STARTUPS will have to work harder for every ringgit of investment from funding sources this year.
Cradle Fund Sdn Bhd chief executive officer Nazrin Hassan said in a slowing economy, startups face challenges in adjusting the price of their offerings to a level which the market can afford.
“The consumer market would be looking for products and services which help them save cost or increase their profit. Investors will also take into account the current market weakness and will be more selective in their deals,” Nazrin said.
However, with the slide of the value of the ringgit, valuation for startups are now lower; regional investors are still actively making investments in Malaysian deals which are scalable.
“From feedback from regional investors, they are more cautious, but at the same time, valuations are more realistic rather than sky-high when times were good,” he said.
Apart from that, Cradle Fund Sdn Bhd, an agency under the Finance Ministry, will also gradually move into the co-investing model from a pure grant-model.
“The key thrust of this year will be about growing private investments and gradually weaning off startups from depending solely on grants or Government funds alone. I don’t think the Govern-ment can continue to sustain the kind of investments it has pumped into the ecosystem like it did in the last decade,” he said.
This year, 50% of its development funding allocation would be on the equity side, totalling RM30mil.
“We are gradually moving away from the grants side and our equity investments will be made collectively from direct equity investment (under Cradle Fund) and co-investment (with our current 19 partners and over RM120mil in cumulative funds),” he said.
Aside from encouraging private investments from local or regional investors, and weathering to the adjustment in market demand, Nazrin added that it is vital to look at the talent shortage that startups face.
They could tap into the expertise of corporate talents affected by lay-offs in recent times.
These talents could bring in their expertise, ranging from introducing better work processes to marketing know-how of specific segments.
“There is opportunity to take advantage of the massive lay-offs happening in other industries and rechannel them as talent for local or regional startups,” he concluded. — Lim Wing Hooi
Source - http://www.thestar.com.my/metro/smebiz/news/2016/02/15/looking-towards-private-investments-and-market-adjustments/