle Investment Programme, a pre-seed and seed commercialization fund. The Ministry of Finance has allocated 100 million ringgit (US$33.3 million) for this programme since it began in 2003.

Nazrin said the industry has sufficiently addressed the stumbling blocks young companies previously faced at the pre-seed and seed funding stages, and as a result, there is sufficient money available today to fund startups and their ideas compared to a decade ago.

But the main obstacle these organizations currently face is growing beyond the initial startup phase, he said. Noting that many startups are not able to scale up and are often hamstrung by annual revenue of 1 to 3 million ringgit (US$333,000 to US$1 million), Nazrin said these companies must learn to cater to higher market demand and to do so by going regional, and even global.

V. Sivapalan, chief evangelist of Proficeo, concurred, adding that startups today do not aim to go regional or have a global outlook from the outset. Proficeo is a Kuala Lumpur-based coaching and training consultancy pioneered by Sivapalan and two other partners.

"Despite the existence of the Multimedia Super Corridor (MSC) Malaysia,various funding initiatives and government grants, as well as the efforts in nurturing start ups, my view is that we've not managed to establish and grow regional and global companies yet," Sivapalan told ZDNet Asia in an interview.

The former venture capitalist added that this is because investors are unlikely to invest in people whom they have just met after a mere 30-minute sales pitch.

Investors, he added, prefer to first get to know technopreneurs, build up chemistry with prospective startups, understand their motivation and look at how they develop the business before putting money into a venture.

"Most of the time, investors invest in people they know and have confidence in, and not merely on a great idea or pitch," he said.

Addressing key challenges
Kal Joffres, a venture capitalist at Tandem Fund, pointed out that technopreneurship in Malaysia was far from where the industry would like to be, but added that there were promising spots in the sector. Tandem Fund is a venture fund that invests in enterprises from the healthcare, housing and food sectors.

"There is a great deal of potential in the mobile and social space where Malaysia is more advanced than many western countries," Joffres said in an e-mail interview.

However, one major challenge that continues to dog the industry is the lack of quality "deal flow" and traction within the local technopreneur scene, he noted. A term used by VCs and angel investors, deal flow refers to the rate at which these investors receive business and investment proposals.

"As a VC, the biggest challenge is deal flow. Across almost all sectors, my colleagues say there is a lack of quality deal flow," Joffres explained. "But while Malaysian VCs are less picky in terms of traction or the quality of the team, they make up for it in terms of due diligence and by being process-oriented."

He suggested that one way to address this is to provide early-stage and pre-seed entrepreneurs with easy access to money, but in quantities that are much smaller than those currently offered by funding agencies.

"The goal is to improve the quality of the angel and VC pipeline by making it easier for people to experiment and getting entrepreneurs to pitch prototypes at an early stage in the product development process," he said. "Letting people build a fully functional product only to realize that the market or investors aren't interested in it is a tremendous waste of entrepreneurial talent."

Joffres added that there is a need to expose youths to startups at the internship level and help them widen their knowledge. "I'm always surprised by the number of technopreneurs who aren't familiar with TechCrunch," he said. "Technology is borderless. We need to be building products that are better than what's currently being built in Silicon Valley, Route 128 or other entrepreneurial centers."

Sivapalan also noted that technopreneurs in the ICT sector lack the ability to pitch to potential investors for funding purposes, and may not have the necessary experiential knowledge to refine their business models and bring their products to the regional and global markets. They also lack the networking platform to meet investors, he added.

Nazrin said Cradle's industry mentoring initiative, Coach and Grow Programme (CGP), aims to help budding technopreneurs address these gaps. "The CGP was mooted with the intent of overcoming challenges faced by entrepreneurs by looking into the key reasons why they fail to grow or scale during crucial stages of their lifecycle," he explained. "We hope that the CGP will help entrepreneurs face these challenges such as difficulty in securing early adopters, challenges in achieving sustainability, scaling and expansion, and the fear of going regional or global without a strong strategy."

Funded by the Malaysian government with a budget of 5 million ringgit (US$1.7 million), the CGP aims to shortlist 150 companies which will qualify for stage two of the programme, comprising a three-month formal coaching period and nine-month informal one-on-one coaching and mentoring phase.

Another round of candidates will then be selected to enter stage three of the CGP, during which the top 30 percent best-performing companies will receive additional assistance and participate in industry showcases. The CGP is open for online application until Aug. 24.

Edwin Yapp is a freelance IT writer based in Malaysia.