“Building Local Tech Champions” means Growing Fast and Going Global

Uber has exited the region, selling out to Grab. Was it a lack of appetite, being late to the game, or simply not understanding how to negotiate outside their home market in the US?

Before I come to that, here are a couple of intriguing stories that came to my mind when thinking about the intricacies of the local business landscape: First, the Malaysian used-car platform company, Carsome raised US$19 million in March 2018. The funding was led by Burda Principal Investments, through their Singapore office. StoreHub, a Malaysian company that built a Cloud-based Point of Sale (POS) application that is used by 3,000 retail stores across 15 countries, raised US$5.1 million from Vertex Ventures. Vertex, an investor in Grab, is owned by Singapore’s Temasek Capital.

Then you may remember that last year, Soft Space, the Malaysian Fintech company raised US$5 million from Japan’s Transcosmos. Carsome, StoreHub and Soft Space, join almost 3,000 other companies that have been accorded MSC (Multimedia Supercorridor) status by Malaysia Digital Economy Corporation (MDEC). Since its inception in 1996, MDEC has been actively pursuing Malaysia’s digital agenda. This was done by initially encouraging technology companies to set up in Cyberjaya, and then bringing in shared services companies, and now by working to build globally competitive Malaysian headquarters companies.

In my last article, I provided examples of the first generation of Malaysian companies, many of whom achieved billion-Ringgit valuations with very little capital. Starting with founder’s money, these companies at best raised two to three million US dollars, which had to take them straight to an IPO. With few exceptions, except Grab and iflix, which raised US$ $170 million, Malaysian companies have not appeared on the radar of major VC firms.

Money chasing Malaysian deals

Well, as they say, times have changed: Money is now chasing local deals because of the ability of Malaysian companies to navigate the fragmented and tightly regulated markets of Southeast Asia. This is very important to note, as this is changing the landscape in Malaysia.

N2N Connect, a company that provides securities trading platforms used its Malaysia-base to grow into the region. We are fortunate to have a forward-thinking central bank. In addition to allowing for crowd funding platforms, and a sandbox for testing of new products, Bank Negara Malaysia (BNM) recently finalised electronic Know-Your-Customer (e-KYC) guidelines.

This is a huge step, allowing for much faster and more seamless customer acquisition. These guidelines made it possible for Internet payment provider iPay88 to launch a virtual account for the “unbanked” market.

I am pleased that MDEC has continued to play an active role in building the ecosystem that has allowed these companies to flourish. We maintain a constant and consistent dialogue with several stakeholders, including BNM and the Ministry of Higher Education – where we led the push to introduce coding classes in schools. While we continue to work on the digitalization agenda, we recognise an urgent need to bring larger VCs into Malaysia.

Companies like Carsome, StoreHub and Soft Space are building businesses, which are like utilities. There are differences though if one was to compare them with Tenaga or Celcom, Maxis and Digi. What are the differences? Utility businesses have large capex needs but their business is protected by licenses. They didn’t start off with a small bunch of customers and build the infrastructure from customer revenues; that business model just doesn’t work that way. Build a small power plant in Petaling Jaya, supply a few hundred customers and from the revenue build a megawatt plant. Big money is raised up front.

Scale up at speed

Well, the startup guys don’t have the protection of a license, so they start with a small bunch of customers and what is typically called a “Minimum Viable Product.” They then get feedback, gain traction and often go through a few product iterations. Once that has been achieved they need money – lots of it – to build the infrastructure, delivery capability and capture market opportunity ahead of potential competition. As we say in MDEC, it’s a matter of “Grow Fast and Go Global”.

Just last week, Zilingo, a Singapore based start-up raised US54 million for an expansion into the region from their base in Bengalaru, capital of the Indian state of Karnataka. That’s big money! The company provides a platform for customers to browse and buy fashion products from retailers in Southeast Asia. Since inception in October 2015, Zilingo has raised US82 million, to launch in Thailand and expand into Malaysia, Indonesia, the Philippines and Vietnam. Like other platforms, the technology relies on artificial intelligence – AI – to learn buyer behaviour and then propose the “right” product.

The need to achieve scale and leverage on engineering capability probably led GHL Systems Berhad to acquire rival company Paysys (M) Sdn Bhd for RM80 million, with half paid in cash and the balance in shares. GHL is no stranger to corporate exercises. In 2013, GHL acquired e-Pay Asia Limited, a company founded by Simon Loh, now vice-Chairman of GHL. Local PE firm, Creador, sold its stake to Actis in 2017, and they are now are pushing for growth in the payments, or fintech space, which is seeing a lot of new entrants.

Malaysia on the VC Map

Digitization coupled with the porosity of borders has meant that competition lands at your doorstep almost from the word go! Scale and speed of growth are important and the fuel for that is cash – and plenty of it! This is one of the reasons why MDEC is pleased to have attracted Vickers Venture Partners, to open their Kuala Lumpur office.

The presence of Vickers on our shores is yet another indication of investor interest in Malaysian-originated deals. Have we done enough to put Malaysia on the map? Only time will tell, but the good news is that investors are now getting off the plane at KLIA. At MDEC, we are busy making sure they continue to keep Malaysia firmly on their radar.

One major initiative we recently worked on this year was the “Sea Dragon Venture Platform” event (10-11 May2018), which was organised by PIKOM. MDEC was pleased to support this major initiative, which saw 30 global VCs and corporate investors visiting Kuala Lumpur. About 35 technology companies from Malaysia and the region were shortlisted to pitch at this event. SEAD are targeting companies that have the potential to be leading players in the Asian and North Asian markets that are looking for growth capital of US$5-25 million. This event was yet another opportunity to showcase to the region why having a startup to scale is best done from Malaysia.

It’s time to “Grow Fast and Go Global,” which is in line with MDEC’s globalization strategy; “Building Local Tech Champions!”

Gopi Ganesalingam is MDEC’s Vice President of Enterprise Development.

This article first appeared on 5 May at 2018 at Business Today, titled “Building Local Tech Champions” means Growing Fast and Going Global

POV from Silicon Valley: Location Matters – Particularly with Cross Border eCommerce

As consumers continue to expand the use of electronic commerce channels as their preferred method of shopping, the traditional retail industry “location matters” adage seems fated to obsolescence. Clearly, the location of a physical retail location is becoming less important than it was as recently as five years ago – the retail location is often in the cloud, accessible from wherever the consumer and his or her smartphone happens to be.

“Location matters” still rings true despite the evolution of commerce from physical to electronic, but its meaning has also evolved.  We all understand the concept of instant gratification and the feeling of frustration that can arise from waiting for a purchased item to be delivered. Jack Ma, founder and Executive Chairman of Alibaba, the world’s largest retailer has set the success requirement for their Electronic World Trade Platform to delivery within 72 hours of purchase to anywhere in the world, 24 hours within a country. Being able to consistently meet this requirement requires a highly sophisticated set of inventory management and logistics systems to be sure, but those things alone will not guarantee success. As it turns out, the shipping point’s location matters to a great extent in timely and efficient delivery – particularly when cross-border shipments are involved.

In an e-commerce world where this location matters, Malaysia enjoys many advantages, just as it has since the beginnings of international commerce centuries ago.  Strategically located on the Strait of Melaka, Malaysia is the natural gateway to southeast Asia, within easy reach of many of the world’s most dynamic economies. The ASEAN region is home to 630 million consumers and collectively the world’s sixth largest economy at over US$2.4 trillion annually. However, it’s not only the physical location that matters. What Malaysia and its partner Alibaba have put in place in that location are what make it one of the world’s most advanced e-commerce hubs.

Reliable and efficient shipping operates on a hub and spoke system, with few hubs connecting out to many spokes in a region.  The hubs are the most vital parts of the system, where synchronization of warehousing, packaging, transportation, and other logistical aspects of fulfilling an e-commerce transaction such as customs clearances or dealing with returned merchandise.  Malaysia’s recently launched Digital Free Trade Zone, which has within it the first international hub of Alibaba’s Electronic World Trade Platform, is among the e-commerce industry’s most advanced hubs worldwide.

Why did Jack Ma and Alibaba choose Malaysia for its first deployment of its Electronic World Trade Platform? Location was clearly one of the reasons. Our geopolitical stability and deeply ingrained trading culture were reasons.  The others relate to a powerful shared vision and the leadership commitment to execute an aggressive development plan. Making the Digital Free Trade Zone a reality involved the Prime Minister and other senior members of the government setting directives that cut across 26 different agencies and ministries. This top-down leadership, plus the sector-specific knowledge of MDEC and others driving the growth of the nation’s digital economy were what made it possible to transform vision into reality in under one year. Datuk Yasmin summed it up this way: “It was many things, but most importantly, he and the Alibaba team saw that we had the vision for it and the ambition to see it through.”

Jack Ma said, “the first-e-hub under the Electronic World Trade Platform outside of China will go a long way towards making global trade more inclusive and provide much-needed support to a hugely important constituent:  SME’s and the younger generation.” Clearly, the significance of the partnership with Alibaba, and the capabilities it has brought to market have industry, socio-economic, and other far-reaching implications. Datuk Yasmin expressed the following in conclusion:  “My dream is that we will rediscover and reposition the glory days of the Straits of Melaka during the silk and spice trade.  Melaka was right in the center of the universe then, and I feel it can be that in the e-commerce universe.”

Datuk Dan E Khoo is the President of MDEC Americas Inc; a Silicon Valley organization established to drive the global expansion of Malaysia’s digital economy.

Malaysian Leaders Must Build World-Class High Impact teams

When I joined Malaysia Economic Development Corporation (MDEC) in February 2015, I took on the role of Vice President of Enterprise Development. It was a new division created to identify and catalyse Malaysia-based companies into the global arena as eventual world icons. This was and still is one of MDEC’s four strategic pillars – to build world class tech champions.

It’s usual for MDEC to move people around internally to lead teams to drive various corporate objectives, so my MDEC story moved through different chapters. Currently, I am leading a laser-focused team using MDEC’s GAIN (Global Accelerator and Innovation Acceleration) initiative to elevate Malaysian companies onto the international stage, starting with the ASEAN region.

World-class ambitions demand a high-performance culture, which is a fast-emerging trend in many key organisations. Personally, I point to football teams (mysteriously called soccer by Americans) as examples of some “secrets” of what it takes to successfully develop and drive high performing teams.
Malaysia has already seen several inspiring success stories, moving in the right direction and gathering momentum. Just to run through a few:

  • Vitrox Berhad is a global player in automated vision inspection solutions. Founded by Chu Jenn Weng and Steven Siaw Kok Tong, both graduates from University Sains Malaya. Vitrox was first admitted to the ACE market in 2005 and moved to the Main Market in 2009. On 19th March 2018, their market capitalization stood at RM2,755 million.
  • Aemulus Holdings Berhad is another listed MSC status company. Founded by Ng Sang Beng and Yeoh Chee Keong, it listed on the ACE Market of Bursa Malaysia in 2015. Co-founders, Ng Sang Beng and Yeoh Chee Keong were colleagues at Altera Corporation in Penang. Their market capitalization stands at RM107 million.
  • Other MSC-status champions include Inmagine Group, now 16 years in operations, best known for their stock image business (123rf.com) and Piktochart, which produces visual stories from charts.
  • Green Packet Berhad is a Malaysian company that started out in Silicon Valley in 2000 and achieved listing in 2005. In true Silicon Valley style, the company evolved, selling its wireless broadband business to Telekom Malaysia to focus on the Internet of Things (IoT) and fintech.
  • iflix, a video on-demand service, was founded by Patrick Grove, who also built the hugely successful Catcha Group, a leading internet player in the region. In 2016, iflix secured a US$45 million investment from pay-tv giant Sky Plc.
  • MDT Innovations is the leading innovator in the region for IoT. Driven by Liew Choon Lian, CEO and Sim Hon Wai, COO, its revenue is 95% export driven. It was listed in Gartner’s Cool Vendor and featured as top 25 IoT companies by APAC CIO Outlook Magazine in 2018.

Passion, Diversity and Innovation

There are several other Malaysia-born companies that are now serving customers around the globe. All of them started with a core team of founders, who recruited their team and infused it with a mission, and – as they say – a dose of passion to achieve performance. As well as performance, they developed and continue to maintain high performing teams: It’s easier when you start from scratch, but if you don’t – you do need to continually add to your talent pool.

That means having to be in a location, which is attractive for talent, like Malaysia. MDEC has played a major role in making this possible, as one of the benefits of MSC (Multimedia Supercorridor) status is the ability to bring in talented staff from around the world.

In the corporate world, managers don’t have the luxury of building their teams from scratch. They join an organization, work their way up the ranks and if all goes well they get to run a department, division, etc. It’s fully staffed but nonetheless it is incumbent upon the leadership team to ensure diversity and inclusiveness. That’s how you get innovation – new ideas are needed from the outside: New blood to enable a fresh perspective, so to speak!

Incentives and a common goal are key to building a high-performance team

What does it take to build a high-performance team? A common goal is clearly important. Incentives also work, as you can see with football players and sales people, in general.

However, one should be wary of incentives driving the wrong behaviour. When too ‘significant’, incentives can sometimes cause problems. Most recently the big four Australian banks were hauled up by regulators and told to stop their product-based incentive payments, as customers were sold products they did not understand or need. The independent commissioner, Stephen Sedgwick said, “some current practices carried an unacceptable risk – of promoting behaviour, which is inconsistent with the interests of customers”.

In my earlier article, I talked about the need to have a strong story. If the story is clear and meaningful, and shows purpose, then you can actually recruit and motivate a team without relying on large monetary incentives! A high purpose generates powerful energies that will drive high performance: That is indeed the practice at MDEC, because working in MDEC is more than a job or a career, it’s about ‘serving the nation with your hand over your heart’.

Coming back to the issues faced by most managers, who after climbing up the corporate ladder have a team to lead: It is often assumed that they have the skills to manage a team, but in practice that might not be the case. A great salesman might not be a great sales team lead, where his job is to motivate, assist and plan for his salespeople to perform. This is where mentoring and coaching is required.

The other point to understand is that in a team, there will some who perform and others who don’t. If you have team members who are not contributors and in fact turn out to be disruptors, they need to be removed quickly and in an open and visible manner. Unfortunately, a lot of line managers prefer to keep these staff on the payroll and avoid uncomfortable conversations. When there is confusion about responsibilities, and no one is really held accountable for performance, managers will struggle to have an open and fair conversation about an individual’s performance. Without accountability, you cannot build a high-performing team.

“Well Done!”

Managers who want to build high-performance teams need to really understand this. If I could borrow again from football: All top Premier League teams are packed with talented, committed athletes, but the reality is that at this level, you can’t build a winning team without a superstar. Liverpool might have discovered one such star in, Mohamed Salah, who just turned 25 years of age and joined the club in June 2017 from A.S. Roma.

In his book, “Leading” Alex Ferguson (with Michael Moritz) said, “the two most powerful words in the English language are ‘Well Done!’ Much of leadership is about extracting that extra 5 percent of performance that individuals did not know they possessed.”

In building a high-performance team, you need a powerful story, committed team members, a couple of superstars and an evaluation system that is fair and open. What’s good for the goose is not always good for the gander, so rewards and expectations must be specific to each member. Add to this a courageous leader and you will have a winner!

Gopi Ganesalingam, Vice President, Enterprise Development, MDEC.

This article first appeared on 27 April 2018 at Leaderonomics, titled “Malaysian Leaders Must Build World-Class High Impact Teams

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