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.
Partnering With The Right People
Aside from announcing CIP300, Cradle also signed two different Memoranda of Understandings (MOU) with The Malaysian Business Angel network (MBAN), K-One Technology Bhd (KiasuLab) and Sunway University Sdn Bhd (Sunway Innovation Lab).
The collaboration seeks to bring a different type of contribution based on their services. K-One Technology CEO, Dato’ Martin Lim, said they want to help startups take their conceptual ideas and turn it into workable products through the technology and software devices available under them.
Their newly set-up co-working space called KiasuLab looks to support entrepreneurs that are mainly involved with technical products such as those dealing with IoT, consumer electronics, automotive scene, mobile industries and so forth.
“The startups can use our lab to develop their product and make it into a viable and sellable solution. Those with good ideas are welcomed to join our lab,” said Dato’ Martin.
Director of Sunway Innovation Labs (iLabs) of SunwayUniversity, Mr Matt van Leeuwen, talked about their objectives in using their labs to cultivate an entrepreneurship mindset with their students and to make innovations more market-driven by starting with the Sunway group.
“Our startups that we’re building will be looking for funding, so they can get grant funding to mature through this partnership. On the other hand, we welcome startups who can solve problems in Sunway. We think Sunway is a great testing grounds for startups to try out their prototypes before they go out for funding,” said Matt.
On the MBAN side, Dr. Sivapalan Vivekarajah, the president of MBAN, said they’re looking to offer their wide pool of angel investors known to invest in high-risk startups.
“After being involved in this scene for 20 years, the missing link is the corporate sector. I believe this partnership can take the Malaysian ecosystem to a new level. From our side, we want to invest in companies that can create a market, sell and expand their products abroad which I think we can achieve together,” said Dr. Sivapalan.
Nazrin stressed that the corporate partnerships is not just for CIP300. Though CIP300 recipients can leverage off these partnerships, Cradle’s end goal is on a larger scale. The partnership fulfills two specific objectives which are:
- Linking large corporates and small startups.
In order for there to be a more rapid expansion, Nazrin believes that smaller startups need exposure based on larger corporates, especially to understand the B2B concept better. through this, they can help smaller startups accelerate further.
- Larger corporates need to be more attuned with the startup scene.
Nazrin said that large corporates need to look out for changes that could disrupt their market.
“An example would be the retail scene. 5 years ago, people predicted that e-commerce would disrupt the market but no one took it seriously. Now retail malls are suffering. We’re seeing a generation that’s more digital. So large corporates need to get into this because unless you’re aware of what’s coming, your market’s gonna be eaten up by something you didn’t expect,” said Nazrin.