Speedhome CEO on moonlighting and riding out Covid-19

Dan Lain-Lain
 (Malay for “and others”) is a weekly column by TIA journalist Emmanuel Samarathisa that dissects the goings-on in the Malaysia tech scene but with a heavy mix of current affairs, policy and politics. Click
here
 to read past articles.

Speedhome CEO Wong Whei Meng / Photo credit: Speedhome

When Speedhome launched in 2017, I was genuinely rooting for the startup. Not because I’m an investor – I’m a journalist, come on. If I had the money to invest, I wouldn’t be here.

But Speedhome promised to disrupt the home rentals space in Malaysia by allowing tenants to rent with zero deposits. If you’re a renter like me, then you’d know how annoying the system is, which typically favors the landlord.

It’s a complex situation, but what happens is that a tenant will need to cough up a “deposit” that can come up to four months’ rent prior to moving in.

This deposit acts as some sort of “insurance” in case you, the tenant, go rogue or display your baddest behavior – e.g. trashing the place or turning it into a crime den.

Better yet, you need to pay legal fees upon signing the tenancy agreement aside from paying the deposit.

There’s also a whole load of racism that some people will have to deal with. Take it from me: Most of the time I’m able to rent a unit because my wife, who’s Chinese Malaysian, does most of the negotiating.

Despite its potential to disrupt the market, Speedhome was disrupted last year when it had to lay off staff. We
reported
 that.

I also found out that its CEO, Wong Whei Meng, had to moonlight as a talk show host on LinkedIn to make ends meet. Viewers of the show, which ran for three months, could donate or send him a tip. Wong also received support from his peers.

Speedhome HQ in Malaysia / Photo credit: SPeedhome

Despite navigating a bleak period, Speedhome is still here. I caught up with Wong to see what has happened since then.

Here’s my conversation with Wong, which has been edited for clarity and brevity:

Q: Last year was rough – you had to double up as a talk show host. What happened?

A: When I did the talk show, it was primarily to see if people were willing to pay me for a talk show that’ll supplement my income. We had a pay cut across the board, especially the CEO. As the CEO, I have to lead by example.

I didn’t have any thoughts about how I wanted to do it. It was more of just doing something and seeing if people would join me on this journey.

Q: Were the donations for the talk show substantial?

A: Yes. I was able to raise a few thousand ringgit in the form of tips or donations. So I felt touched knowing that people find the things that I share have value to them.

But after a while, I stopped because it was quite taxing in terms of time and topics. And when people start paying you, you feel obligated to do something good.

That pressure made me dedicate more time to preparation, so I stopped after running it for almost three months. I quit doing the talk show at the end of last year as growing Speedhome had always been the focus. We had to get the startup to profitability.

Q: Did you have to explain yourself to your investors?

A: Yes, I told them it is what it is. I explained it to them transparently: I was doing this literally right after working hours, and I was compartmentalizing my time for different things.

Obviously, investors were concerned that if I have to figure out my personal finances, then I can’t fully focus on the business. But we were able to reduce our burn and stay the course.

Q: You
wrote
 on LinkedIn that this entire journey took a toll on your family. Are they still with you on this?

A: This was not my first time doing business, but back then, when I went through the dips, I didn’t have my kids with me. I was 20-something, so even though I had troubles, it was manageable.

This time’s different. I need to put food on the table and to think about my kids’ education. So these all added up to the immense pressure of running a startup.

I had a very frank discussion with my wife to manage expectations, and she was there to support me. I’m thankful to have a partner who supports me.

That said, I had to be clear that last year was only a one-time experience for my family. It can’t go on. It’s not fair for me to ask for that kind of understanding forever, right?

Q: You are still here with Speedhome, though.

A: We were really surprised and grateful that we survived last year. So we decided to get our act together to focus on what’s important.

We reduced a lot of burn throughout last year. We aggressively cut costs, trimmed 20% of our workforce, and optimized certain aspects of the business.

For example, customer service – we used to run seven days a week. If we kept at it, we’ll be worse off. Eventually, we decided to run five days a week but automated some of the processes and that has helped so far.

What systemic issues in the Malaysian property market was Speedhome trying to address?

A: When we began, it was about helping landlords and tenants rent transparently and hassle-free.

We saw many things were broken in the sense that there wasn’t strong regulation nor was there a strong ecosystem. Obviously there’ll be bad apples on both the tenant and landlord sides.

But generally, what landlords were gunning for was using deposits as a way to filter or screen tenants.

And because there’s a gap in proper regulations, people default to what they know – skin color, language, religion – simply because there isn’t a better solution.

People then begin to judge a book by its cover, and that’s where discrimination or “taboos” crop up because we lack a better way to tackle these things.

Q: I’m brown, so I get that all the time.

A: Since we’re on this topic, the moment the skin is darker, acceptance level drops drastically in Malaysia. I can’t speak for the rest of the region, but that’s really true over here.

Q: How has Speedhome addressed these problems?

A: We’ve collected 50 million data points, both positive and negative, and from there we have models and patterns to screen a tenant.

Our main data sources are derived from credit reporting agencies as well as what’s available in the public domain.

When we started in 2017, the tenancy default rate was high. But we’ve managed to reduce that with our screening process.

Our goal is to build a model where we can tell the world or at least in the Malaysian context that there’s a more objective way of screening tenants.

Q: How has Covid affected the way you process and predict data?

A: When we built our models pre-Covid, we never expected massive job losses. Covid was a black swan event where a good tenant could quickly become bad simply because they’ve lost their job.

As a company, we suffered too. Across the board, the hit was bad, but we were able to collect more data. We back-tested them and deployed a newer model. We are projecting to at least reduce tenancy default rates by 20% to 30%.

Q: What’s next for Speedhome?

A: We are focused on expanding ancillary services like Speedfix, where we connect contractors directly with tenants or landlords for maintenance work.

Since we have a captive audience, we are not competing with jobs platforms. We are looking at servicing our internal customer base.

So we already have your contact details, from your phone number to your address. All you need is to just upload a photo of your maintenance problem and we’ll automatically match you with someone who can do the job.

Previously, we were known for zero deposits, but we have enabled landlords to choose to take in deposits or not. While we think the zero-deposit concept is good, we have neglected some landlords who may still want to use our platform but do not subscribe to our zero-deposit ideology.

Q: But how are you going to get to profitability while staying lean?

We currently have a captive audience of 6,000 plus, but we need to reach 8,000.

Since there’ll be no major marketing spend, we’re relying on word of mouth. We are also trying to boost revenue by providing ancillary services like Speedfix.

Currently, our largest markets are the Klang Valley (Kuala Lumpur and Selangor), followed by Johor and Penang. We’ll double down in these areas as developing new markets is certainly not high on the agenda.

I’m hoping that by reducing burn, we’ll get to profitability by the end of this year, if not the first quarter of 2024.


Malaysia’s 5G rollout goes full circle back to square one

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Hello reader,

After a few months of fending off the frustrations that come with poor mobile internet connectivity, I was suddenly surfing the web seamlessly. It took me a while, but I eventually noticed the “5G” icon near the network bars on the top right corner of my phone screen.

Despite the recent exasperations, I was largely a satisfied user of 4G tech – so much so that I initially viewed its successor as excessive. But the past few weeks have convinced me that the fifth-generation standard for broadband cellular networks can supercharge economies and usher in the era of new tech advances. (And yes, it’s ridiculously fast.)

In fact, 5G in India is expected to have a cumulative economic impact of
US$1 trillion by 2035
. The lure of this tech is evident, however its rollout has been anything but straightforward in most countries, especially in emerging markets.

Today, we shine the spotlight on Malaysia’s chaotic efforts to build its 5G networks.

From Chinese tech giant Huawei seeking a backdoor entry to the polarizing creation of government-owned Digital Nasional Berhad, the development of 5G infrastructure in the Southeast Asian country has faced a host of unforeseen challenges.

The premium story also dives into how years of political instability and policy flip-flops have somewhat ironically led Malaysia back to what was initially planned when the country laid out its 5G ambitions in 2018.

Today we look at:

How Malaysia’s 5G rollout turned messy

Bukalapak standing firm on zero service fees for users

18 essential reminders for budding entrepreneurs by
Tech in Asia
 founder Willis Wee

Other newsy highlights such as Indonesia and Malaysia launching a cross-border QR payment linkage

— Shravanth

P.S.: If you’re an entrepreneur looking for funding,
fill out this form
 to get your company featured on our list of fundraising startups.

Premium summary

Coming full circle

Image credit: Timmy Loen

Smooth sailing is not the word I’d use to describe Malaysia’s 5G rollout. What makes it all the more excruciating is after over five years of chopping and changing, the country is veering back toward something akin to the initial plans it had drawn up in 2018. But better late than never, right?

The origins:
 After the 2018 elections, Prime Minister Mahathir Mohamad’s government drew up plans for the country to move into 5G. In short, telcos would be asked to form a consortium and go about building 5G infrastructure. What this consortium needed to do was bid for 5G spectrum auctioned by the Malaysian Communications and Multimedia Commission (MCMC), a state-owned industry regulator.

The twist:
 Mahathir’s administration was ousted in 2020. His successor’s government incorporated a firm called Digital Nasional Berhad (DNB). MCMC then allocated the spectrum to DNB for a price, and the company would lease the spectrum to telco players, making DNB, in telco talk, a single wholesale network – aka a monopoly.

Middle ground:
 Telcos rebelled against this plan. Things got so bad that the government had to offer these firms equity in DNB – almost all telcos took up the offer. Those that complied with DNB’s terms and conditions began rolling out their 5G services from December 2021. But this, too, was a slow affair.

Read more:
How Malaysia’s 5G rollout turned messy

News spotlight

Going against the grain

Image credit: Timmy Loen

Bukalapak
has opted against
 introducing transaction and app service fees for users, bucking the recent trend among several ecommerce companies in Indonesia.

Not alone:
 Bukalapak isn’t the only ecommerce platform operating in Indonesia that’s not charging its users transaction and app service fees. Lazada, too, doesn’t require customers to pay these fees. However, the Alibaba-owned platform’s future plans for such fees are currently unknown.

Rival charts own path:
 On May 2, Tokopedia started collecting US$0.07 for every purchase using virtual payment. The firm also increased its app service fee from US$0.07 to US$0.14 or US$0.2 upon checkout, depending on the total transaction amount. This adjustment is expected to have long-term positive impacts for the company.

Business as usual here:
 Shopee customers must pay a service fee of US$0.07 for every transaction, except for
zakat
 (mandatory alms for Muslims), donations, and financial products. Since October 2022, the fee has been charged to every buyer who has made four transactions – with any payment method and no minimum purchase – since opening an account.

See also:
Why GoTo’s shares jumped following Q1 results, while Bukalapak and Blibli are flat

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Quick bytes

1⃣
Boosting financial inclusion

The central banks of Malaysia and Indonesia
have linked
 QR payments of both countries to promote inclusive cross-border payments. Customers can now make instant retail payments by scanning the Quick Response Code Indonesian Standard or DuitNow QR codes at physical or online stores that use services offered by participating financial institutions.

2⃣
From fried chicken to stock trading

Online investment platform DragonFi
launched
 in the Philippines after a year of development. Tony Tan Caktiong and Edgar Sia, two billionaires behind fast-food restaurant chains Jollibee and Mang Inasal, are listed as co-founders of DragonFi. The duo have invested in the trading firm, but details of their investment are unclear.

3⃣
For the entrepreneurs

After building
Tech in Asia
 for over a decade, founder Willis Wee shares invaluable insights and lessons on the things he wished someone had told him when he was starting out. From having a clear vision to being kind,
here are his 18 essential reminders
 for those ready to take on the challenge of building a startup.

4⃣
First one to go?

Cainiao Network Technology, Alibaba’s logistics arm,
plans to raise
 up to US$2 billion through a Hong Kong listing in early 2024. The IPO is part of the Chinese tech giant’s restructuring plan, which involves splitting its business into six units. This is the first publicly reported capital raising plan from Alibaba’s units, which is expected to boost the sluggish Hong Kong capital markets.

5⃣
The new VC on the block

Investment veteran Jeffrey Seah
announced the launch
 of MSW (Mettle Salt Wealth) Ventures, an investment outfit focused on early- and growth-stage opportunities. Through its inaugural fund Asia Fund X, the Singapore-based company will look for potential investments across Southeast Asia, especially in foodtech, agritech, data tech, sustainability, and enterprise tech.

6⃣
Going in for a second bite

Big Idea Ventures, a Temasek-backed foodtech investor,
is looking to raise
 its second alternative protein fund. The move comes about two years after the venture firm secured US$50 million for New Protein Fund I, its debut alt-protein fund that also received funding from Enterprise Singapore.


Mastercard opens Malaysia data hub for Asia-Pacific clients

Photo credit: Mastercard

Mastercard
 has opened a data and services (D&S) hub in Malaysia, which will be focused on supporting the firm’s clients in Asia Pacific.

The new hub will provide cybersecurity, credit risk, and data analytics services to help scale clients’ businesses. According to Mastercard, the hub aims to support both private and public organizations to “make more data-driven decisions and optimize performance and profitability.”

The payments firm’s D&S experts work with nearly 4,000 clients in over 120 countries, providing solutions for a range of services such as loyalty programs and product prototypes.

See also:
Malaysia’s Islamic fintech scene: fool’s gold?

Recently, Malaysia had officially linked QR payments between it and
Indonesia
 as well as
Singapore
. This enabled participating merchants to accept QR payments through Malaysia’s DuitNow, connecting with QRIS in Indonesia and  NETS for Singapore.

Note: This article was written with the help of AI. Don’t worry, humans were still involved in producing this story.


Malaysia, Indonesia launch cross-border QR payment linkage

A QRIS transaction / Photo credit: Shutterstock

The central banks of Malaysia and Indonesia have
officially linked
 QR payments of both countries to promote faster, more transparent, and more inclusive cross-border payments.

The pilot phase of Bank Indonesia (BI) and Bank Negara Malaysia’s (BNM) linkage started on January 27 last year, paving the way for today’s commercial launch.

Customers can now make instant retail payments by scanning the Quick Response Code Indonesian Standard (QRIS) or DuitNow QR codes at physical or online stores that use services offered by participating financial institutions.

This move, which promotes more extensive use of local currencies for bilateral transactions, will benefit MSMEs and maintain macroeconomic stability, said BI governor Perry Warjiyo.

See also:
Indonesia’s big four banks are minting it but need to watch their backs

Compared to the pilot stage, the official launch saw an increase in the number of participating financial institutions, including non-banking ones.

Indonesian institutions in the lineup include Bank Sinarmas, Bank Central Asia, as well as fintech firms Dana and LinkAja. Meanwhile, those from Malaysia include Hong Leong Bank, Maybank, and Public Bank.

The development follows
a similar tie-up
 between the
Monetary Authority of Singapore
 and BNM, with Singapore’s NETS and Malaysia’s DuitNow providing the QR payment services.


Aeon to proceed with Malaysia digibank despite MoneyLion exit

Japanese conglomerate Aeon runs a chain of shopping malls in Malaysia, targeting suburban residential neighborhoods nationwide. / Photo credit: Wikimedia Commons

US-based neobank
MoneyLion
 is no longer partnering with Japanese conglomerate Aeon to launch a digital Islamic bank in Malaysia.

A representative from Aeon told
Tech in Asia
 that MoneyLion decided to pull out of the consortium to focus on its US operations.

This means Aeon, which runs a chain of supermarkets and shopping malls in Malaysia, will launch the digital bank with its two subsidiaries.

T
he group originally consisted of
Aeon Credit
,
Aeon Financial Services
 and MoneyLion. The Aeon units each hold a 45% stake in the consortium while the remaining 10% was owned by MoneyLion.

Aeon did not respond to queries on whether it was actively seeking a new partner following MoneyLion’s exit. For now, the Japanese firm said it’s still on track to launch the digital bank, which was scheduled within 24 months from the approval date of its license from the Ministry of Finance.

The Aeon-led consortium
bagged
 Malaysia’s first digital banking license on April 29, 2022. This means the official launch should be in April 2024, pending approval from Bank Negara Malaysia (BNM), the country’s central bank.

Steering Aeon’s digital bank is Raja Teh Maimunah Abdul Aziz, the former managing director of Ambank’s wholesale banking arm. She
was appointed
 Aeon’s digital bank chief executive officer in November 2022.

The Aeon-led consortium is one of the five groups that got approval to launch digibanks in Malaysia. Three consortiums are set to run conventional digital banks, namely: Boost and RHB; Grab-Singtel and Kuok Brothers; and YTL Digital Capital and Sea Group.

The remaining two will operate Islamic digital banks. Aside from Aeon’s group, a consortium made up of KAF Investment Bank, Carsome, Jirnexu, and MoneyMatch also holds this license.

See also:
Malaysia’s digibank race heats up: 3 things to watch


Malaysia’s Islamic fintech scene: fool’s gold?

Dan Lain-Lain
 (Malay for “and others”) is a weekly column by TIA journalist Emmanuel Samarathisa that dissects the goings-on in the Malaysia tech scene but with a heavy mix of current affairs, policy and politics. Click
here
 to read past articles.

Since we’re still in the Eid al-Fitr season, let’s talk about Malaysia’s Islamic fintech scene.

Malaysia’s national mosque in capital Kuala Lumpur / Photo credit: Wikimedia Commons

You may think that since Muslims make up roughly 65% of the population, Malaysia is a goldmine of an opportunity. A startup comes in, launches a fancy app, and boom! A unicorn in the making. But the truth may be far off.

Let’s check out the lay of the land first. The country has 294 fintech companies but only 5% of them are Islamic fintech firms, according to the
Malaysia Fintech Report 2022
.

Some names in this space include MadCash, PayHalal, Microleap, Ethis, Wahed, Pewarisan, and Wakaful. Some, like US-based Wahed, are not headquartered in Malaysia.

Now, what makes a fintech company “Islamic”? Obviously its products adhere to Shariah principles, with distinct features including the prohibition against charging of interest (known as
riba
) and an emphasis on risk-sharing as well as ethical investing.

The latter, too, is guided by the Islamic law. So, obviously, no investments or dealings with companies that produce alcohol, for example.

But despite a large population and a somewhat conducive environment, Malaysia hasn’t had a Shariah fintech unicorn. Heck, we don’t even have a fintech unicorn.

For comparison, Indonesia has
Ovo
, a fintech unicorn that also offers Islamic products.

The lack of a mythical beast aside, here are four major challenges for Malaysia:

Powerful incumbents

This is pretty obvious but worth spelling out. The country’s financial services space is dominated by incumbents, including some of the country’s largest banks like Maybank, CIMB, and RHB.

Naturally, their Shariah banking arms also command attention. According to
The Asian Banker’s rankings
, six of the world’s top 20 Shariah banks – Maybank Islamic, CIMB Islamic, Bank Rakyat, RHB Islamic, Bank Islam Malaysia, and Public Islamic Bank – are headquartered in Malaysia.

These players are household names and since they’ve been around for some time, they have a lot of dry powder to roll out digital services. You could even say their tech capabilities are superior to the regular fintech upstart.

Too many stakeholders

Secondly, Malaysia’s Islamic finance is largely decentralized, meaning that each state has its own suite of services to cater to the local Muslim community.

Say you have a brilliant plan to create a one-stop app for Muslim users to fulfill some of the important aspects of their religious life, such as contributing
waqaf
 (voluntary charitable donations) or
zakat
 (an obligation for qualified Muslims to donate a portion of wealth yearly to charitable causes).

The easiest hurdle you’ll run into is to deal with multiple stakeholders – mostly government-run agencies at both the federal and state levels.

Zakat
, for example, can either be paid to a federal or state agency. These agencies have their own apps.

This decentralization problem isn’t just confined to Malaysia. If you want to scale and expand to Indonesia, for example, you’ll find no standardized framework that governs Islamic finance.

Such was the case of HelloGold. Before it
bombed
 due to the pandemic, among other reasons, the company wanted to expand to Indonesia since its products were Shariah-compliant. But progress was slow.

Robin Lee, the gold-trading firm’s co-founder,
told
 business publication
The Edge
 that the expansion would have been easier if there had been a set of standards, like a checklist agreed upon and recognized by countries regionally or globally.

Lack of investment options

Thirdly, there aren’t just that many Shariah-based investment products. Let’s take exchange traded funds, for instance.

At the time of writing, there are only six Shariah-compliant ETFs on local exchange Bursa Malaysia: MyETF Dow Jones US Titans 50; MyETF MSCI Malaysia Islamic Dividend; MyETF Dow Jones Islamic Market Malaysia Titans 25; MyETF MSCI Southeast Asia Islamic Dividend; MyETF Thomson Reuters Asia Pacific ex-Japan Islamic Agribusiness; and TradePlus Shariah Gold Tracker.

While these ETFs are “Islamic”, they’re similar to conventional indices. For example, MyETF Dow Jones Islamic Market Malaysia Titans 25 invests in various large-cap companies that are component stocks of the KLCI, which is Bursa Malaysia’s benchmark index comprising 30 of the largest stocks by market value. As a result, investors may not benefit much from diversification.

Another example here is the foray of the Employees Provident Fund (EPF), the country’s largest institutional investor with assets under management of a billion ringgit (US$440 million).

The private pensions purse has a Shariah-compliant account for members who prefer such. But in terms of dividends, it has been trailing its conventional counterpart.

When asked by the press why such is the case, former EPF CEO Shahril Ridza Ridzuan
said
 that Shariah-compliant investments aren’t exposed to “to the global conventional banking system, mainly global banks and global insurance companies.”

He went on to add that members who opted for the Shariah-based product weren’t concerned with dividends but just wanted a product of that kind.

Funding concerns

Lastly, regulations. A few investors I spoke to told me that the entire process of getting investments or operating/financial services licenses approved can be cumbersome, leading to the question of whether a startup should be allowed to burn cash while waiting for those approvals.

This in turn is one of the reasons the country’s Islamic fintech companies are
unable
 to net funding north of US$100 million, despite Shariah-compliant stocks accounting for 65.5% of the Bursa Malaysia in 2022, according to the Securities Commission Malaysia.

Surely proponents will argue that there are opportunities here. Islamic fintech isn’t all hype for sure, as there are many other products such as SME financing that may provide these fintech firms an avenue to make an impact. However, it goes back to the earlier point of having incumbents deep within the financial ecosystem.

Until a compelling case for Shariah fintech can be made, let’s hope that whatever buzz these companies create won’t turn out to be fool’s gold.


Finnish EV firm raises $93.8m, gears up for SEA expansion

Photo credit: Virta

Virta
, a Finland-based provider of charging services for electric vehicles, has raised US$93.8 million (85 million euros). The round is led by its existing investors such as Jolt Capital, Future Energy Ventures backed by E.ON, Helen Ventures, and
Vertex Growth Fund
.

The fresh funds will be used to grow its charging transactions by more than 5x in the Asia Pacific and Europe by 2025. The company said it will expand into Malaysia, Indonesia, and Vietnam within the next two years.

Founded in 2013, Virta provides smart charging services for both EV drivers and companies alike. The company, whose Asia-Pacific headquarters is located in Singapore, plans to introduce its smart-charging capabilities for Asian markets later this year.

In Southeast Asia, Virta has partnerships with Thailand’s EVolt Technology and Malaysia’s VSD Automation.

See also:
Vingroup founder’s EV play revs up Vietnam’s ride-hailing race


Coins and Controls: a breakdown of Southeast Asia’s crypto regulations (Malaysia)

When it comes to crypto rules, it appears that Malaysia is more comfortable playing it safe than sorry.

Generally speaking, financial authorities in the country have operated on a whitelist method – investors can only trade seven approved tokens or coins: Bitcoin, Ether, XRP, Litecoin, Bitcoin Cash, Link, and Uni. This is heavily regulated by the Securities Commission Malaysia (SC), and
officially licensed exchanges
 in the country must abide by this whitelist.

Here’s a look at how Malaysia’s regulatory environment for cryptocurrencies got to this point:

Click on each section of the infographic to find out more

Mass protection

Like most jurisdictions, heavy regulations are meant to act as protection for general consumers.

Many retail investors these days aren’t very well-versed in protecting themselves against investment risks because they don’t need a high level of research or education to get started, says Wilson Chin, head of marketing at
Tokenize
, a Malaysia-based digital asset exchange (DAX) platform.

“You have to keep in mind that it’s so easy to start investing these days,” he continues. Consequently, the onus is on regulators and market operators to protect this growing consumer base.

Growth figures back this up – while adoption has
slowed over the past year or so
 due to the crypto winter, there was a
strong uptick in interest
 from Malaysian investors leading up to that.

Putting a lid on it

In general, Malaysia’s extremely strict regulations put a cap on the types of products or services that local firms can provide.

Licensed or regulated companies can’t offer
leveraged investing
,
staking
 or even meme tokens like
Dogecoin
, among other things.

Photo credit:
rufous
 /
123RF

In particular, meme tokens (or
shitcoins
, as they’re often called) might not have much luck with the SC, given that there’s a long list of stringent criteria that a product or service has to meet before it can be whitelisted.

“The regulators will look into things like the founders’ backgrounds, distribution of coins, number of nodes, as well as risk of market manipulation and
pump-and-dump schemes
,” explains David Low, general manager of
Luno’s
 Asia-Pacific business.

Essentially, the SC will only approve of traded tokens that are “credible,” he says, and that’s something the memecoins don’t have.

“We know that the token was just created for fun rather than for an actual use case.”

Hand in hand

That said, while the country may have some tough rules, local crypto firms have taken to them well.

“We’re very happy being regulated by the SC. They’ve always shown a significant amount of knowledge about the industry and can never be underestimated,” says John Sidoli, head of compliance at
Sinegy
, a local DAX.

More specifically, regulations are seen as a good thing because of their ultimate purpose: consumer protection.

“A regulated route may not be the more economically appealing route because there’s more constraints. But I think that in the long term, all activities in Malaysia regarding the exchange of digital assets will – in one way or another – fall into a regulated space,” says Fadzli Shah, CEO of
MX Global
, another Malaysian DAX.

“This long term is good because then users will be confident that they’re trading with good actors. It’s a marathon, not a sprint.”

Ultimately, it’s clear that authorities and crypto firms in the country will always have a close relationship.

Sinegi’s Sidoli hopes that with regards to new products or services, the government can consider having more assets approved for the whitelist, including a possible expansion of the current seven approved coins to 20.

According to Luno’s Low, another ideal goal is to have a policy that protects Malaysians who invest online, as some of them may not fully grasp the legalities of trusting their assets with foreign companies.

That’s because while Malaysia-domiciled companies have a strict rulebook to follow, the same doesn’t necessarily apply to overseas-based firms. They may still be able to advertise their products or provide an easy way for Malaysians to sign up on their platforms online, exposing these investors to high risks.

Additionally, as use cases like staking become more popular, Low believes the government will start working with local stakeholders to define the right policies to govern the introduction of these use cases.

“It’ll always be a catch-up game for regulators, so they have to always expand their scope as the market matures,” he says.

“It’s really a collaborative approach, and the regulators have always been very forward-thinking about it.”

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.44 ringgit.

Coins and Controls is a series that covers crypto regulations by jurisdictions in Southeast Asia. To read more about the latest crypto news and developments,
check out Tech in Asia’s coverage here
.


How Malaysia’s 5G rollout turned messy

Dan Lain-Lain
 (Malay for “and others”) is a weekly column by TIA journalist Emmanuel Samarathisa that dissects the goings-on in the Malaysia tech scene but with a heavy mix of current affairs, policy, and politics. Click
here
 to read past articles.

Yes, the telco arm of conglomerate YTL, was among the first adopters of Malaysia’s 5G rollout. / Photo credit: Yes

Last week, I took a break from writing this column. No, I didn’t do any soul-searching – I just wanted a reprieve from the weekly grind.

During my time off, one topic surfaced in the news: Malaysia’s 5G rollout. To be sure, it has come up before, usually from negative coverage.

This time, however, the buzz was that Prime Minister Anwar Ibrahim would be announcing the results of a government review on the country’s 5G initiative. The day of reckoning was supposed to be yesterday. Alas, there was no post-cabinet press conference.

While a formal announcement may only be made after the Eid celebrations, there are some things that need to be said. For starters, Malaysia botched its 5G rollout.

Believe it or not, Malaysia was ahead of Singapore… at least in announcing its intention to push out 5G. Singapore
announced
 its plans in 2020, Malaysia did so in 2018.

But talking about this is like being a Liverpool fan, a diehard who can only cope with the football club’s present inconsistent run by looking at past accolades. But, hey, this isn’t a sports column.

Of political instability

Let’s get back on track. 2018 – if you’ve been following Malaysian affairs – was a crucial year for the country because a regime change occurred after the 14th general election – a first in Malaysia’s history.

In the run-up to the elections that year, there was a proposal to deploy broadband nationwide.

When Mahathir Mohamad returned as prime minister after the 2018 elections, his government reviewed the broadband plan, and from this study came a clearer ambition to move into 5G, among other things.

In a nutshell, telcos would be asked to form a consortium and go about building 5G infrastructure. Financing will come from the telcos’ own books.

The Malaysian government would provide some aid through an already established kitty for digital infrastructure called the Universal Service Provision (USP) fund. There would also be the possibility of another consortia should this model prove successful.

What this consortium needed to do was bid for 5G spectrum auctioned by the Malaysian Communications and Multimedia Commission (MCMC), a state-owned industry regulator. MCMC also oversees the above-mentioned USP fund.

But Mahathir’s government was ousted in 2020. His successor, Mahiaddin Yassin, together with then finance minister Tengku Zafrul Aziz, made some material changes to the country’s 5G plans.

What happened was that the government incorporated a company called Digital Nasional Berhad (DNB) and then pumped 500 million ringgit to capitalize the company.

MCMC then allocated the spectrum to DNB for a price, and the company would lease the spectrum to telco players, making DNB, in telco talk, a single wholesale network (SWN) – aka a monopoly.

DNB’s creation was polarizing. Critics pointed out the poor track record of the SWN model, citing the experiences of other countries.

They also feared that telcos would pass on the cost of riding on DNB’s network to consumers, which would result in higher prices.

Some worried that there would be governance issues since DNB is wholly owned by the government. How do you regulate a government entity when MCMC is also a state agency? What about the use of public money and tracking this? Are the bank loans to DNB government-guaranteed?

But DNB and its supporters rebutted these by highlighting that telcos in general are for-profit entities. They are in the business of “sweating” their assets which are heavily invested in things like 4G infrastructure. So there’s no incentive for them to move into 5G – or if there is, their efforts would be severely limited to certain areas.

DNB also
claimed
 that telcos can save on 5G investments, allowing them to offer services at a lower cost.

Finally, DNB insisted that all its tenders were above-board and that financing would not come from public coffers. Loans would also not be government guaranteed, as banks had already lent the firm money to execute the rollout.

Does DNB have other policy levers in its favor? Definitely. Telcos would have no choice but to work with DNB if they wanted to develop 5G because MCMC made it so.

Enter the multiverse of madness

Telcos
rebelled
 against the plan. Things got so bad that the government had to
offer
 telcos equity in DNB to push things along.

The contracts between DNB with the other players were subject to multiple revisions. As for equity, almost all telcos took up the offer, save for two: Maxis, the country’s second-largest telco, and a small-ish player called U Mobile.

Prime Minister Anwar Ibrahim (center) meeting with relevant ministers and officials to discuss DNB and 5G on March 18 / Photo credit: Fahmi Fadzil’s Facebook account

Those that complied with DNB’s terms and conditions began rolling out their 5G services starting December 2021 onward. But this, too, was a slow affair. Digi, another large telco player in Malaysia, only began offering 5G products in November last year.

But there are other funnies worth mentioning too. DNB’s savings math, for instance, doesn’t add up. For example, a report released last year by Kuala Lumpur-based brokerage CGS-CIMB
stated
 that the three major telecommunication companies – Maxis, Celcom, and Digi – would be required to pay wholesale fees amounting to 7.4 billion ringgit (US$1.6 billion) to 8.4 billion ringgit (US$1.9 billion) each over a nine-year period.

If each telco paid 7.4 billion ringgit, the total payment to DNB would be 29.6 billion ringgit (US$6.67 billion), which is similar to DNB’s estimated expenses if the telecommunication companies decided to establish their own 5G network.

Even the timeline is whacked. In December 2021, DNB unveiled its 5G deployment plan, which intended to attain 40% 5G population coverage with 4,018 sites by the end of 2022.

However, in January of the following year, DNB failed to meet its goal, having established just about 3,900 5G sites by the end of December 2022. Despite this, DNB claimed to have surpassed its objective with nearly 50% 5G population coverage.

After being reprimanded by Communications and Digital Minister Fahmi Fadzil for unverified coverage claims, DNB
clarified
 that only 38% of 5G population coverage is accessible to the public, as only 2,800 sites are “on air.”

Latest figures
 are that 5G nationwide coverage is at 54.7%, with Kuala Lumpur being 97% connected. No one has verified these claims, by the way, not even the MCMC. Why? Because there are
complaints
 of 5G users still having to rely on 4G.

A backdoor lobby

If things couldn’t get any funnier, the
Financial Times

reported
 on March 6 that Chinese firm Huawei is seeking a backdoor entry into Malaysia’s 5G landscape. Minister Fahmi had to tell companies to
stop lobbying
 for 5G tenders through the media, which many had been doing.

For what it is worth, when Prime Minister Anwar was opposition chief in 2021, he
said
 that Huawei could complete the rollout at half the price that was estimated. How he arrived at those figures remains unclear.

All these issues culminated in a
Reuters

report
 on Monday that said Anwar’s government would be mulling a second 5G network next year to challenge DNB’s lock on the market. This was supposed to be either confirmed or denied at yesterday’s press conference.

While we are still in limbo for an official announcement, Anwar’s government wants to ensure 80% coverage by 2023.

There are many permutations to achieve this. What some industry veterans and investment bankers tell me is that they are bracing for a dual wholesale network as suggested in the
Reuters
 report.

The government may also relinquish its stake in DNB and allow it to be run as a consortium of sorts with better oversight and greater transparency. DNB may not be disbanded because, well, it has loans to repay.

Some large telcos may get what they want and be allowed to deploy 5G on their existing spectrum, albeit with conditions.

Basically, what was initially planned in 2018 under Mahathir’s government, where telcos will work together to share networks and manage costs of the 5G rollout, may happen after all.

Crazy, right? Two years’ worth of political instability and policy flip-flops, all to go back to plan 1.0. According to a report by research firm GSMA Intelligence, Malaysia is now not only behind Singapore but also the Philippines, Indonesia, and Thailand in 5G take-up rates.

Photo credit: GSMA Intelligence

To be sure, people can live with a good 4G connection since most of us use it for calls, emails, streaming, and maybe gaming. But a consistent 4G connection can also be rare.

So let’s get this straight: telcos aren’t perfect. And that will remain the status quo because MCMC, the regulator, has been quite toothless.

And I’m not talking about patchy connections in some remote part of Malaysia but even in areas within the Klang Valley.

As for 5G, it would be used for research and development and all those highfalutin tech niches. Examples include 5G-powered ports and hospitals in Thailand or Singapore’s automated EV manufacturing facility.

If we want to lure big tech multinationals and nurture innovative startups, then getting 5G right and having some policy certainty there would be great.

So the delay is quintessentially a Malaysian problem, where public infrastructure becomes a politician’s vanity project. After all this is the land where the mind boggles.


Fave exits Indonesia to focus on other ‘core markets’

Photo credit: Fave

Fintech firm
Fave
 has exited Indonesia to focus on its core markets of Singapore and Malaysia as well as its new Indian operations.

Confirming the news to
Tech in Asia
, the company said its withdrawal from Indonesia took effect on April 1. The company has advised customers to redeem their vouchers and e-cards by May 31.

Fave also added that it will keep serving merchants in the country through its sister company
QwikCilver
 – which offers end-to-end B2B gift card solutions – as well as other offerings from its parent firm, Pine Labs.

The company said it can’t specify the number of Indonesian staff affected by the move. “We are taking steps to minimize any impact on our employees. Fave’s priority is to ensure that our employees are treated fairly and with respect throughout this transition,” a spokesperson added.

The development follows
Joel Neoh
, co-founder and CEO of Fave, stepping down last month. At the time, Neoh said in a statement that “millions of consumers across Malaysia, Indonesia, and India use Fave on a daily basis for payments and rewards.”

Fave, which began as gym subscription service KFit in 2015, got a new lease on life when it acquired Groupon’s businesses in three Southeast Asian countries two years later.

Fave offers eCard, a digital card that provides cashback, as well as a digital payments system, a deals portal, and a buy now, pay later service. The startup said it reached its highest volumes of transactions with a 40% quarter-on-quarter growth at the end of 2022.

The company was acquired by Pine Labs in 2021 in a
US$45 million deal
.

See also:
Southeast Asia’s thriving buy now, pay later players (update)

Update
 (April 19, 5:30 p.m. SGT): This article was
updated
 to include additional comments from Fave.


Indonesia’s ascent to the top of global Islamic fintech faces obstacles

Indonesia is a leading Islamic fintech hub, but it still lags behind Malaysia and Saudi Arabia, despite the fact that the latter two have smaller Muslim populations.

Malaysia and Saudi Arabia remained the first and second Shariah fintech markets in 2022, according to the
Global Islamic Fintech Report
 by research and advisory firm DinarStandard. The study considered factors such as talent, regulation, infrastructure, capital, as well as market and ecosystem.

Indonesia improved one rank to third place with an overall score of 64.7%, surpassing the United Arab Emirates.

Ironically, despite having the biggest Muslim population globally, Indonesia trails behind in market size, reaching only US$4.2 billion in 2021. Malaysia had US$4.8 billion, while Saudi Arabia saw a whopping US$26 billion.

Market size is calculated based on actual transaction volume, and what might have contributed to Indonesia’s modest figure is the 5% Shariah fintech penetration rate. Nevertheless, low penetration rates are a common trend in many Muslim-majority countries, according to local player Hijra Group (previously Alami).

The Muslim community celebrates Idul Fitri at a public park in the city of Pematang Siantar, Indonesia. / Photo credit: Shutterstock

That said, the archipelago is home to 61 Islamic fintech players, but the number is only a fraction of the 300 fully licensed fintech firms. Still, 61 is the world’s highest compared to Saudi Arabia’s 38 and Malaysia’s 37 companies.

Although Shariah fintech is growing rapidly, it has a meager market share compared to the Islamic financial industry at large, says
Yusuf Wibisono
, director of think tank Indonesia Development and Islamic Studies.

He adds that as of January, Islamic fintech assets in Indonesia stood at 136 billion rupiah (US$9.2 million), less than 0.1% of Shariah non-bank financial industry’s total assets, which reached 148 trillion rupiah (US$9.9 billion).

But there’s significant room for growth. The DinarStandard study predicted that by 2026, the country’s Islamic fintech market will hit US$11.3 billion, while Malaysia will have US$12.1 billion and Saudi Arabia US$52.3 billion.

Limited budget, low inclusion

The Indonesian government’s push for Islamic economic development has been far greater than in the previous two decades, says
Wahyu Jatmiko
, a finance lecturer at the University of Indonesia.

Supportive regulations have been put in place, including specific laws on Islamic banking and
zakat
, as well as general regulations related to Shariah economics.

Furthermore, the country has formed national committees and bodies to accelerate the Shariah finance industry growth.

Three large state-owned banks – Mandiri, BNI, and BRI – have also
merged
 their Shariah units into one entity called Bank Syariah Indonesia.

Despite these efforts, Jatmiko says that the national budget for the Shariah finance industry has been limited.

This has led to the committees seeking partnerships with other institutions, such as Bank Indonesia, the Financial Services Authority (OJK), and the Indonesian Association of Islamic Economists (IAEI).

Photo credit: Shutterstock

The lack of financial literacy and inclusion has also stunted the growth of Shariah finance.

OJK
reported
 significantly lower Islamic financial literacy and inclusion rates in 2022, at 9.1% and 12.1% respectively, compared to the general financial literacy and inclusion rates of 49.7% and 85.1%.

Hijra Group CEO
Dima Djani
 says that his company has been trying to solve the issue through market education and a more direct marketing approach.

With this approach, the user acquisition cost was relatively high at first but then decreased “as the Islamic finance industry became more mainstream,” Djani adds.

See also:
Mapping the key Islamic tech startups in Southeast Asia

To address this problem, the Ministry of Religious Affairs must strengthen partnerships with fintech or other startups to promote Shariah products, says
Pandu Sjahrir
, founding partner of AC Ventures.

In addition, a lot of demand for Sharia businesses may exist in remote areas, so the government should enhance the financial infrastructure to facilitate the transfer and collection of funds from these locations, he says.

In the DinarStandard research, Indonesia scored 4 points for proximity to customers, while Malaysia and Saudi Arabia had 5 points each.

Late to the game

Indonesia had a slow start in Shariah finance. One reason for this is the country’s political and economic instability during the 1990s, which hindered the development of the financial sector as a whole.

It was only after the 1997 Asian financial crisis that Indonesia started to implement economic reforms and take the necessary steps to create a more stable financial environment.

“A top-down approach with government support is the key to growing the Shariah market. The Malaysian government initiated the Islamic Banking Act in 1983 and Saudi Arabia has implemented Islamic banking since the beginning,” says Djani.

Bank Muamalat
, Indonesia’s first Islamic bank, was founded in the 1990s when the national banking sector had yet to embrace Shariah banking.

The legal basis for operating an Islamic bank was only briefly mentioned in a 1992 regulation under the term “profit-sharing banks,” without clear guidelines on the Shariah legal basis and permissible business activities.

It wasn’t until 2008 that
an Islamic banking law
 was enacted, giving a more comprehensive legal framework to accelerate the growth of the national Islamic banking industry.

(From left) Alami co-founders Harza Sandityo, Dima Djani, and Bembi Juniar / Photo credit: Alami

Even so, the government and market players lacked synergy at that time, resulting in scattered approaches that failed to expedite market penetration, Djani says.

“However, since the formation of the National Sharia Economy and Finance Committee in 2020, we’ve been seeing stronger support and collaboration between the government and key players in the market,” he adds.

But there’s still a long way to go, not just in terms of regulation. The limited state budget for the Shariah finance industry has undoubtedly affected the progress of its fintech subsector, according to Jatmiko, who is also the executive secretary of IAEI.

Islamic fintech companies still depend heavily on conventional VCs in terms of capital because there are only a handful of Shariah-based VCs, Jatmiko says.

See also:
Indonesia’s big four banks are minting it but need to watch their backs

In 2021, local Shariah bank BTPN Syariah
launched
 a VC subsidiary, but macroeconomic turmoil has hindered funding support for the firm, Jatmiko observes.

AC Ventures is among the conventional VCs playing in this field. It
co-led
 Alami’s US$20 million equity and debt funding round in January 2021 and participated in subsequent rounds.

Younger Muslims critical to prospects

Indonesia’s 230 million Muslims provide a strong foundation for the Islamic fintech industry to prosper. With a rising middle class and their increasing purchasing power, the market potential for Shariah finance is set to expand further.

“For young Muslims with a growing awareness of the halal lifestyle, the Shariah fintech solution – being halal and convenient – will be something closer to their preference,” Djani says.

DinarStandard’s report also showed that a new customer base of Muslims under 30, representing 29% of the global population, is a critical determinant of Islamic fintech prospects.

See also:
Indonesia’s OJK launches more stringent regulations for online lenders

Hijra’s peer-to-peer lending has been profitable since last year. As a group, the firm has disbursed around US$320 million to finance more than 12,000 MSME projects across 482 cities in Indonesia.

In December 2022, Hijra launched a new digital banking business and said it’s committed to deploying a significant amount to grow the unit.

Shariah banking assets in Indonesia have reached 500 trillion rupiah (US$33.6 billion), growing 13% annually in the past five years, says AC Ventures’ Sjahrir.

“This demonstrates that customer demand for the [Islamic] financial products is there despite the availability of conventional products,” he notes.

Currency converted from Indonesian rupiah to US dollar: US$1 = 14,866 rupiah.


Funding Societies hits $3b in SME financing

Funding Societies’ Singapore leadership team/ Photo credit: Funding Societies

Funding Societies
, a Singapore-headquartered fintech firm, said it has disbursed US$3 billion in business financing to SMEs in Southeast Asia to date.

The company said that it has served nearly 100,000 companies while its overall
default rate
 remains under 2%.

Founded by
Kelvin Teo
 and
Reynold Wijaya
 in 2015, Funding Societies lends between US$500 to US$1.5 million to SMEs in Singapore, Malaysia, Vietnam, Thailand, and Indonesia.

In June 2022, Funding Society
acquired
CardUp, a Singapore-based payments company, for an undisclosed amount.

The SME lender added that it’s planning to expand Islamic financing offerings in Malaysia. It also
recently appointed

Chai Kien Poon
 as its Malaysia country manager and Funding Societies Malaysia co-founder
Wong Kah Meng
 as group COO.

In February 2022, Funding Societies
raised US$294 million
 in new funding, which consisted of US$144 million in a C+round led by SoftBank Vision Fund 2 and US$150 million in debt financing from other institutional lenders.

See also:
Funding Societies swipes right on payments in SEA


Google Cloud appoints Zoom, AWS veteran to lead Malaysia

Google headquarters in Mountain View, California / Photo credit: 123rf.com

Google Cloud has named
Patrick Wee
 as the new country manager for its business in Malaysia.

Wee has more than 20 years of experience in the IT industry and has held leadership roles at Zoom and Amazon Web Services. In the new role, he will lead local operations for Google Cloud and Google Workspace, according to a statement.

Wee will report to
Megawaty Khie
. She is the regional director for Indonesia and Malaysia at Google Cloud and oversees the enterprise, public sector, and corporate and mid-market segments in both countries.

The announcement comes as Google Cloud prepares to launch its first [cloud region](https://cloud.google.com/docs/geography-and-regions) in Malaysia, which will join its 11 other regions in Asia Pacific and Japan.

Google Cloud claims that it has been attracting big-name customers in Malaysia, such as Axiata Group, Capital A, and Malaysia Airlines.

See also:
Indonesian startups push back on Google Play’s new billing rules

Recently,
Amazon Web Services
 also announced plans to invest
US$6 billion
 in Malaysia by 2037 and launch an
infrastructure region
 in the country.


India’s BetterPlace officially acquires Malaysian recruitment startup (update)

Pravin Agarwala, co-founder and group CEO of BetterPlace / Photo credit: BetterPlace

BetterPlace
, an India-based SaaS and workforce management platform, has officially acquired
Troopers
, a Malaysian firmt that specializes in part-time staffing and recruitment services.

The deal was first reported by
Tech in Asia
 in March.

Troopers was acquired in a deal estimated to be worth between US$15 million and US$20 million, a source told
Tech in Asia
 last month.

Founded in 2017 by
Joshua Tan
 and
Kevin Lee
, Troopers provides part-time recruitment roles for individuals and offers staffing solutions to companies.

The acquisition will integrate Troopers’ automated gig matching and rostering features into BetterPlace’s platform, according to an official announcement from BetterPlace.

This comes just a month after BetterPlace
acquired Indonesia-based MyRobin
 for an undisclosed amount.

In a previous interview with
Tech in Asia
,
Pravin Agarwala
, BetterPlace’s co-founder and group CEO, had indicated that the acquisition was just the first step in the company’s plans for expansion into Southeast Asia. The firm is looking to invest “north of US$50 million” into the region over the next three years, he said.

See also:
Exclusive: Acquiring MyRobin the first of BetterPlace’s SEA plans

Agarwala had also
said
 that Better Place was eyeing Malaysia next. The Indian firm also plans to expand into Thailand, the Philippines, and Vietnam, but it’s unclear if this would be done via through further acquisitions.

Better Place is also setting its sights on the Middle East as well as Latin America and Africa.

Update (April 17, 4:00 p.m. SGT
):
This article was updated to include an official announcement from BetterPlace
.


Why Malaysia’s government should avoid direct investments in startups

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Hello reader,

“Nanny state.” “Benevolent dictatorship.” “Authoritarian.”

These are some of the terms used to describe or criticize Singapore’s government. For some time now, people have felt like its regulations might be too intrusive or harsh, such as when it bans some things outright.

It’s funny because it seems like the long-term effects of these policies is to make ordinary citizens become more or even too reliant on them. There’s been cases where people
call the police
 to deal with mundane issues like inconsiderate neighbors, for instance.

In some ways, it’s a good sign because it shows that public services are reliable enough for the common Singaporean.

On the other hand, overreliance is never a good thing. This appears to be the case with the relationship between Malaysia’s government and the country’s startups. The solution? The government should wash its hands off most direct investments in startups, according to an insider. Our featured premium story explores why.

Today we look at:

Why Malaysia’s government should
stop directly investing in startups

Why TikTok is deleting millions of videos from Indonesia

Other newsy highlights such as Alibaba pumping US$353 million into Lazada and Byju’s goal of hitting overall profitability in the June quarter.

Premium summary

Why can’t we be friends?

Image credit: Timmy Loen

The government investing directly in its country’s startups seems to be a noble idea. After all, which government wouldn’t want to support the local tech scene as much as possible? While that might be the case in Malaysia, there are several pitfalls stemming from this arrangement.

No one man:
 With Khazanah, Malaysia’s sovereign fund, part of the issue is that its chairman is also the country’s prime minister. This means that if the sitting prime minister isn’t interested in investing into startups, then the fund won’t do much in that area.

Moving the needle:
 According to an anonymous insider who spoke to
Tech in Asia
, Malaysia should look at investing in young fund managers. Ideally, the government would just allocate a small sum to those fund managers, with subsequent funding dependent on performance.

Where to come in:
 Our insider source also said the government should focus on setting policy and reducing friction. If there are cases for direct investment, it should be in extremely deep tech sectors where commercial funding is difficult to get, like defense-related endeavors, for example.

Read more:
Malaysia’s government shouldn’t directly invest in startups, says insider

News spotlight

You shall not pass

Image credit: Timmy Loen

Tech in Asia
 has been exploring the potential of
TikTok
 for our content pipeline. For now, it’s mostly just fun stuff – memes, skits, and short informational videos – so we haven’t run afoul of the platform’s content guidelines.

Many other videos in Indonesia, however, haven’t had the same luck. Around
7.6 million videos were removed by TikTok
 in the fourth quarter of 2022 alone.

Not the kind of award you’d want:
 This 7.6 million figure means that Indonesia is among the countries with the most content violations on TikTok.

How others fared:
 Globally, the number of videos that TikTok deleted was 85.7 million, or 0.6% of the total videos published throughout Q4. Still, it’s better than Q3 2022 – the platform took down 110.9 million videos.

Minus minors:
 The safety of young users is the biggest concern for the app, as it’s the most frequently violated policy. A lot of TikTok users are underaged – roughly one in four are under the age of 20.

See also:
CapCut could be ByteDance’s next cash cow

Quick bytes

1⃣
The spinoff you’re looking for

Lazada has received a
US$353 million injection
 from parent firm Alibaba. This development comes shortly after Alibaba announced that it’s going to divide its operations into separate business units. Lazada will now be under Alibaba’s Global Digital Business group, which includes AliExpress, Trendyol, and Daraz.

2⃣
Getting a reaction

Reactional Music has raised an
undisclosed amount of pre-series A money
 from Amanotes, the music publisher behind
Magic Tiles 3
. The Swedish startup focuses on music personalization and in-game purchases. Following this investment, Amanotes aims to expand its interactive music ecosystem.

3⃣
Hug it out

Social marketplace Hug has
raised US$5 million
 in a seed round. Founded in 2022, Hug provides a platform for artists to sell digital and physical goods. Hug will roll out its first capsule collection featuring both digital and physical goods with artist Amber Vittoria, who has collaborated with brands such as Casetify, H&M, and Samsung.

4⃣
Walking the talk

Indonesian edtech firm Cakap has
raised an undisclosed amount
 for its series C1 round, pushing its valuation to go over US$100 million. It plans to use the funds to develop a blended learning approach, allowing students to study online and offline.

5⃣
Seeing green

Indian edtech giant Byju’s is
vying for group-level profitability
 in the June quarter. According to CEO Byju Raveendran, five of the company’s six businesses – Aakash Educational Services, Great Learning, Epic, Osmo, and TutorVista – are either breakeven or profitable.

6⃣
Going soft

The Edgeof, a Singapore-based VC firm, is
set to acquire SoftBank Ventures Asia
, the venture arm of SoftBank Group. Financial terms were not disclosed. Following the acquisition, a new brand identity will be introduced. It will focus on supporting and developing “game-changing startups” across Asia.


VCI Global’s stock ends first trading day up 6.25%

The Kuala Lumpur cityscape / Photo credit: Wikicommons

Stocks of
VCI Global
, a business and technology consulting firm based in Malaysia, jumped by as much as 18% in its first day of trading on the Nasdaq on April 13.

It ended the day at US$4.25, up 6.25% from its listing price of US$4. The company offered 1.3 million shares in its financial debut.

Founded in 2013, VCI Global provides investor relations and public relations services to its clients from Malaysia, China, Singapore, and the US. The firm’s expertise lies in the business, tech, and marketing domains for industries such as real estate, ecommerce, and fintech.

In March, VCI Global said it was aiming to offer 1.6 million shares at a price between US$4 and US$6. In 2022, the company planned to sell 5 million shares in the same price range – a deal that would have netted the company US$15 million at the midpoint.

But it had to scale back the IPO after working closely with Nasdaq to follow the exchange’s listing requirements,
Victor Hoo
, the firm’s global founder and group executive chair told
Tech in Asia
.

VCI Global will use the proceeds from the IPO for general working capital, business and team expansion, and industry-focused acquisitions.

Amid a slowdown in global IPOs due to factors like rising interest rates and growing inflation, a recent report from Ernst & Young
found
 that Southeast Asia remains a bright spot for public offerings, especially Indonesia.

See also:
Mapping public tech companies in Indonesia


StanChart VC arm invests in SG wealthtech firm

Photo credit:
MOZCO Mateusz Szymanski / Shutterstock

Singapore-based
BetterTradeOff (BTO)
 aims to enable financial institutions deploy bespoke financial planning solutions to their clients quickly and at scale.

 Laurent Bertrand
, CEO and co-founder of BTO, told
Tech in Asia
 that banks and insurance providers often have three main pain points in terms of serving mass affluent customers: poor customer engagement, challenges with scaling, and limited client data.

The firm has raised an undisclosed sum from SC Ventures, the VC arm of Standard Chartered.

Funding details

Funding amount:
 Undisclosed

Investor:
 SC Ventures

Stage:
 Unspecified Stage

Source

BTO is expanding its operations in Asia Pacific, targeting markets such as Thailand, India, Taiwan, Indonesia, Vietnam, and Japan.

The company said its Asian expansion is driven by “strong momentum” from banks and insurance providers in the region that are looking to better serve younger, digital-first clients.

See also:
How an SG regtech firm won over StanChart and HSBC with ‘ChatGPT for banks’

In 2021, BTO partnered with Standard Chartered to launch
SC Goals Planner
, a digital wealth management and financial planning solution for SG customers.


Malaysia’s ‘failed Silicon Valley’ is becoming a white elephant

Dan Lain-Lain
 (Malay for “and others”) is a weekly column by TIA journalist Emmanuel Samarathisa that dissects the goings-on in the Malaysia tech scene but with a heavy mix of current affairs, policy and politics. Click
here
 to read past articles.

On March 26, business publication
The Edge

ran
 a sponsored post titled “The rise of Cyberjaya as a global tech hub.”

Paid content is the bread and butter for many media houses – nothing wrong there. But the article got me thinking of that city, which is roughly about 50 kilometers from Malaysia’s capital, Kuala Lumpur.

Shaftsbury Square in Cyberjaya, home to the Malaysian Communications and Multimedia Commission, an industry regulator and state agency / Photo credit: Wikipedia

To be sure, this isn’t the first sponsored content with the same story angle that Cyberview, the state-owned developer behind Cyberjaya, has paid for. In 2021, it
published
 another sponsored article called “Revitalising Cyberjaya into a global tech hub.”

Cyberview commissioned both pieces to say the same thing: Cyberjaya is a tech hub and has the means – from infrastructure to talent pool and incentives – to be so.

Interestingly, the paid post last March came right after
Business Insider
 published two articles in January that cast a negative light on Cyberjaya.

The
first piece
 talked about the “ghost malls” – empty shopping centers – in the city. The
second one
 was about spending a night in a shipping container hotel.

Spoiler alert: The reporters muse about unpleasant experiences, and both articles had the keywords “Malaysia’s failed Silicon Valley.”

As far as I can recall, the first publication to
call
 Cyberjaya a failure was
Wired
 magazine. The 2016 article had the same trajectory: Reporter scouted the area, noted some disappointing stuff, and then mentioned that plans were under way to reboot the place into a tech hub.

Lack of political will

Cyberjaya was born out of then-Prime Minister Mahathir Mohamad’s ambition to create a “multimedia super corridor” in 1997. Through the years, some large tech multinationals such as NTT, Dell and IBM have set up shop in the city.

This effort resulted in a mesh of company headquarters, research hubs, call centers, and global business or delivery centers. Two local universities were also established in the city.

IBM
shut down
 its Cyberjaya services center in 2021, but the tech giant still maintains an office in Petaling Jaya, a city bordering Kuala Lumpur.

Building Cyberjaya was part of Mahathir’s plan to put up a tech corridor close to Putrajaya, Malaysia’s administrative center and also his brainchild. Various tax incentives were also thrown into the mix as bait.

But after Mahathir resigned in 2002 and ended his first stint as prime minister, his successors never followed through on his vision.

Cyberjaya flopped. Some of the systemic problems afflicting the country had a direct impact on the city, including a limited talent pool and market size as well as a lack of collaboration between government agencies and the private sector. But the more important hurdle was how tech startups in Cyberjaya got little or inadequate VC and angel funding.

Competing with a hot address

Perhaps the clincher was when Mahathir’s successor, Najib Razak, decided to run his own parallel tech dream. Under his leadership, Malaysia wooed Jack Ma into
opening
 an Alibaba office in Bangsar South, Kuala Lumpur, in 2018.

Former Malaysian prime minister Najib Razak and Alibaba founder Jack Ma taking a selfie after a meeting in Putrajaya in 2016 / Photo credit: Najib Razak’s Facebook

Bangsar South was originally Kampung Kerinchi. I grew up in this village (or
kampung
 in Malay), which used to be filled with low-cost flats, squatters, and longhouses. Nowadays, it’s a trendy albeit gentrified address.

Why the name change? Bangsar proper – a residential suburb – fetches a premium, so why not slap “Bangsar” to name an area on the fringes of the real place?

Aside from Alibaba, other startup organizations such as
Endeavor
 and tech companies such as TNG Digital have offices in Bangsar South. Even agencies such as the Malaysian Digital Economy Corporation, whose headquarters are in Cyberjaya, has an office in Bangsar South.

Bangsar South is also more connected in terms of public infrastructure and transport. Cyberjaya, on the other hand, lags – in fact, the city only got its own inter-city rail station
last month
.

Whether it’s schools, shopping malls or even public transport, downtown Kuala Lumpur and the areas adjacent to it always win.

Kuala Lumpur still the focus

The only saving grace for Cyberjaya is ample land, which means only big tech companies can benefit from it. Drone services firm Aerodyne, for example, can certainly use Cyberjaya’s dedicated drone testing zone.

But that’s just one niche business among many. SaaS companies won’t move there because Kuala Lumpur is much more attractive in terms of network, facilities and such.

To be sure, Malaysia has its own Silicon Valley: Penang. The country’s second-richest state started out by manufacturing chips and continues to do so. It also has a growing startup community.

For what it’s worth, there’s chatter that Kuala Lumpur, not Cyberjaya, will still be the hub for most startups. Some accelerators and VCs are also thinking of opening labs and education centers in the capital, too.

If all these unfold as predicted, then Cyberjaya will be further left behind. Well, the good news is, you can always fly a drone there.


MDEC appoints politician as non-executive chairperson

Syed Ibrahim Syed Noh, MDEC newly appointed chairman / Photo credit: Syed Ibrahim Syed Noh’s Facebook

Syed Ibrahim Syed Noh
 has been appointed as a non-executive chairman at Malaysia Digital Economy Corporation (MDEC) effective April 1.

Syed Ibrahim, who’s the member of parliament for the Ledang constituency, hails from Parti Keadilan Rakyat, the political party led by Prime Minister Anwar Ibrahim.

MDEC, an agency tasked with executing the country’s digitalization policies, falls under the purview of the Communications and Digital Ministry. Its current minister, Fahmi Fadzil, is also from the same political party.

Syed Ibrahim has “extensive experience” in the telco industry, with a stint at state-owned Telekom Malaysia from 1989 to 2014, according to MDEC statement.

See also:
Mapping Malaysia’s government tech entities

This isn’t the first time that a politician has been appointed to the MDEC board.

Syed Ibrahim’s predecessors,
Rais Husin
 and
Md Alwi Che Ahmad
, were politicians when they were appointed to the post.

Rais is a former supreme council member of of Bersatu, the political party he co-founded with then-prime minister Mahiaddin Yassin. Rais quit the party in 2022.

Md Alwi, on the other hand, is a member of the United Malays National Organization.


Malaysia’s Soft Space closes $31.5m round for global expansion

Southern Capital and Soft Space team / Photo credit: Soft Space

Despite the current tech downturn, fintech firm
Soft Space
 said its revenue has almost doubled in the past two years.

The
software point-of-sale company
 claimed that 70 financial institutions and partners in Japan, Europe, Oceania, and the Americas use its full-stack payments platform.

To support its global expansion, Soft Space recently closed its US$31.5 million series B1 round led by Southern Capital Group, a private equity firm operating in Singapore and Kuala Lumpur.

Funding details

Funding amount:
 US$31,500,000

Lead investor:
 Southern Capital Group

Other investors:
 Transcosmos, JCB, Hibiscus Fund, RHL Ventures, KB Investment

Stage:
 Series B1

This round includes last year’s US$5 million
injection
 by JCB, the international payment giant, as part of a partnership.

Tapping into the Malaysia-based company enabled JCB to better link Japanese customers to Southeast Asia, both sides said at the time.

More details

Soft Space
→

The company was founded in 2012 by
Chew Soon Chang
.

Stage

Amount (US$)

Investors

Series A

5 million

Transcosmos

Series B

Undisclosed

Sumitomo Mitsui Financial Group

Series B1

31.5 million

Hibiscus Fund, KB Investment, JCB, Southern Capital Group, transcosmos, RHL Ventures

Total

36.5 million

See also:
Can SEA catch up to open banking in the West?


Bukalapak acquires majority stake in Malaysia’s iPrice

(From left) iPrice Group CEO Paul Brown-Kenyon and co-founders David Chmelař and Heinrich Wendel / Photo credit: iPrice Group

Bukalapak
, an Indonesian ecommerce major, has bought a majority stake in
iPrice Group
, a price comparison platform.

Without disclosing the amount iPrice Group co-founder
Heinrich Wendel
 told
Tech in Asia
that Bukalapak invested “a sufficient amount of capital.”

Bukalapak said the acquisition was part of its strategy to focus on niche marketplaces and grow faster. Meanwhile, iPrice noted that the partnership would help it reach more consumers and offer more deals and discounts across new categories and regions.

In 2014, Wendel established iPrice with
David Chmelař
. The startup enables online users to compare product specifications, prices, and seller feedback. It has raised about US$26 million in funding since inception, according to
Crunchbase
 data.

In June 2022, the company laid off 20% of its total workforce amid the economic downturn. iPrice Group said it had to scale back “several aspects” of its operations, including projects such as consumer lending comparison and user experience upgrades for its main app.

“When the markets changed rapidly in Q2 2022, we had to make the tough decision to cut these initiatives and refocus the company back on our core,” Wendel said.

After the deal, iPrice Group will continue to operate independently. It is targeting the gaming space and and entering Australia.

See also:
Bukalapak’s financial performance in 7 charts

Wendel said iPrice also intends to “meaningfully” contribute to Bukalapak’s goal of reaching profitability this year. The Indonesian ecommerce major recently posted
US$130.8 million
 in profit and US$15.6 million in adjusted losses for 2022.


YC shrinks cohorts, sees less SEA, India investments

Y Combinator has been quite active in the development of the startup ecosystem in Southeast Asia and India, but the recent numbers indicate a slowdown.

In the past two years, there has been a decline in the number of Southeast Asian and Indian startups participating in Y Combinator’s program, according to the firm’s
startup directory
, which lists publicly launched companies from its cohorts.

Image credit: Timmy Loen

The startup enabler holds its accelerator program twice a year: the Winter (W) edition runs from January to March, and the Summer (S) one takes place from June to August.

Cohort sizes have always fluctuated, but out of the 254 public participants in the latest batch (W23), there were only 14 startups from Southeast Asia and India.

In fact, this figure marked an over 4.5x decrease from the W22 group, which had 65 startups from the two regions. Overall, this cohort was also the largest in size, having 333 startups in total.

That said, Y Combinator had smaller cohorts in the recent past, but these batches had greater representation from India and Southeast Asia – an example being the 2020 groups.

The ratio of Southeast Asian and Indian startups to the total cohort size has also shrunk. These companies only made up 5.5% of W23, marking the lowest ratio since S18 – nine batches ago.

A spokesperson for the company tells
Tech in Asia
 that batch sizes in general have decreased, and this was an “intentional” decision.

The person cited three reasons why the firm decided to reduce the startups it funded from W22 to S22: the economic downturn, its impact on the venture funding environment, and the return of in-person operations.

The California-headquartered accelerator has certainly felt the pinch of the macroeconomic environment.

Last month, the firm – whose portfolio includes Stripe, Opensea, and Xendit –
laid off 20% or 17 of its staff
 in its late-stage investing team, opting to focus on supporting new startups.

Prior to this, Y Combinator was active in a number of follow-on deals such as
Durioo+’s US$2.85 million seed funding
 and Gimo’s
US$5.1 million
 series A round, to name a few. The startup enabler also led
Strive’s US$1.3 million round
.

Y Combinator’s layoffs follows news that the company had 30% of its portfolio exposed to the Silicon Valley Bank collapse.

Many of its portfolio companies in India and Southeast Asia also had accounts with the bank, which would have been affected as well.

On the other hand, similar firms such as Antler has vowed to invest in more
Indonesian startups
, with plans to
expand its Southeast Asian footprint
. Last year, the company also
announced an India-based residency for entrepreneurs
.

Singapore-based accelerator Iterative also welcomed
33

firms
 – almost
doubling

the 2021 total
.

See also:
Recession Run: Iterative’s $55m plan amid a downturn

Last year, Y Combinator saw the number of investments in Southeast Asia and India fall by 9% from the year before.

This raises a question whether Y Combinator is reducing its focus on these regions, and why?

In general, startup funding in India and Southeast Asia continues to dry up.

In Southeast Asia,
deal value fell by a third
 in 2022 to US$17.8 billion, down from a high of US$25.8 billion in 2021. Though the latest figure still topped pre-pandemic levels, the large drop from the year prior marked a slowdown in investment into the region.

India, which ranks fourth globally by VC funding, saw funding value
tumble by 38%
 in 2022.

Recently some startup programs even exited the region. Last November, UK-based venture builder
Enterpreneur First halted its operations in Singapore
 and pulled out of the region, citing a lack of deeptech talent.

Photo credit: Y Combinator

Regardless, Y Combinator says that it’s not reducing investments in Southeast Asia and India, nor have application numbers from the region fallen.

The representative says that the “number of founders funded in each country fluctuates,” and that the firm invests in founders, not ideas or verticals.

“We fund companies in any market and will continue to fund the best companies moving forward,” the spokesperson concludes.

Following the hype surrounding ChatGPT, the firm has
recently been focusing on
 investing in artificial intelligence firms, which are scarce in Southeast Asia and India. It could be a reason for this momentary shift in focus away from these two regions.


SG, Malaysia announce payment system linkage

Photo credit:
stpsae / 123RF

The
Monetary Authority of Singapore
 (MAS) and
Bank Negara Malaysia
 have linked QR payments between the two countries.

The move will enable customers of participating financial institutions to make retail payments to merchants in both countries through QR codes. These customers will be able to scan codes with Singapore’s NETS (Network for Electronic Transfers Singapore) and Malaysia’s DuitNow.

MAS also said that person-to-person transfers and remittances between Singapore and Malaysia will be supported by the end of the year.

The link was initially announced in
2021
, with MAS saying at the time that remittances between Singapore and Malaysia reached S$1.3 billion (US$980 million) in 2020.

Participating financial institutions from Singapore are DBS Bank, OCBC Bank, and UOB. Meanwhile, those from Malaysia include Ambank Malaysia, Boost, CIMB Bank, Razer Merchant Services, and TNG Digital.

“We will continue to work closely with our partners to accelerate our digitalization agenda toward increased regional economic and financial integration,” said Tan Sri Nor Shamsiah Mohd Yunus, Bank Negara Malaysia’s governor.

See also:
Winners and losers of SG and India’s novel PayNow-UPI linkage

The development follows MAS’ similar deals with the
Reserve Bank of India
 and Thailand’s
PromptPay
.

Currency converted from SG dollar to US dollar: US$1 = S$1.33.


Capital A’s financial health in 3 charts

Kuala Lumpur-based Capital A, listed in the Bursa Malaysia stock exchange, recently announced its
financials for the fourth quarter of 2022
. Below are three charts – updated quarterly – that track the group’s performance:

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.41 ringgit


Malaysia’s government shouldn’t directly invest in startups, says insider

Dan Lain-Lain
 (Malay for “and others”) is a weekly column by TIA journalist Emmanuel Samarathisa that dissects the goings-on in the Malaysia tech scene but with a heavy mix of current affairs, policy, and politics. Click
here
 to read past articles.

I’ve been talking about the Malaysian government’s tech agencies for a while, and this time round, I thought it would be good to get an insider’s take on it.

Sovereign wealth fund Khazanah Nasional has been given a mandate to deploy funds for startups this year. / Pic credit: Khazanah Nasional

Given the nature of the topic, this person will be anonymous. I can vouch for this particular individual as they have a wealth of experience in working at and with government-owned tech agencies and institutional investors.

It’s a timely discussion: Prime Minister Anwar Ibrahim has made it clear that
“unicorn farming”
 is on the agenda. He has deployed state-owned institutional investors or government-linked investment companies (GLICs), such as sovereign fund Khazanah Nasional and private employees’ pensions pot Employees Provident Fund.

Sovereign fund Khazanah has already made a move by backing Gobi Partners. Both recently
invested
 in Kuala Lumpur-based Care Concierge, a senior-care solutions platform.

Government tech agencies under various ministries have also been tasked with a similar mandate. The Malaysian Digital Economy Corporation, a government agency, has
paired up
 with audit firm KPMG to farm 20 unicorns by 2025.

And as these institutes and agencies hobble along, investors and founders will inevitably have to deal with them. So hopefully this will be an insightful read.

Here is my interview with this anonymous source, edited for brevity and clarity:

Briefly tell us how an entity like Khazanah makes investment decisions for startups?

If we rewind to 2012, one of the major investments Khazanah made was in Alibaba. It was more of an opportunistic investment and has been quite successful.

Then Khazanah decided to conduct a study since it was looking for a more structured approach to tech investments and went on to form what is called the Investment and Technology team.

Its strategy is varied. You can make direct investments into companies or make them indirectly through funds. An organization like Khazanah would usually invest in series C rounds and greater. Firstly, anything lower or earlier than that doesn’t move the needle much in financial returns.

Secondly, the process was not conducive for small deals. It is a very structured — you can call it cumbersome — investment process. To be fair, things may have changed recently under the new CEOs.

The process had been quite stringent. If you want an investment of a ringgit or a million ringgit, the process is the same.

Thirdly, once Khazanah invests, there’s the post-investment monitoring. So, the process to monitor after the investment was quite expensive and detailed. Impose the same rigor on a young company, it’ll encumber the team to meet reporting standards, when they ought to focus on nailing down product-market fit or acquiring users, for instance.

Also, given the size and legacy of Khazanah, the fund had a private-equity mindset. It didn’t have internal staff that could deal with early-stage companies or those with the expertise to deal with things such as product-market fit or hiring. And, Khazanah’s approach to series C onward was closer to a private equity type of deal.

Other government-run institutional investors or GLICs have a similar setup: They may have a different internal process for investments as well as risk appetite, but the structure is about the same as Khazanah’s.

Khazanah, in particular, keeps being negatively benchmarked against Singapore’s Temasek. Why?

Temasek is definitely braver – I think Khazanah was a lot more adventurous, but the mandate completely changed after Mahathir Mohamad became prime minister again in 2018.

He had different views and tried to untangle many of the things Khazanah embarked on since 2012.

Remember that it was his government – particularly then economic affairs minister Azmin Ali – that played up Khazanah’s
failed investment
 in an India-based online lingerie venture.

Also, it was under Mahathir’s government that Khazanah
sold
 its 2.3% stake in Sea Group for 612 million ringgit (US$138 million) in 2019 after investing 650 million ringgit (US$147 million) in 2016.

We need to understand that with investments, you can’t be 100% successful. Even Warren Buffet doesn’t win every time. But we, the public as well as the politicians, are also culprits. We highlight only the losses.

We didn’t highlight Khazanah’s success with Alibaba, for example, where the sovereign wealth fund made a return of US$1.2 billion on an investment of US$250 million.

Structurally, Khazanah’s chairman is also the prime minister. The finance minister and – depending on the regime – the economic affairs minister, sits on the board.

So, if the prime minister of the day is not into startups, then Khazanah won’t move much in that direction. It’s the same with other GLICs too since they report either to the prime minister or finance minister.

But it seems tech investments are back on the agenda with this government. What will move the needle?

The focus this time has to be young fund managers. Some of these institutions need to take some adventurous steps to do this.

I say this because if we take Temasek, they seed young or first-time managers. Some of the names you know today – such as Jungle Ventures – that were a product of this initiative.

They allocate a sum, say about 10%-20% of your fund size, and in a way, place a bet on or invest in your fund. So Temasek gives you the seed and you raise the remaining 80% or so. Then you can go to market with validation from a large institution.

And then for the second or third funds, the top-up will depend on your first fund’s performance.

We can’t run away from the fact that corruption allegations and charges have been a major problem in Malaysia. Every time I engage overseas investors, they don’t take us seriously. “Is this fund for ‘friends and family?’” is what I get asked – and I don’t blame them.

By investing in young fund managers, we avoid these problems or at least mitigate them. Otherwise, we’ll be lagging.

For example, there aren’t that many series A funds here. Penjana Kapital was supposed to do this. But its performance has come under
criticism
.

How do we avoid another Penjana Kapital then?

If we want to restructure the space, the government shouldn’t be a direct investor. Take Penjana Kapital, the government directly owns the company.

Instead, the government should set policy, reduce friction, or red tape, and if they want to invest directly, it should be in very, very deep tech sectors, where no commercial funds will reach in the beginning – like defense-related stuff. For example in the US, the Central Intelligence Agency has its own VC arm, In-Q Tel.

So, GLICs can pick up the heavy work to invest, because they can fall on their asset allocation.

There are some legitimate concerns such as deal size. In Malaysia, deals are usually small. But they can still consider putting aside 0.1% of their allocation to local startups and fund managers.

Here, there’s no taxpayer money to be touched. True, GLICs are public institutions in a way but they don’t take public money.

Some like Khazanah pay dividends to the government yearly. So the money will come from these institutions’ books and they can also tolerate long-term investment horizons.

But, in an organization like Penjana, where the government is the owner, not only is there the issue of using public money, but any change in government may affect the company’s sustainability. For example, the minister backing Penjana today may be out tomorrow if he or she loses the election.

Then we have to remember that many people in government tech agencies are either bureaucrats or those who’ve not even worked in a tech company. They may also not be commercially driven because they have no real stakes in the game or never had to raise funds in their entire lives.

Finally, there are structural issues. Some of these government agencies are allocated so-called soft loans by the government, where they in turn will need to pay back the government a small profit rate.

Here the government stands to make some money, but then these agencies are going to invest in startups that may not have cash flow. So how are you, the agency, going to make that small extra percentage to repay the government?

That’s why in Malaysia, you’ll come across term sheets that have redeemable convertible preference shares (RCPS) baked into them, where an agency will be able to call back the funding or loan at any time.

This makes planning difficult if you are running a company because they can trigger the RCPS at any time. The agency acts as a debt provider in that sense. Then you have issues where the agency wants a joint operating account and playmaker checker, where one person creates a transaction and the other (usually an agency representative) confirms or authorizes the same.

These things have got to go.

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.41 ringgit


Unpacking Amazon and Tesla’s deals in Malaysia

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Hello reader,

I’ll be honest: As a consumer living in Singapore, Amazon and Tesla don’t really show up on my radar.

I do most of my shopping on regional ecommerce platforms like Shopee – I only use Amazon to buy ebooks for my Kindle – and given that I dislike driving and have no intentions toward car ownership, most of what I hear about Tesla is in relation to Elon Musk.

But of course, Amazon is more than just an ecommerce company, and while I may not be interested in Tesla’s electric cars personally, lots of other people are. Them investing and setting up something in a country – whether it’s data centers, sales offices, or factories – is usually good news.

Recently, both companies have announced deals in Malaysia. But are these as big a deal (haha) as they’re cracked up to be? My colleague Emmanuel unpacks them in today’s premium story.

Today we look at:

What Amazon and Tesla’s deals in Malaysia are all about

Singapore-based proptech firm Ohmyhome’s IPO

Other newsy highlights such as Pinduoduo getting banned from the Google Play Store and Vingroup’s investment in ride-hailing firm Be

Premium summary

So, what’s the deal?

Image credit: Timmy Loen

Malaysia’s incumbent government seems pretty excited about Tesla and Amazon’s upcoming investments into the country.

Amazon is apparently going to commit US$6 billion until 2037, which will include building data centers. Meanwhile, Tesla will set up a sales and service office in Malaysia and build a network of electric car superchargers. Let’s go a little deeper into this.

There’s been a bit of a lag:
 Malaysia seems a bit late to the game as Amazon has already poured in US$6.1 billion in Singapore since 2010. Last year, it announced its intent to invest US$5 billion into Indonesia. Meanwhile, Indonesia has plans to entice Tesla to build a “gigafactory” in the country.

We’ve seen this before:
 This isn’t the first time tech giants have made plans in Malaysia, and there’s grounds for skepticism around how they’ll pan out. Microsoft, for one, had plans to build a data center in 2014 in Johor but it never happened. In 2021, the firm said it intends to build a data center in Kuala Lumpur instead, but it didn’t mention anything about its previous commitment.

Issues in the system:
 While it’s good optics to have major tech companies keen on Malaysia, there are many systemic hurdles that need to be overcome to see their projects through.

Read more:
Scrutinizing Amazon’s and Tesla’s Malaysian deals

News spotlight

Making a home on Nasdaq?

Image credit: Timmy Loen

Ohmyhome, a Singapore-based proptech firm, ended its first day of trading marginally above its IPO price of US$4 per share. Here are
the finer details
:

The shares:
 The firm aims to sell over 3.7 million shares for the IPO, with 2.8 million coming from the company and the rest from Anthill Realtors, which is also owned by Ohmyhome’s founders.

The money:
 Ohmyhome is looking to raise US$11.2 million from the IPO. Meanwhile, Anthill Realtors aims to net US$3.9 million.

The question mark:
 The firm’s listing comes as a surprise as it’s still a relatively small startup – research has shown that small companies tend to underperform in their IPOs.

See also:
Ohmyhome IPO raises red flags

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Quick bytes

1⃣
To Be or not to Be

Vingroup’s Green and Smart Mobility (GSM) has announced that it
will back
 Vietnamese ride-hailing firm Be Group. On top of a direct investment, the collaboration will also see the two firms partner with Vietnam Prosperity Joint-Stock Commercial Bank to offer exclusive policy deals for Be drivers.

2⃣
No Google Play Store for you

Google
has suspended
 Pinduoduo from the Play Store after malware was found in versions of the Chinese ecommerce firm’s app outside of Google’s platform. The development follows Pinduoduo being called out by Chinese security experts for allegedly developing Android apps with malware aimed at tracking users.

3⃣
Recovery in sight

Auros, a Hong Kong-based crypto exchange,
has secured US$17 million
 in a round led by Vivienne Court. This is the first time that the crypto firm has raised funding since the downfall of FTX – Auros saw around US$20 million worth of its assets affected by the collapse.

4⃣
Ready for regulation

The Monetary Authority of Singapore (MAS) is
reviewing feedback
 for its proposed crypto regulations and is aiming to publish its response later this year. The agency has been working with industry stakeholders to make crypto activities safer for its users.

5⃣
Let’s go to Dubai

Crypto.com
has received
 a minimal viable product preparatory license from the Virtual Assets Regulatory Authority in Dubai. This follows the initial provisional approval that Crypto.com received in June 2022, with the preparatory license being the next step toward an operational license in Dubai.

6⃣
Bad times

Social ecommerce firm Avana is
struggling to pay
 its employees in Indonesia due to a lack of capital. It has made several job cuts since November 2022, which have affected 30 members of its team in the country.