Net Value: A long and bumpy road
The Edge - December 25, 2006 : (page 2)

Mirror, mirror on the wall
Aside from money issues, the ability to recognise and realise that some ideas cannot work is of vital importance. First-phase finalist 1.com.my did not follow through with Venture 2002. Its managing director Lee Earn Pin says the team did not complete the training and development programme because the idea could not be commercialised. "Initially, we all thought it was a great idea. Then we were short-listed and we went through some of the sessions with the VCs. We listened to what they had to say and some were things that we didn't think about. Eventually, we realised that the idea was not practical because it would have been too expensive and difficult to implement," says its managing director Lee Earn Pin.

A true-blue entrepreneur, Lee laughingly confesses that he has never attended a job interview in his life. He knew early in life that he wanted to strike out on his own. Hence, he started preparing during his university days. Taking on freelance web design projects, Lee saved up RM30,000 to achieve his dream. Aside from that, he lined up projects that would keep him afloat for the first six months of setting up. Immediately after graduation, he left his hometown Kluang and set up shop in Dataran Prima. "When I first started, I was the only person in the 800 sq ft office with my desk and PC. For the first six months or so, I worked, ate and slept in the office," he reminisces.

Funding blues
The fact that none of the finalists received any venture funding since gives us a pretty good idea of the state of the venture capital industry in Malaysia. VCs in Malaysia are very cautious about whom they provide funding to. Most of the time, entrepreneurs complain that VCs tend to be overly cautious, offering financial support only to those who are already profitable and hence do not really need assistance. Local VCs counter this by explaining that they are extremely careful because they are dealing with other people's money.

Getting down to the root of it, VCs essentially are supposed to be able to take bigger risks than bankers. The VCs in Malaysia, however, behave and think like bankers. Thus, they are not completely filling the funding gap.

"From my point of view, the Malaysian VC industry is still immature. They are low risk takers when they should be taking calculated risks based on a company's future business prospects," criticises Tew Hang Siong of IAS.

He adds that IAS has yet to get funding from any VC or angel investor after a tiring 1½ years of attempts. Fuelled by new opportunities, Tew remains bullish about the company's future as a palm mill enterprise resource planning solutions provider. "We are a bit fortunate that we are in the oil palm industry and that it is still flourishing with more new plantations and mills. We see this as a sunrise industry because of the possibilities from the introduction of biodiesel to the importance of crude palm oil as a food source."

Wang Sim Kok of Integrated Methods points out that he faced the same situation of constantly pitching without getting any results. "The main question the VCs and angel investors raised was the readiness of the market. 'Why us when there is Microsoft or other open source application?' In the end, we did not obtain any funding and survived on small projects. We did obtain a grant from a local programme here to further enhance our product but we had our share of difficulties in getting the right resources to assist in the development of the product's next phase," he confides.

Angel investors in Malaysia are few and far between. Jeffrey Tan of Phenomenal was one of the lucky few who managed to find himself an angel that really believed in his company. "Initially, I got the Cradle grant but RM50,000 was not enough to develop the system. The entire unified communications system requires an investment of RM1 million. After getting the grant, Cradle recommended me to Mavcap for funding but I didn't get it. I feel that I'm really fortunate to be able to develop the product with the help of my angel."

Having gone through pitch after pitch, Tan feels that the VC environment here is simply too conservative. "I'm sure they have their reasons but there has to be more risk taking. Local VCs are usually not entrepreneurs, so they seem to lack the understanding that you need a lot of creativity to be a technopreneur. Funding in the technology space is always not in proportion to what you want to achieve. It is sad when compared to the UK or the US. Venture funding is moving so much more there," he laments.

Taking things slow and persistence paid off for Paximej Sdn Bhd. Its group managing director Ahmad Kamil Mohamed says the company was recently given a RM2 million loan by Pembangunan Ekuiti Sdn Bhd under the SME Growth Acceleration Fund. "We haven't had any funding since Venture 2002 but we kept the company going through our other revenue streams. In hindsight, there is a difference in the VC environment now compared to four years ago. Before, they were only interested in funding technology. Now, they are more interested in pioneering new arenas and markets that have not been penetrated," he remarks.

A new leash of life?
Even though the Venture business plan competition was no meal ticket to funding, the general consensus of the finalists was that the competition had its benefits and that it should be resuscitated. "There are a lot of pros and cons. The promotion and publicity that comes with the competition helps with exposure but sometimes it attracts the wrong sort of attention. Follow-up could have been done with the finalists to help secure funding," observes Tiffany Lim of Sherman3D, Chin's partner, who was also a member of the team in Venture 2002.

Perhaps because they did not have to chase for funds, the Maestro Solutions team is fully supportive of Venture 2002. "During Venture 2002, there was a lot of hoopla and it helped shine the light on entrepreneurship. I think the necessary steps that were lacking before have already been taken by the VCs, MDeC and the government," says Chui. Another team member, Azreen, says there were accusations that Venture 2002 was unsuccessful and that the model should be changed. "We think the competition should be resuscitated. Look at what it did for our company. However, the reward of winning the competition should be a shot at getting funding and realising one's dream."

2 of 3 - Continued...