Malaysian Cradle Fund unveils DEQ800 to diversify investment strategy for a maturing startup ecosystem

Tue Feb 28, 2017 - 12:27pm UTC
(From left) Cradle’s chief investment officer Juliana Jan; group CEO Nazrin Hassan and vice president of investment Azman Hood

Malaysian early-stage tech startup catalyst Cradle Fund Sdn Bhd has announced the launch of a new investment product known as Direct Equity 800 (DEQ800) which follows an investment portfolio expansion effective February 2017. This equity investment initiative indicates a gradual shift in the firm’s investment strategy from grant funding model to equity investments model.

With a total funding size close to RM11 million (about US$2.47 million), Cradle plans to close 13 deals by June 2017 – investing in 10 startups via direct equities as well as co-investing in 3 startups, each writing cheques between RM300,000 to RM800,000. For the co-investment exercise, Cradle will be introducing a 2:1 ratio, whereby if one of their investment partners invests RM200,000, Cradle will invest RM400,000, doubling the matching contributions for every ringgit invested, up to a limit of RM800,000.

While Cradle has been mainly focused on tech and innovation startups, Juliana Jan, Cradle’s chief investment officer clarifies that “Cradle is not focusing on any one tech area but rather wants to provide support to areas that have good growth potential.”

Looking at DEQ800, the focused investment sectors under this initiative include areas within Malaysia’s National Key Economic Areas (NKEA) including areas of financial services, tourism, business service, electrical and electronics, wholesale and retail, education, healthcare, communications content and infrastructure, oil, gas and energy, agriculture, information and communications technology (ICT) and non-ICT sectors.

For startups interested in DEQ800, Cradle judges a startup eligibility on several criteria including:

– being a startup incorporated in Malaysia with at least 51 percent owned by Malaysian shareholders;
– ownership of all intellectual property rights, titles and interests relating to prototype, products and/or services for the purpose of commercialisation;
– an operation timeline less than five years, in addition to a total revenue of not more than MYR5 million.

Speaking on the initiative, Cradle’s CEO Nazrin Hassan is ascertained that this is the perfect time for the shift to direct equity investment as local startup ecosystem has significantly evolved and mature throughout the decade. Then again, Hassan adds, “Government- and Cradle-backed prototype grants will always be available as there is always a need for that type of risk taking, but startups still need to learn how to get private investments or they will continue relying on grants.”

Established in 2003, Cradle is a non-profit organisation under the Malaysian Ministry of Finance that manages Cradle Investment programmes. It has filled a funding gap in the area of developing ideas through its CIP150 programme, that helps develop ideas into prototypes as well as its CIP500 programme, that helps to move on to funding for prototype-to-market. The company, since its inception, has also supported more than 700 Malaysian tech start-ups, holding the highest commercialisation rate among government grants in the country.

With the introduction of its new programme, Cradle looks forward to assisting more Malaysian startups by providing them with equity investment, mentorship, as well as help in connecting them with other venture capitals and investors. Companies invested by Cradle, especially those that are looking to go global can look forward to more support and growth guidances via Cradle’s experience and network.

By Vivian Foo, VCNewsNetwork