3 things about Malaysia’s new ‘startup’ government

Malaysia’s new government has gone to work. Prime Minister Anwar Ibrahim
announced his Cabinet
 last Saturday and has appointed 28 ministers. Deputy ministers and other roles will be revealed later, but the most important part was settled.

Prime Minister Anwar Ibrahim (in glasses) chairing his second Cabinet meeting on Wednesday / Photo credit: Anwar Ibrahim’s Facebook page

I’m hoping that by next week, we can take a break from this heavy political coverage cycle. But since this is an ongoing and important development, we’ll have to stomach this for a while because politics will have an impact on startups and the tech space in general – to a certain degree.

“Extraordinary circumstances”

For starters, Anwar has gone back to the old days of consolidating the prime minister and finance minister roles. This bestows him with near-absolute power. Malaysia’s federal constitution already makes the PM a powerful person, but coupled with the finance portfolio, he can single-handedly dictate where the government should invest without check and balance.

You could argue that Anwar’s Cabinet members would scrutinize deals and provide input. Ditto lawmakers in parliament, but dissent is rare. That’s how the
1MDB scandal
 exploded – it was because then-PM Najib Razak was also finance minister and he had the backing of his coalition.

After winning the 14th general election in 2018, Pakatan Harapan (PH) – Anwar’s coalition, which was then under the leadership of Mahathir Mohamad – separated the portfolios. PH was ousted by a coup in 2020 and the two successive governments since then have maintained that separation.

This time, Anwar merged it ostensibly due to
“extraordinary circumstances”
. He also believes that he is the best person to draw in foreign investors.

While another 1MDB scandal is possible, Anwar has assured none of these things will occur under his leadership. He doesn’t have the
privilege
 of leading a strong, single coalition, unlike his predecessors.

This time, the new government is more of a consensus between Anwar’s and two other coalitions. So the PM can’t do as he pleases as he might risk losing support, which could trigger a change in government or another election.

Raising the bar

As for tech reforms, I’m betting that it will fall on Anwar’s colleague, Rafizi Ramli, who’s also the economic affairs minister. Rafizi runs an AI startup called Invoke Solutions, so he’s very much attuned to the startup and tech scene.

Rafizi isn’t Nadiem Makarim, who took on the education minister role after growing super app Gojek into a unicorn. Invoke is not even near soonicorn status as the startup is currently
valued
 at 105 million ringgit (US$23 million), according to Rafizi. But this is Malaysia where the bar is low, so we’ll have to start somewhere.

The good news is that Rafizi is different from earlier officeholders who were career politicians – he has dabbled in both startups and politics.

He has also hinted that Malaysia will
move away
 from being commodities-driven, which has been the case since forever. So that gives a glimmer of hope that we’ll see a more lively space that will have a greater emphasis on tech and digital policies as well as funding.

The difference between the finance and economics affairs ministries is that the former crafts policies, especially on revenue generation while the latter focuses more on development and long-term goals.

But the ministers of both departments sit on the board of some of the country’s largest institutional shareholders, including sovereign wealth fund Khazanah and asset manager Permodalan Nasional Berhad – familiar names in the startup ecosystem.

There’s also a digital communications ministry and a science and innovation ministry. Both are helmed by first-time ministers: Fahmi Fadzil and Chang Lih Kang, respectively. They too will engage the startup space in some capacity, especially for research and development.

However, the main state-owned VCs are Penjana Kapital, Mavcap, and Cradle, which all fall under Anwar’s or Rafizi’s purview.

Tackling monopolies

As expected, reviews of major public projects are underway. The tech-related one is the 5G rollout. The initiative was launched by Anwar’s predecessors, who opted for a state-owned monopoly, Digital Nasional Berhad (DNB).

Anwar charged that procurement was not done in a transparent manner, but DNB has denied this claim and welcomed a review.

We have also yet to hear of news whether Penjana, the state-owned
fund of funds (FOF)
, will be reviewed. Penjana caused a stir when it was launched: two of the eight selected VCs are
linked
 to then-finance minister Tengku Zafrul Aziz, whose relatives established the FOF.

Penjana would go on to
deny
 any conflicts of interest and threatened to sue anyone who questioned the VC selection process.

Despite serving in different coalitions, Zafrul is back in government. He’ll be leading the international and trade ministry this time around, but his term can only last for three years. This is because under Malaysian law, senators can only serve two three-year stints at most, whether it’s consecutive or otherwise.

Zafrul first became a senator in March 2020 and resigned last month to run in the recent general election, which he lost. As a result, he only has one more senatorial stint left. It also means that if Anwar’s government survives a term – five years – there will be a change at the international trade ministry.

Now, what’s with my headline? Well, this government is in many ways a startup. The composition of its ministers and the coalitions that they represent are a first for Malaysia.

I also get a sense that Anwar may have factored in these risks. Even going by the mega-project reviews, the PM isn’t being combative; instead, he is trying to establish an image that he prefers negotiations.

He may not rock the boat too much, either. But going by what is happening so far, this new government is signaling that it wants to jumpstart the Malaysian economy. Anwar is embarking on some reviews that touch on decades-old monopolies enjoyed by tycoons. That might point to a government that aims to create a slightly more level playing field for entrepreneurs and investors.

I wouldn’t say this is our moment – that will take a while longer. But perhaps it’s good enough to get us some attention as we’re constantly eclipsed by Singapore and, more recently, Indonesia and Vietnam.

And like any startup, investing in Malaysia may be risky, but there’s that shot for a reward.

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.40 ringgit
.

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.


Malaysia’s Al Rajhi Bank launches digibank offering

Al Rajhi Bank Malaysia (ARBM)
, a subsidiary of Saudi Arabia’s Al Rajhi Bank, has announced the launch of its digibank app Rize.

Al Rajhi Bank Malaysia CEO Arsalaan Ahmed / Photo credit: Al Rajhi Bank Malaysia

ARBM said that a wide range of services are already available on Rize, including deposits, account and personal finance management, debit card application, and ATM services.

One of the app’s key features is a personalized digital financing option that requires minimal documentation and no processing fee. Customers will only need to spend 15 minutes to have money in their account, ARBM said.

The app also has a savings feature called Rize Savings Pot with a profit rate, allowing users to earn money while saving. Users can also invite their family and friends to chip into the pot.

Launched in 2007, ARBM offers Shariah-compliant financial solutions in the retail, corporate, treasury, and investment segments, with a network of 13 branches across Malaysia.

Rize will be competing against digital banking hopefuls in Malaysia, including GXS Bank, which is backed by Grab and Singtel.

See also:
Pleasant surprise in Malaysia’s digibank race


Carousell revenue growth in slow lane even as losses narrow

Welcome to The Checkout! Delivered every Thursday, this free newsletter breaks down the biggest stories and trends in ecommerce. View past issues
here
 or
sign up here
 to receive future newsletters.

Hi there,

Five years ago, we bought our car from a seller after connecting via a Facebook post. That was the only time I dabbled in recommerce. The idea of buying secondhand clothes or shoes still doesn’t come naturally to me.

But the market for used goods has been going from strength to strength. In the US alone, it was a
US$160 billion
 opportunity in 2021.

In the first Big Story this week, my colleague, Melissa, brings you Carousell’s financial report card, where the firm emphasized recommerce as its next lever for growth. While classifieds continue to make up nearly 70% of the Singapore-based company’s topline, it believes revenue from recommerce could shoot up in the near future.

Coming back to my car story, since it’s been five years, we decided to sell it off and upgrade to a bigger vehicle this September. We chose to sell it on Cars24, an ecommerce marketplace for cars as it offered us the best price and convenience.

Cars24 co-founder and CEO Vikram Chopra in a recent
interview
 with
Moneycontrol
 said the company is “almost profitable.”

Malaysian used-car marketplace Carsome is also on a similar path. In the second Big Story this week, my colleague, Emmanuel, exclusively speaks to Carsome CEO Eric Cheng on the tough decisions it has taken to reach profitability.

In the Hot Take, I analyze the sudden rise of Temu, the new shopping app sensation in the US.

– Samreen

THE BIG STORIES

1⃣
Carousell posts $49.5m in revenue in 2021 as growth slows

Image credit: Timmy Loen

In 2021, the classifieds giant laid foundations for recommerce, which will pave the way for its next phase of growth as it heads toward profitability.

2⃣
Can Carsome break even in 2023?

Image credit: Timmy Loen

The used-car platform plans to go back into the black after an eventful 2022.

THE HOT TAKE

What lies ahead for Temu

Photo credit: Temu

Here’s what happened:

Temu
, the shopping app operated by the parent of Chinese ecommerce giant Pinduoduo,
topped
 the list of free Android apps in the US, beating both Amazon and Shein.

Contributing over 5 million downloads (accounting for 97% of its total), the US forms its biggest global market.

PDD Holdings, the owner of Pinduoduo and Temu, recently said it will strive to create
“unique value”
 with Temu.

Here’s our take:

In almost no time, Temu has become one of the most loved shopping apps in the US, thanks to its
eye-popping
 discounts. For example, a Lenovo wireless earphones variant, priced on Amazon at US$19.5, is available on Temu for US$7.39.

That’s not a surprise, of course, considering who Temu’s sister app is. Pinduoduo’s success has been largely due to its ability to source products directly from Chinese factories. By cutting out the middleman (and the cuts they take), the firm can transfer cost savings over to customers.

But Temu is taking it a step further, offering a discount 30% on top of the already cheap prices as well as free deliveries with no minimum spend. It’s a typical strategy for a company entering a new market, but has proven time and time again to not be a sustainable one.

For Temu, the biggest challenger is likely Shein. For the moment, Shein is focused on fashion, while Temu is a more general platform, but Jianggan Li of Momentum Works notes that it is very likely the two firms will compete at some point.

“Both are formidable players, and it is quite hard to say how things will evolve from there, since there are many factors which might impact,” Li tells
Tech in Asia
.

There is, however, one key difference between Temu and Pinduoduo: Momentum Works
pointed out
 that Pinduoduo was able to leverage WeChat’s social networks to achieve hypergrowth (since WeChat parent Tencent had invested in the ecommerce company). But WeChat’s reach is limited outside of China. Temu likely cannot expect similar support from Facebook and TikTok in global markets, and these two platforms also operate differently than WeChat.

Still, one thing to look out for is how soon Temu expands beyond the US market into developing regions like Latin America or, of course, Southeast Asia.

Pinduoduo, for one, is not yet present in Southeast Asia. As we’ve previously written, however, copy-pasting its model onto the region would be difficult, considering the region’s high cost of logistics as well as relatively lower digital penetration as compared to China’s.

See also:
Explaining Pinduoduo, and whether the model can work in Southeast Asia

Plus, it will likely face competition from players such as Shopee (which also has operations in
China
), albeit a small one) or Alibaba-backed Lazada, which have a deeper understanding of the local ecosystem. TikTok is also gearing up to become a formidable player in the region, and while its ecommerce business is still small, it has the edge in terms of social media reach.

Li points out that in the short term, more affluent markets such as North America will contribute more gross merchandise value and revenue and therefore be seen as “a bigger prize to catch.” Perhaps only when Temu has conquered the US – still the world’s second-largest ecommerce market behind China – will it set its sights elsewhere.

– Samreen

NEWS YOU SHOULD KNOW

Check out
Tech in Asia’s
 coverage of the ecommerce scene
here
.

1⃣ Former
Lazada
 president Jessica Liu
joins
 Shein as vice president for global brand operations.

2⃣ Indonesian conglomerate Astra International has
launched
 a used-car marketplace called
Mobbi
.

3⃣ Southeast Asia
food and grocery delivery spending
 is up 30%, according to a
Grab report
.

4⃣ Vietnamese online grocery firm
Cooky

raises
 US$4.5 million from Do Ventures and Nextrans.

FYI

1⃣
Lessons from the demise of two Chinese grocery delivery pioneers

The MissFresh app / Photo credit:
Wirestock Creators
 /
Shutterstock

The influential Nice Tuan and MissFresh both shut down in recent months despite having early success, rapid expansion, and innovative business models.

2⃣
Have Amazon and Shein cracked the omnichannel fashion code?

Photo credit: Shein

Both online giants recently opened physical fashion stores, and their new ventures may be lighting the way for the future of retail.

That’s it for this edition – we hope you liked it! Do also check out previous issues of the newsletter
here
.

See you next week!


Can Carsome break even in 2023?

This year has been bittersweet for Carsome.

The Malaysian unicorn kicked off 2022 by raising US$290 million in a series E round, increasing its valuation to about US$1.7 billion. It was also a magnet for talent, having beefed up its workforce with employees that came from the likes of Capital A and MyTukar, the Malaysian arm of rival Carro.

Photo credit: Carsome

Carsome, however, had to also shelve its dual-listing plans in Singapore and the US that were set for this year,
Bloomberg

reported
 in June.

Despite its war chest – our
estimates
 show that Carsome has a three-year runway – the company ultimately had to lay off staff at the end of September. Its leadership team is also forgoing pay until the end of the year.

External headwinds, both at home and abroad, have been a thorn on the side of many ambitious tech companies this year. Carsome will not be an exemption, Kuala Lumpur-based investors tell
Tech in Asia
, saying that the current political change in Malaysia as well as the possibility of a global economic recession will be its stumbling blocks.

Carsome CEO Eric Cheng, however, tells us in an interview that the company will be on track to break even in 2023. By deciding to make tough cost-cutting decisions early, he says “we can go toward profitability in a much closer time frame.”

According to Cheng, the job cuts touched all departments but did not affect “a big part of the workforce.” He estimates that “less than 5%” were laid off and that Carsome still has 4,000 staff.

The focus now, he says, is to work on the company’s “accelerated profitability plan,” a road map that’ll guide Carsome to hit its goal.

And Cheng is banking on the company’s “tech stack” to bring it to the black.

Of thin margins

Carsome’s main business is the buying and selling of used cars, and it’s one of several players tackling this space in Southeast Asia.

We
discovered
 that if marketplaces like Carsome or its closest rival Carro could acquire just 15% of Southeast Asia’s growing used-car market, they could generate a revenue of a little more than US$7 billion – multiple times larger than what these players are making today.

Covid-19 has not muted growth for Carsome and Carro either. Both platforms posted new revenue records amid the pandemic, while also providing a lifeline to used-car dealers, such as
those in Kuala Lumpur
.

Indeed, Carsome’s revenue for the financial year ending December 31, 2021 doubled to US$656 million compared to the previous year.

However, our
previous calculations
 also show that the business has thin margins overall, especially since these marketplaces act as intermediaries.

So if we subtract Carsome’s acquisition cost for vehicles sold (i.e., cost of goods sold), the firm has a gross profit of US$36.6 million, which is just 5.6% of its revenue figures. While that appears to be par for the course in the used-car business, it’s a relatively lower figure compared to other industries.

Carsome’s golden goose

The technology that powers Carsome is where the money lies, a Malaysian investor familiar with the used-car platform’s business tells
Tech in Asia
.

“The data that Carsome receives from users and transactions as well as the ability to accurately predict prices or ensure stock availability or even understand user behavior… these are the aspects of the business that can be spun off,” he says.

Cheng also tells us that 70% of Carsome’s Malaysia business involves intercity transactions. This means a car can be sold in one state and bought from another – all in one platform.

However, despite some of Carsome’s cutting-edge technology, Malay-language news portal
Malaysia Gazette
 reported that over 50 Carsome customers who had sold their cars to the platform had to wait around three days for their money to be disbursed. The report, which cited sources, noted that the process had typically taken one to three hours before.

Cheng tells us it “wasn’t the company mismanaging the process” and adds that the incident was an isolated case. “When you’re selling a car with us, everything can be done within an hour. Payment is made within the same day.”

These are according to company policy, he says. But Cheng notes that there are other variables that are out of Carsome’s control, such as bank transfer time or the lack of sufficient documentation from the customer’s side to support the sale.

He adds that the larger segment of customers have been happy with the business, citing the company’s net promoter score (NPS), which has been over 70 “for the last 12 months, even when news like that happened.”

NPS measure a customer’s likelihood to recommend a service based on their experience. A score of 70 and above means that the experience is excellent.

The “transactional platform” for the underserved

Carsome’s tech stack has also enabled it to venture into the digital banking space. The company is part of a consortium that consists of Malaysia’s KAF Investment Bank along with fintech firms Jirnexu and MoneyMatch.

Cheng says that aside from its marketplace business, Carsome has also provided financing for consumers and dealers over the last four years through Carsome Capital.

This, he argues, will help KAF cross-sell banking solutions to a wider pool of consumers. But it would also help Carsome push out hire-purchase loans to the unserved and underserved market.

Hire purchase is a commonly used method to buy cars in Malaysia. In a hire-purchase agreement, the car user is responsible for insuring and maintaining the vehicle, but the bank remains the legal owner until the loan is fully paid.

Think of it as a rent-to-own scheme, where you are hiring (or renting) the car that is owned by the bank, and you will only fully own the car when you have paid off your monthly installments.

But venturing into hire-purchase financing can be tricky. The pandemic affected other used-car financing companies such as ELK Desa, which is also listed on the Bursa Malaysia. While the group is now riding the recovery, it had to
increase
 impairment allowance and credit loss charges during the peak of Covid-19.

Cheng argues that while Carsome is geared toward borrowers who do not qualify for prime rate loans, it is a “transactional platform” unlike banks and car financiers such as ELK Desa.

This allows the company to offer an alternative. If a customer can’t continue paying for the car, they can downgrade their vehicle to a cheaper one with a lower installment plan. Banks, on the other hand, would take back the cars from defaulters.

The KAF digital bank, which is a product of the consortium, is expected to launch by the end of next year.

Keeping burn rate low to hit profitability

Carsome has also been putting its capital to use by making acquisitions. It finalized its A$191 million (US$128 million) purchase of Australia-listed iCar Asia early this year. It has also expanded to Singapore, Thailand, and Indonesia.

What was also noticeable about the company’s series E round in January was that it was led by the Qatar Investment Authority. Other investors include 65 Equity Partners and Seatown Private Capital Master Fund, both of which are backed by Singapore’s Temasek Holdings.

But at the time, macroeconomic conditions were different than they are today. The US Federal Reserve has aggressively raised interest rates (expected to reach nearly 3% by the end of the year), thus marking the end of cheap capital.

This, coupled with investors’ declining appetite for high-growth companies, may become a challenge for Carsome moving forward, says a Malaysian VC attached to a regional institutional fund. “And I think interest for such companies will either remain low or drop further,” she tells us.

Cheng knows that he needs to take advantage of Carsome’s strong liquidity position to break even next year. The company sits on US$340.4 million in dry powder as of the end 2021.

Eric Cheng, Carsome’s co-founder and Group CEO / Photo credit: Carsome

Without providing specifics, he says Carsome’s burn rate is low. The CEO also says that the company’s financing partners – such as Malaysian banks Maybank and Public Bank as well as Indonesia’s Bank Jago – are still providing “debt facilities” at competitive interest rates “when it comes to financing working capital as well as buying and selling inventory.”

As for its listing plans, Cheng clarifies that the company never went on record about the delay, but he says that it is one of many options on the table. He adds that “it doesn’t really make sense to explore” an IPO at the moment given current market conditions and economic headwinds.

“We are capable of going public, as we have the right governance structures in place such as audit and compensation committees. So it’s a matter of when or if we should do it. No one has the right answer to be honest,” Cheng says.

The region’s used-car space is heating up, too. Carsome has a strong footprint in Indonesia and Thailand, but another used-car player, Mobbi, has made its debut in Indonesia. The company is backed by local conglomerate Astra International.

But, aside from profitability and better service, Cheng highlights that Carsome will be working on refining a few things in the next 12 months. Chief among them is its mobile app – besides their ownership profile, car owners will be able to keep track of ancillary needs such as after-sales services and road tax renewals.


Making sense of Malaysia’s new PM and tech reforms

Last Thursday, when my
first column
 went live, Malaysia finally settled on its 10th prime minister – Anwar Ibrahim.

Malaysian Prime Minister Anwar Ibrahim / Photo credit: Sadiq Asyraf / Prime Minister’s Department

The decision came after a week of political intrigue, and it took shorter than I personally expected. Malaysia has entered a post-election coalition era and that’s something all of us, including those in the tech space, will need to get used to.

This brings me to today’s topic about the country’s new prime minister and what the tech industry can expect from the Anwar government in the next few months.

Before we get to this, here’s a little Malaysian Politics 101:

Anwar is the chief of the Pakatan Harapan (PH) coalition, which won the most seats – 82 of them – in the lower house. To form a government, a coalition needs to win at least 112 seats.

Because none achieved this, Anwar and the other coalition chiefs were instructed by the Malaysian king, Yang di-Pertuan Agong, to form a unity government.

But Anwar’s closest rival, former prime minister Muhyiddin Yassin, didn’t agree to this. His coalition, Perikatan Nasional (PN) – which primarily consists of Islamists and conservative Malays – has decided to sit out and remain as the opposition.

This leaves Anwar’s PH and other friendlies, namely Barisan Nasional (BN) and Gabungan Parti Sarawak (GPS) – the country’s third and fourth largest coalitions, respectively – to form the government. This is unprecedented as PH, BN, and GPS were all on opposite sides of the political spectrum.

Notably, BN has had a knack for corruption. Najib Razak, who’s in jail for corruption charges involving a company linked to 1MDB, comes from this party. The coalition’s current chief, Ahmad Zahid Hamid, is also facing corruption trials.

Meanwhile, GPS is Sarawak’s ruling party and has always seen PH as rivals and a thorn. Somehow, this time, they were able to reconcile.

This is a case of weird bedfellows, but it is what we have today.

All three coalitions have previously been in government. BN was the country’s ruling coalition until 2018 when it lost to PH during the 14th general election.

Anwar was also part of PH during this time and was designated as Mahathir’s successor, but the succession plan never materialized. PN succeeded PH in 2020 after it successfully triggered a coup.

Meanwhile, GPS was in a pact with BN and PN when both were in government.

Now, what can we expect from this government? Things are chugging slowly. At the time of writing, Malaysia doesn’t even have a Cabinet yet. But there are trends that we can map out.

Greater tech adoption?

I’ll begin with some good news: Tech-related policies will have a greater emphasis under Anwar’s government.

Two simple reasons: First, the man himself has shown interest. Under PH 1.0, Anwar launched the
Digital Native Agenda (DNA23)
. This was supposed to be a key pillar of the government once he took over from Mahathir.

DNA23 was supposed to set the tone for the country’s digitalization policy, efforts include job creation and bringing the digital economy to the more rural parts of Malaysia. However, the program lacked any concrete policies.

Second, some of his PH colleagues, who spearheaded important tech initiatives while serving in the Cabinet, have been reelected as lawmakers. This means we might see some of them in government.

Names that are relevant here are former communications and multimedia minister Gobind Singh Deo and former energy, science, technology, environment, and climate change minister Yeo Bee Yin.

When Yeo was minister, she
started
 discussions with major VCs and startup players in the country to establish a fund-of-funds (FoF) initiative. This was the precursor of Penjana Kapital, the current state-owned FoF.

She also looked into
restructuring
 five tech-related agencies: Malaysia Venture Capital Management (MAVCAP), Cradle, Malaysia Debt Ventures, Malaysian Technology Development Corp, and Kumpulan Modal Perdana. This is a much-needed discussion that I’ll wade into in the near future. Suffice to say, nothing materialized due to the change in government.

Gobind, on the other hand, tackled policies such as internet speeds and
spearheaded
 the Malaysia 5G policy. Succeeding governments have decided to continue with the country’s 5G rollout but due to the change of administrative hands, this initiative is moving at a snail’s pace.

We are not sure whether either of them will be reappointed to the Cabinet and to their previous positions. But we can at least say that there are experienced hands in the coalition who understand certain aspects of the tech industry.

For what it’s worth, PH has governed Selangor and Penang since 2008, the richest states in Malaysia. They, too, have been trying to stimulate the local tech and startup scene, so there’s some continuity on multiple fronts.

Whether bureaucracy can grok the needle is something for a later column. But this is where everything makes or breaks with the government.

For now, the consensus from many Kuala Lumpur-based investors I spoke to is that Malaysian government officials, including those helming state-owned VCs and tech agencies, do not have their ears to the ground.

The only puzzle here is: Who’s going to be finance minister? Remember that all state-owned VCs, tech agencies, and government-linked institutional investors – including sovereign wealth fund Khazanah Nasional – are answerable to this ministry as well as the prime minister.

I’ll add in something here too: The governance of state-owned entities, or government-linked companies (GLCs) as they are called in Malaysia, is convoluted. Funnily, the term GLC is wide-ranging to the point that if I list them all here, it’ll take forever.

Another thing to note is that the finance ministry owns a golden share in GLCs and thus controls board appointments and major decisions. This golden share is like the dual-class share system where, in this case, despite owning only one share, the owner can veto decisions and so on.

But despite this setup, relevant ministries – usually the communications and multimedia ministry or the science and technology ministry – will also have to monitor these entities’ progress.

If you’re scratching your head, believe me, I have been doing that earlier than you have. Welcome to Malaysia.

Into uncertainty

Now onto some bad-ish news. We’ll start with the upcoming reviews of major ongoing infrastructure projects, a de rigueur of any new government.

In the past, these reviews can be consequential as there was political will backing each government since these were the days of strong single coalitions.

This is no longer the case. Anwar has promised that he won’t embark on a witch hunt. That may be good, but reviews will still be done since he’ll need to do two things: placate his cabinet members and plug leakage.

I’m not going to predict which projects will be looked at. Historically, however, there are some trends: It’ll involve large-scale projects north of a billion ringgit (US$223.3 million). There would be a pause, an evaluation, and a renegotiation of the project – albeit at a lower price – and then resumption of work.

Examples include the
National Integrated Immigration Systems
 and the intercity rail projects such as the
Mass Rapid Transit
 and the
East Coast Rail Link
.

There have been cases where projects were canceled and a fresh tender was called. Usually these types will end up in a lawsuit that’ll usually be
settled out of court
. Suing the government is tough.

For now, any major deals or policies that involve a government agency – including state-owned VCs – is fair game.

An effect of project reviews is also a change in the leaderships of state-owned entities. Tech-related agencies such as MAVCAP, Malaysia Digital Economy Corporation, and Malaysia Debt Ventures are not spared.

There are some who’ve withstood regime changes and continue with their work, such as Malaysian Research Accelerator for Technology & Innovation CEO Dzuleira Abu Bakar. But she is an exception to the norm.

TL;DR: We will be facing momentary uncertainty.

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.48 ringgit.


The pandemic hit rural SMEs hard. Here’s how Shopee helps them bounce back

When the pandemic upended the Malaysian economy, the impact was especially dire for
SMEs
, who saw their share of the national gross domestic product decline in 2020 and
again in 2021
.

This is a worrying development, as SMEs account for
98% of all Malaysian establishments
, many of which are located in rural or semi-rural areas.

In general, these small businesses tend to
lag behind larger firms in digital transformation
, and tech adoption is especially low among rural entrepreneurs due to a lack of internet infrastructure, key talent, and hardware. With
60 million new consumers
 coming online thanks to the pandemic, these SMEs need to pick up digitalization in order to survive.

Photo credit:
oqba
 / 123RF

All of this has created a digital divide that has only widened with the pandemic, an issue that the government is addressing with a
21 billion ringgit (US$4.7 billion) investment
 and a network of IT centers for entrepreneurs to help them access free training and facilities.

The potential that digitization unlocks

Though internet connectivity in the country’s less urban areas is still far from perfect, the pandemic has shown that just having a basic connection could have a transformative effect for entrepreneurs in these locations. Mohd Ghazali, a former teacher from the Sabak Bernam district, is one example.

“During the first lockdown in March 2020, I spent most of my time preparing and conducting home-based teaching and learning,” he recalls.

He began selling his wife’s
sambal pecal
, a spicy peanut-based sauce, on ecommerce platform
Shopee
 as a way to kill time and earn a little extra income. Previously, she’d only been selling it offline.

Before opening his online store, Mohd Ghazali and his wife struggled, as their reach was limited to how many people he could physically meet, how many jars he could carry, and the cash-only payments he could accept.

All that changed with Shopee: the entrepreneur’s business became much easier to run with digital tools that helped to promote his products, conduct transactions online, and manage logistics.

What started out as a humble venture has since become a thriving online business. He now earns an average of 30,000 ringgit (US$6,740.00) a month and has expanded his product line to include local snacks.

“With digitalization, rural entrepreneurs have the opportunity to bring their products, such as fresh produce or handicrafts, to a wider audience without high costs,” says Kenneth Soh, the head of marketing campaigns for Shopee Malaysia.

Soh adds that SMEs in these areas are often
at a bigger disadvantage
 than their urban counterparts who benefit from more readily accessible internet connections and their technical know-how. Complex and expensive logistics further complicate the matter.

“We want to reduce these barriers and help sellers access the benefits of the digital economy,” says Soh.

Connecting buyers and sellers

Shopee launched in Malaysia in 2015 with the goal of helping sellers connect to more buyers and scale online quickly.

“First-time entrepreneurs can easily open a store on Shopee and manage all aspects of their operations with ease – from deliveries and payments to inventory management and marketing,” says Soh.

Kenneth Soh, head of marketing campaigns for Shopee Malaysia / Photo credit: Shopee

Mohd Ghazali shares that having access to a variety of tools for functions like marketing and logistics at zero cost helped him make the most of his available resources. Meanwhile, the free online classes he attended via Shopee University, a multilingual seller training program, enabled him to increase sales and traffic to his store.

Shopee’s interface is an end-to-end ecosystem with tools and solutions such as livestreaming capabilities and cashback programs. Mohd Ghazali points to features such as Shopee Ads and shipping discounts as key promotional solutions that led to the success of his wife’s
sambal pecal
 business.

“I probably would not have been able to be where I am today without the reach that Shopee is able to provide,” he says.

Putting power back into sellers’ hands

For Khairul Azmi, who is the son of farmers from the small fishing port of Tok Bali, Shopee helped his parents regain control over their lives.

“My mother and stepfather… plant corn and sweet potatoes and rely on middlemen to collect the produce to sell in Cameron Highlands,” he says. “We had no control over the price of produce, as that’s usually determined by the middlemen.”

When Covid-19 hit, Khairul’s parents saw their incomes dwindle as the brokers they worked with shuttered operations or demanded steep discounts.

“I decided to help by setting up a Shopee store to directly sell to consumers,” he says. “It wasn’t difficult, very little tech knowledge is required – it’s like setting up a social media account.”

From his home in Kuala Lumpur, Khairul could remotely manage his parents’ orders and marketing initiatives.

“Whenever I receive an order, Shopee’s platform auto-generates an
airway bill
 which I send to my family through WhatsApp,” he explains. “They then print it out, harvest the produce, pack, and ship out within 24 hours.”

By cutting out the go-between, Khairul says his parents sold their entire stock within two months, collecting 100% of the proceeds.

“We gained more autonomy and control over the way we run our business,” he says.

Supporting the community

The success of Mohd Ghazali’s
sambal pecal
 store has enabled him to support not just his children but also local farmers whose livelihoods were affected by the pandemic.

“I purchase an average of 400 kilograms of produce from farmers in my village every week at a slightly higher price to help them increase their revenue,” he says.

Mohd Ghazali Anuar runs a store on Shopee selling a peanut-based sauce / Photo credit: Shopee

His earnings have also enabled him to employ underprivileged workers as a way of giving back to his community.

“It’s not much, but it helps,” he says. “When you help others grow, you will receive blessings.”

Mohd Ghazali’s story shows how important SMEs are to the continued recovery and growth of the overall Malaysian economy. When rural entrepreneurs are supported, there are both tangible and intangible knock-on effects.

Similarly for Khairul, his parents’ store has helped spread the word of the quality of Tok Bali corn.

“The most popular corn in the market is from Cameron Highlands, but most people don’t know that there aren’t many corn plantations there,” he says. “Most of the time, that corn was purchased in Tok Bali.”

“Maybe now there will be more support given to farmers there.”

Shopee is the leading ecommerce platform in Southeast Asia and Taiwan, where customers and merchants are connected in an ecosystem for an easy and secure online shopping experience. Shopee is committed to supporting rural entrepreneurs in Malaysia by providing them with the tools and services they need to scale and succeed.

To find out more about how Shopee can support your entrepreneurial journey, click on
this link
.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community.
Learn more
 about partnering with Tech in Asia Studios.


Malaysia: No country for tech heroes

Recently, I had tea with a few startup founders. A common request – and a reasonable one – is to showcase what Malaysia has to offer. A hero story, as they say.

Malaysia’s capital city, Kuala Lumpur. Photo credit: pat138241 /123RF

That sounds really good: I work for a regional tech publication, which is the best platform to parade and fete what the country has to offer.

But it’s also a difficult request.

More so now as Malaysia looks to appoint its new government. Depending on when you read this column, the country would either already have a new prime minister sworn in while horse trading is still on, or we’ve reached an impasse with no clear winner.

What does politics have to do with tech? Policymaking, of course. The outcome of Malaysia’s search for a new government could either push the country’s tech industry forward or hold it back.

From brain drain to political uncertainty

There are major problems that the country has to deal with but two seem relevant here: the lack of skilled talent, with many citizens plying their trade elsewhere, including Singapore, and a dull tech industry that only produces local champions or
jaguh kampung
 in Malay.

The tech evangelists in the previous government, including former finance minister Tengku Zafrul Tengku Aziz, are no longer around, having lost their respective battles in the recent general elections.

The startup space will remember Zafrul as the man who got Penjana Kapital, a state-owned fund of funds, going. He also
graced
 Catcha founder Patrick Grove’s Wild Digital conference, which was among the large tech-related conferences in the country before the elections.

But despite an openness towards startups and VCs, Zafrul failed to install more serious reforms in the space. Many government-owned VCs overlap in terms of investment mandates.

Even the largest of these, Mavcap, has come under
criticism
 for being sluggish in deploying capital and in raising a VC class. State-owned VCs and tech agencies answer to the finance minister.

What hangs in the balance is a
bag of goodies
 worth US$100.4 million for tech and startup funding in the country’s 2023 federal budget.

When a new government waltzes in, it’ll have to table the budget again, which will then be voted on in parliament. This is because elections were called right after the budget was announced but not passed.

This will be the first order of government business. This process allows some of the startup/tech items to be reviewed. There might also be a chance that these perks and promises stay as they are.

Bear in mind, however, that the government is not bound by budget promises. It can divert funds to other more important issues or delay the funding of certain programs.

There are other issues that need to be rectified. Founders will have to deal with a
staid bureaucracy
 and political turmoil. Such hurdles encourage startups to be domiciled in a country where bureaucracy is much more efficient and approvals come easier.

Corruption remains a major headache too. The country’s graft buster is
investigating
 the Malaysia Digital Economy Corporation for US$4.9 million in false claims.

To make matters worse, Malaysians are talking more about Indonesian startups than local ones. In September, Traveloka
netted
 US$300 million from BlackRock and the Indonesian government at a time when the world is recovering from the Covid-19 pandemic but staring at an economic recession.

This has led to chatter of what others in the region are doing, with many pointing out that Malaysia seems to be left in the doldrums despite having strategic advantages like better public infrastructure and a multilingual workforce.

And we haven’t even touched on the number of politically linked individuals in the startup space, which makes it difficult for me to cover and highlight. There’s possible legal action with the good ol’ defamation suit. There’s also the web of relationships that one has to mine in order to get to the bottom of who is truly a startup’s benefitting owner.

But there are some good people here. There are also those who have Malaysian roots but are doing good work abroad.

If there’s one thing that will mark the Malaysian tech narrative for at least the next five years, regardless of who walks into government, it’s not one of heroes, but of survivors.


Why Malaysian tech firms are shunning Bursa for Nasdaq

If you’ve been following tech news in Malaysia, one thing that stands out is the number of companies – including Carsome and Capital A – that are keen on listing on the Nasdaq.

Pic: Bursa Malaysia

And why not? With a market capitalization of shares traded US$28.4 billion, the stock exchange is second only to the New York Stock Exchange globally.

Starbox Group, which provides cash rebates, digital advertising, and payment solutions, is the
first Malaysian company
 to list on the Nasdaq. The group began trading on the exchange on September 4 this year.

But why are many Malaysian firms seeking fortunes abroad instead of looking toward Bursa Malaysia, the local exchange? After all, Indonesian peers Blibli, Bukalapak, and GoTo are listed on the Indonesia Stock Exchange.

The answer is complex, according to Kuala Lumpur-based investors who spoke to
Tech in Asia
, but they agree that if nothing is done to bolster Bursa Malaysia’s appeal, the country will continue to lose out to overseas peers.

One Kuala Lumpur-based institutional investor we spoke to believes that the main reason Malaysian companies are going abroad is the allure of dual class shares, which provides owners with superior voting rights over their companies despite not having large equity ownership.

Companies that have a dual-class structure have two designations for common stock, A shares and B shares. One class of stock ownership has more power than the other. Holding these more powerful shares allows shareholders, which usually consists of founders, to control boardroom decisions.

Grab is a good example in this case, he says. The super app’s co-founder, Anthony Tan, has 60.4% of the firm’s voting rights even though he owns just 2.2% of its shares.

“And this isn’t a Nasdaq thing,” he points out, referring to Malaysia’s regional peers Singapore and Hong Kong. Both countries introduced dual class shares in 2018.

“One explanation here is that Malaysian law is heavily influenced by the Commonwealth system. This includes the country’s companies law. But the UK is now open to dual class shares,” the investor said.

The UK’s Financial Conduct Authority (FCA) said last year that it would implement changes to its listing rules to permit companies with dual class shares to be admitted to a “premium list.” But there’s a
caveat
: Companies are expected to drop the share structure after five years of going public.

To be sure, dual class shares have their critics. Principles for Responsible Investment, a sustainable investing body backed by the UN, wrote a
letter
 in September last year to the FCA stating that dual class structures “would weaken the existing [governance] regime and risks undermining confidence by institutional investors in the UK premium listing segment.”

Different per-SPAC-tives

Another attraction for Malaysian companies is the nature of special purpose acquisition companies (SPACs) in the US. A SPAC, or blank-check company, is generally given a two years to close the acquisition of a private company before returning the raised money to investors – Grab is an example of a successful SPAC listing.

A banker attached to a regional investment bank tells
Tech in Asia
 companies going through the SPAC route in the US have an advantage at the pre-IPO stage.

“Investors, or sponsors as they are known, backing a SPAC during this period are able to vote” on the acquisition of an existing operating company or the merger of an operating company and a publicly listed SPAC, which in turn means fewer votes are needed from public investors, she argues.

Malaysia introduced SPACs in 2011. So far 11 have filed for listings, but only two have been successful. Both companies are in the oil and gas sectors. Bursa, on the other hand, sees an average of 30 IPO listings every year.

The Securities Commission (SC) Malaysia, however, revised SPAC listing guidelines this year. Chief among them is that a SPAC now needs only a simple majority by all shareholders present and voting rather than the 75% majority.

SC is one of two capital market regulators in Malaysia – Bursa itself is the other.

The political elephant in the room

Finally, there’s the political risk. “We can’t ignore the elephant in the room,” says a Singapore-based dealmaker. “The Malaysian market has been unattractive since the 1Malaysia Development Bhd scandal exploded in 2017 and the ensuing political crises.”

Malaysia has seen three regime changes since 2018: The first was after the 14th general election that year, the second was through a coup in 2020, and the third cameafter the government failed to win a confidence vote in parliament in 2021.

Companies looking to list in Malaysia will have to adhere to the country’s affirmative action rules, which require them to allocate a certain percentage of ownership to Malay institutions or investors.

Further, there’s lesser liquidity on the Bursa Malaysia compared to other exchanges such as the Hong Kong Stock Exchange as state-owned companies, also known as government-linked companies (GLCs),
make up
 25% or 445 billion ringgit (US$99 billion) of the bourse’s market capitalisation of 1.81 trillion ringgit (US$397 billion). GLCs are controlled by state-owned institutions.

Bloomberg terminal data also show that Malaysian state-owned institutions also make up 50% of investors on the Bursa, followed by foreign (40%) and retail (10%) investors.

Malaysia’s capital market regulators – SC and Bursa – are also vulnerable to political interference. The SC’s newly appointed chairman, Awang Adek Hussin, is a
member
 of the country’s ruling political party, Umno. Bursa also saw new leadership appointments following regime changes in 2018 and 2020.

Systemic difficulties

As mentioned above, the SC and Bursa Malaysia govern the country’s capital market. In a nutshell, besides having prosecution powers, the SC oversees the Bursa to ensure the stock market operator performs its duties and obligations effectively.

Bursa, on the other hand, ensures the fair and orderly trading of securities and derivatives. There are three platforms to trade these instruments on the Bursa: Main, ACE and LEAP.

ACE and LEAP are acronyms for Access, Certainty and Efficiency and Leading Entrepreneur Accelerator Platform.

To list on the main market, a company needs to have a combined track record of 20 million ringgit (US$4.39 million) in profit for the latest three to five financial years. The profit in the latest financial year should be at least 6 million ringgit (US$1.31 million).

Some companies that successfully listed on the main market tell us that the process is stringent and can be expensive, given that the SC demands a lot of paperwork and hefty investment banking fees.

“It roughly cost us about 3 million ringgit (US$659,000) to get the initial work done and investment banking fees and a duration of 10 months to be listed on the main market,” the managing director of a company listed on the main market-listed tells us.

He went on to add that this may drive many firms away from listing on the main market because it’s more of a “profits-test” exercise.

ACE and LEAP, on the other hand, are regulated by the Bursa and have less stringent measures.

Companies listing on ACE are not required to provide a track record of historical profit but need to have a paid-up capital of between 5 million ringgit (US$1.09 million) to 10 million ringgit (US$2.19 million). Patrick Grove’s Catcha Digital, for example, is listed here.

LEAP, introduced in 2017, is designed for SMEs that do not meet the paid-up capital requirements of ACE. Companies looking to list here are also not required to furnish a profit record but need to ensure they are solvent as per the standards set by the Malaysian companies’ act.

But LEAP is only accessible to “sophisticated investors,” which the bourse defines as entities with net assets exceeding 10 million ringgit (US$2.19 million) or individuals with net personal assets exceeding 3 million ringgit (US$655,158) or whose gross annual income exceeds 300,000 ringgit (US$65,883).

LEAP was the first of its kind in Southeast Asia. Regionally, other similar markets include South Korea’s Konex and Taipei Exchange’s Pioneer Stock Board.

However, Bursa has yet to roll out a transfer framework from LEAP to ACE despite discussing it since 2019. Only in August this year, Bursa
officially
 put out a call for public feedback on how the transfer should be carried out.

Unless Bursa moves quickly, LEAP companies seeking to transfer to ACE will have to delist and relist. An investment banker who has worked with ACE and LEAP aspirants tells
Tech in Asia
 that listing on the ACE will set a company back roughly 2 million ringgit (US$439,000).

There are also no transfer frameworks from ACE to the main market. To list on the main market, an ACE-listed company will need to delist and relist and cough up more money.

As of September this year, there are 1,008 companies listed across all three markets, according to the Bloomberg terminal data – down from 1,027 firms in 2006. The Singapore Stock Exchange has 763 companies while the Hong Kong Stock Exchange has 2904 firms.

Malaysia to lose out?

A corporate advisory firm that has been engaged by US bankers tells
Tech in Asia
 that many bankers and advisers from the States have been flying into Kuala Lumpur to urge local businesses to list on the Nasdaq.

Some even offer incentives such as discounts on underwriting, one said. He adds that the common sales pitch includes access to a larger pool of investors, better credibility, and regulatory framework, as well as greater funding opportunities.

Another private equity investor we spoke to agrees that some of these may help a company’s valuations. He believes Malaysian tech unicorns would have a lower valuation if they listed on the Bursa than on the Nasdaq.

“Type of investors, a company’s profile, the ability to tap alternative markets – these things are important when determining a company’s valuation, which is typically what helps improve shareholders’ return,” he explains.

A founder of one of the companies we mentioned above also says that many firms have been asking regulators to review some of the strict guidelines – especially the emphasis on profits – to make it easier and attractive to list on the Bursa, but progress has been slow.

Another tech startup founder tells us that it may be inevitable that companies list overseas. He says that a local company may have an office in Malaysia, be headquartered in Singapore, but list in the US.

He says that startups in Malaysia are often quizzed about their “willingness to grow beyond Malaysia,” which is a comparatively small market.

He says that this pressures startups to raise more capital, attract a different investor base, and operate in a country that has clear guidelines and incentives. “The only option, for now at least, is abroad,” he adds.


Google rolls out e-wallet in more SEA countries

Google
 has added support for its e-wallet in more Southeast Asian countries, including Thailand and Vietnam. This comes after Visa announced it would soon support
Google Wallet in Malaysia
.

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

Google Wallet is now available in 57 countries in total. It has already launched in Singapore, Hong Kong, and Taiwan.

The e-wallet allows users to pay for transportation and products in supported stores. Google has also partnered with ticketing companies, such as Thaiticketmajor in Thailand, to allow users to add event tickets to their wallets.

Additionally, Google joined hands with airlines, including AirAsia and China Air, allowing boarding passes to be saved in Google Wallet.

Google Wallet’s expansion comes after it was added to the Google Pixel Watch last month. Today, Google also launched the service on the Fitbit Sense 2 or Versa 4.

According to the
e-Conomy SEA 2022 report
, Southeast Asia’s digital economy’s expected to reach US$200 billion in gross merchandise value. The report also predicts digital financial services to overtake ecommerce as the region’s top sector for investments.

See Also:


Visa launches Google Wallet feature in Malaysia

Starting today,
Visa Malaysia
 credit card holders registered with Hong Leong Bank – as well as Public Bank credit and debit card holders – can store their cards on
Google Wallet
 on both Android and WearOS devices. Purchases will be enabled for in-store, in-app, and online transactions.

Photo credit: Visa

Visa also announced that HSBC and HSBC Amanah credit card holders will have access to this feature in the coming months.

Google Wallet uses and shares tokenized account numbers with merchants to keep consumer information safe. It also allows users to store other documents such as tickets, vaccination records, and IDs.

According to the
Visa 2021 Consumer Payment Attitudes report
, usage of mobile contactless payment solutions has increased for 60% of Malaysian consumers, with safety and convenience being the main motivations for this. Last year, 70% of all Visa transactions in the country were contactless.

The
e-Conomy SEA 2022 report
 also predicts that digital payments in Malaysia are expected to hit nearly US$200 billion in gross transaction value by 2025.

“The impact Covid-19 had on the mobile payment landscape saw shifts in preference for digital payments, with more Malaysians opting for safer and more convenient payment solutions and having an overall positive attitude towards new payment trends,” said
Ng Kong Boon
, country manager of Visa Malaysia.

See also:
The Amazon-Visa stand-off: What’s the endgame?


ASEAN central banks sign MOU to boost cross-border payments

The central banks of Indonesia, Malaysia, Singapore, Thailand, and the Philippines have inked an agreement to bolster regional payment connectivity.

Photo credit: aseanbriefing.com

Bank Indonesia, Bank Negara Malaysia, Bangko Sentral ng Pilipinas, Monetary Authority of Singapore, and Bank of Thailand (BOT) have agreed to make payments across countries faster, cheaper, more transparent, and more inclusive.

The banks signed the memorandum of understanding on Cooperation in Regional Payment Connectivity (RPC) on November 14 in Indonesia, which saw President Widodo highlighting the importance of collaborations during the event.

According to a joint statement, RPC is expected to boost regional economic recovery and promote growth through boosted cross-border payment support. The cooperation will include initiatives centered around QR codes and fast payments, among others.

See also:
QRIS, BI Fast propel banks’ fight against e-wallets in Indonesia

Ronadol Numnonda, deputy governor of the BOT, noted that ASEAN has become an international hub for cross-border payment linkages.

“Building on our previous efforts, this MOU marks another milestone in our
ASEAN Payment Connectivity initiative
 in working together to address the long-standing pain points in cross-border payments,” said Numnonda.


Sunseap’s tale of hope despite widening losses

Welcome to On the Rise! Delivered every Tuesday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in emerging tech. If you’re not a subscriber, get access by
registering here
.

Hi there,

Global warming has been a hot topic (no pun intended) in the past few years.

The 2021 film
Don’t Look Up
 satirized political sentiment and society’s reaction to the climate crisis, while
Blade Runner 2049
 painted Earth as a barren wasteland, set 27 years from now.

Additionally, one of my favorite bands – The 1975 – lent the
opening track
 of their fourth album to climate activist Greta Thunberg and her poignant spoken word.

Despite ideas around climate change entering the public consciousness, a real paradigm shift has yet to come as fossil fuels continue to be the biggest contributor to the problem. After all, most of the decades-old factories and plants in operation still require gas, oil, and coal for power.

Even though alternative energy sources remain an option,
adoption has been slow
.

This is bad news for firms such as Singapore-based solar power firm Sunseap. In this week’s Big Story, my colleague, Collin, explores the firm’s 2021 financials in a series of charts.

After two years of profitability, the company has reported its largest annual loss in the last seven years. The firm’s total expenses in 2021 nearly doubled from 2020, while revenue only rose 15.4% within the same time span.

Regardless, Sunseap’s revenue from energy supply has doubled in 2021 to US$62.3 million – making it the firm’s largest source of income. This marks a turning point, as two years ago, it was the smallest revenue contributor – its construction and maintenance of solar photovoltaic systems was its largest income stream before this.

This indicates a growth in demand for alternative energy in Southeast Asian homes and businesses, and perhaps the inklings of a cleaner future.

In other news, Indonesian coffee giant Kopi Kenangan has made its first foray abroad, into Malaysia. This week’s Making Waves features my colleague, Aditya, demystifying the move.

— Shadine

THE BIG STORY

Sunseap records biggest loss in 7 years

Image credit: Timmy Loen

The Singapore firm slipped into the red in 2021 after two years of profitability. But its filings show Southeast Asia’s steady adoption of solar energy.

MAKING WAVES

Kopi Kenangan’s hot cuppa now in Malaysia

Image credit: Timmy Loen

Here’s what happened:

Indonesia’s Kopi Kenangan has expanded to Malaysia under a new brand, Kenangan Coffee.

The coffee unicorn has also established a training center called Kenangan Academy in its new market.

After Indonesia, Vietnam and the Philippines, are the next hot markets for coffee startups in Southeast Asia.

Here’s our take:

Last month, Kopi Kenangan, an Indonesia-based coffee startup,
opened its first international store
 in Suria KLCC, a shopping mall in Malaysia. By the end of this year, it plans to open four more stores in the country.

The company, which entered the unicorn club at the end of last year, uses the brand Kenangan Coffee for its international market.

Aside from Rocket Internet-backed Flash Coffee, Southeast Asia has seen
a rise
 in coffee startups that not only serve a single country but have also been eyeing international expansions. This comes as no surprise since almost 16% of the world’s coffee
comes from Southeast Asia
.

Both Kopi Kenangan and Flash Coffee are chasing the retail coffee market in Southeast Asia that in 2019, was worth US$6.5 billion, with annual growth of around 6%. According
to a report
 from consultancy firm RedSeer, relatively newer startups like Kopi Kenangan and Flash Coffee have several advantages compared to existing brick-and-mortar-only coffee players, such as greater online presence, lower price points, and locations closer to residential areas that have resulted in faster coffee deliveries.

However, Kopi Kenangan’s recent move to pick Malaysia as its first international market begs further scrutiny, especially since Malaysia is not a market high on Southeast Asia’s coffee business.

Besides Indonesia, three coffee markets in Southeast Asian countries that are bigger than Malaysia: Vietnam, Philippines, and Thailand.

Kopi Kenangan said in a statement that it chose Malaysia as there are many similarities between Indonesia and Malaysia people in “taste” and “interest to try new things.” In fact, the word *Kenangan*, which means “memories” in Indonesian, can also be understood by Malay-speakers.

See also:
Kopi Kenangan’s financials
 and
Fore Coffee’s numbers

Besides, expanding to Malaysia means Kopi Kenangan doesn’t need to directly compete with Flash Coffee, which currently operates in Indonesia, Singapore, Thailand, Taiwan, Hong Kong, and South Korea.

Last year, Flash Coffee announced that it plans to enter Vietnam, the Philippines, and Malaysia by the end of this year. However, the move hasn’t materialized.

In Malaysia, Kopi Kenangan will have to compete with both big and small coffee chains, including the likes of Starbucks, which in partnership with Berjaya Food, plans to open
40 new stores by July 2023
. However, the startup has fared well with a similar profile of challengers in its home country.

On top of that, the startup is likely to see competition from Zus Coffee, which expects to have
180 outlets
 across Malaysia by the end of the year and can be a significant competitor, considering its well-priced cuppas are available in areas Starbucks isn’t.

Interestingly, Kopi Kenangan’s also built a training center called Kenangan Academy in Malaysia to train baristas and other employees that will be in charge of operation in its stores.

The firm built a similar academy in its home country in November 2019, around two years after its inception. Six months after the academy was established, it had
trained a thousand baristas
.

Setting up a skills academy is increasingly becoming de rigueur, as seen in the case of Malaysia-based Carsome, which has set up
similar centers
 in Indonesia and Thailand, besides its home country.

Besides helping put the word out about a new player in town, these training centers also ensure a ready supply of skilled employees for these companies to open up more stores. After all, there’s no such thing as too much coffee.

–Aditya

FYI

Image credit: Timmy Loen

1⃣
Indonesian agritech firm rakes in $2.5m in seed money to support middlemen

PasarMikro enables transactions between farmers and traders while also providing them with working capital and a marketplace to sell their products.

2⃣
Indonesia’s Wahyoo eyes series B raise to bake in cloud kitchen ambition

Image credit: Timmy Loen

The restaurant enabler is turning its partners – including small eateries called “warteg” – into cloud kitchen networks for other brands.

NEWS YOU SHOULD KNOW

Check out
Tech in Asia’s
 coverage of the emerging tech scene
here
.

1⃣ Indonesia-based
Fishlog
 has raised
US$3.5 million
 in its pre-series A funding round. The fishery firm will use its funding to recruit more staff.

2⃣ Software-as-a-service startup
Chargebee

has laid off 142 employees,
 or about 10% of its total headcount. The India and US-based startup said it took these measures to increase efficiency and reduce expenses.

Image credit: Timmy Loen

3⃣
Propseller,
 a Singapore-based proptech firm, has closed its biggest deal to date on a
US$14.5 million property in Sentosa Cove.
 In a LinkedIn post, the firm’s CEO said that Propseller’s daily revenue from the deal was as much as it made in its first 501 days as a company.

That’s it for this edition – we hope you liked it! Do also check out previous issues of the newsletter
here
.

See you next week!


SG healthtech firm gets $28m pre-series B injection

Healthtech firm
Speedoc
 has raised US$28 million in its pre-series B round, which drew backers including Bertelsmann Investments, Shinhan Venture Investment, Mars Growth, and Vertex Ventures Southeast Asia & India.

Speedoc co-founders Serene Cai (left) and Shravan Verma / Photo credit: Speedoc

Founded in 2017 by
Serene Cai
 and
Shravan Verma
, Speedoc offers tech-enabled, omnichannel healthcare services, giving users access to telehealth consultations, on-site doctor and nurse visits, virtual hospital wards, and ambulance-hailing services.

Headquartered in Singapore, the firm operates in its home country and eight cities in Malaysia. Speedoc last
raised
 US$5 million via its series A round in 2020.

At the height of the Covid-19 pandemic, the firm provided support for the Singapore government’s home recovery and home vaccination programs.

The fresh funds will be channeled into developing virtual hospitals across Southeast Asia. Speedoc also aims to expand H-Ward, its 24/7 virtual hospital platform.

The startup is working with Singapore-based hospital partners on a two-year pilot trial for virtual ward services. The initiative is part of the Ministry of Healthcare Office for Healthcare Transformation’s Mobile Inpatient Care@Home initiative.

See also:
An unknown Singapore healthtech firm’s dubious $583m valuation


Malaysia’s CTOS reports strong Q3 results, set to ride SEA’s fintech wave

CTOS may not be a familiar name to readers, especially those outside Malaysia.

This is despite the credit reporting company having the largest IPO on Bursa Malaysia, the country’s stock exchange, in 2021. Retail demand for the
1.2 billion ringgit
 (US$253.2 million) IPO was the largest in eight years, which reflects CTOS’ position as the market leader in Malaysia.

Photo credit: Tech in Asia

The company was
established in 1990
, before the term fintech was even
coined
. Yet, it is set to benefit from the same trends driving the growth of the fintech sector in Malaysia and the wider region.

As a credit reporting firm, CTOS provides information to financial institutions so they can assess whether or not to lend to potential borrowers and how much they can disburse to them. Businesses also use the information provided by CTOS to determine the financial condition of potential partners. Its key customers include peer-to-peer lenders and ecommerce platforms.

Revenue and EBITDA up

Unlike many of today’s cash-burning fintech startups, CTOS is profitable and generates cash flow from its operations. It even pays shareholders a dividend.

Last week, the company announced healthy
results
 for the third quarter of 2022. Revenue for the quarter was up 37% year on year, and
EBITDA
 increased by 86% over the same period.

EBITDA margins expanded from 43% in Q3 2021 to 58% in the most recent quarter, which the company
attributed
 to scalable organic growth and higher contribution from its associates.

The company’s operating expenses have generally gone up in line with revenue. However, for the first three quarters of this year, total operating expenses as a percentage of revenue was 62%, down from 67% in 2021, which hints at better economies of scale.

CTOS’ share price is currently 1.37 ringgit (US$0.29), up 25% from its IPO price of 1.10 ringgit (US$0.23), but down 26% year to date.

Riding the fintech wave

As tech players have grown and ventured into lending services in recent years, so has their demand for credit reports. CTOS is the dominant player in Malaysia, and it competes with the likes of CRIF Omesti and Dun & Bradstreet Malaysia – whose parent Credit Bureau Asia is listed in Singapore.

Malaysia’s upcoming digital banks and accelerating adoption of buy now, pay later services will further fuel demand for CTOS’ services.

However, the company wants to expand its offerings beyond its core business. In its
latest annual report
, it noted that its “key competitive edge” is its ability to provide value-added digital solutions “beyond traditional credit reporting.”

To that end, it has spent the past few years launching digital solutions that span every stage of the customer life cycle, from digital onboarding to debt recovery.

CTOS segments its revenue by customer type, with the largest share coming from SMEs in Malaysia. Its client base is diversified, with no single customer contributing 10% or more of the company’s revenue.

However, CTOS stated in its prospectus that its strategy going forward is to maintain and grow its market share by growing its key accounts customer base. It also plans to launch more digital solutions targeted at consumers.

Southeast Asia underpenetrated

The size of Southeast Asia’s credit reporting industry is small, amounting to only 3% of its US counterpart, according to
research
 conducted by tech market intelligence provider IDC.

However, it is growing at a faster rate. From 2o21 to 2025, IDC expects the region’s credit reporting market to grow at a compound annual growth rate (CAGR) of 10.8%, compared to 7.5% in the US for the same period.

Within Southeast Asia, the top three markets for credit reporting are Singapore, Malaysia, and Indonesia.

There is an inverse relationship between market size and expected growth – generally, the larger a market is, the slower the expected rate of growth. The exceptions are Malaysia, which is expected to grow at a higher CAGR than Indonesia despite the latter’s larger market size, and Thailand, where growth between 2021 and 2025 is expected to lag behind Indonesia, even though the former’s market size is much smaller.

This bodes well for CTOS, since it had a dominant share of 73% in Malaysia for 2021. However, there may be limits to its growth.

CTOS and its subsidiaries hold three of seven credit reporting agency licenses issued in Malaysia, which could subject the firm to “increased regulatory scrutiny,” it acknowledged in its prospectus.

The company already has a presence in Thailand through its investment in Business Online. In the longer term, CTOS sees Southeast Asia as a “tremendous opportunity,” one it is likely to seize through acquisitions.

Acquisition spree

Since its IPO, CTOS has made a series of acquisitions meant to bolster its presence in the region and in areas outside traditional credit reporting.

So far this year, CTOS has spent 325 million ringgit (US$68.6 million) on investments in associates, which is more than the 220 million ringgit (US$46.4 million) it raised in its IPO. To bridge this gap, the company raised a further 174 million ringgit (US$36.7 million) in March through a private placement.

The Juris acquisition, in particular, was significant, with CTOS paying 206 million ringgit (US$43.5 million) for 49% of the company.
According to the credit reporting firm
, the acquisition would allow it to offer a “full suite of solutions, similar to other global bureaus” such as Experian, TransUnion, and Equifax.

How do these acquisitions affect CTOS’ financials? They don’t affect the top line but are instead reflected as “share of profits of associates” and count toward the company’s profits.

For the
full year ending December 31, 2021
, this line item accounted for 14% of CTOS’ profit before tax. The comparable figure for the first three quarters of 2022 is 21%.

It’s worth noting that the sums that the company earmarked for acquisitions and investments have exceeded its expectations at the time of its IPO by more than 5x. In its prospectus, CTOS said it planned to deploy 58.7 million ringgit (US$12.4 million) of proceeds from its offering for investment and acquisition of various targets “in the next 36 months.”

In response to
Tech in Asia’s
 queries, CTOS said that M&As are “often opportunistic.” It stated that what was disclosed in the prospectus was based on available options at the time, but that when it subsequently “got the opportunity to acquire more stakes … we took it.”

Management has since “reaffirmed its plans to
put on hold
 any further acquisitions for one to two years,” according to an analyst note from Nomura.

Why the pause for now? CTOS tells
Tech in Asia
 that it intends to spend the next couple of years “digesting our recent acquisitions” and that it will “focus on extracting synergies via cross-selling opportunities to deepen wallet share to increase revenue.”

Given the pace of acquisitions and the volatile macroeconomic environment, that may be the prudent choice for now, and it is unlikely to have a significant impact on CTOS’ revenue or profit growth.

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.74 ringgit.


Tony Fernandes steps down as AirAsia X group CEO

Tony Fernandes
 has resigned as
AirAsia X
 group CEO only four months after taking up the executive role,
The Edge Markets
 reported. Effective immediately, the decision was made due to “other commitments,” he said.

Previously, Fernandes was a non-independent non-executive director at the company. Fernandes stepped into the role after his predecessor Nadda Buranasiri
resigned
 in April.

Malaysia-based AirAsia X is the sister company to budget airline AirAsia and operates medium- to long-haul flights.

Fernandes is largely known for turning the previously indebted government-linked airline into a thriving company, listed on the Malaysian stock exchange. He has been with AirAsia for over 20 years.

AirAsia X recently announced that it will
expand medium-haul routes
 from Bangkok to cities in Japan, South Korea, and Australia amid high demand, “reactivating” 175 pilots and 285 cabin crew who had been previously furloughed at the height of the pandemic.

See also:
AirAsia Rides builds on Gojek’s operations to battle Grab in Bangkok


Capital A sees 161% YoY growth in AirAsia super app users in Q3 2022

Capital A
 said it saw a 1,925% year-on-year increase in passengers for the third quarter of 2022, operating 68 aircraft during the period.

With the still climbing interest in travel, the company said its super app saw 9.5 million average monthly active users in the quarter, a 161% growth compared to the same period last year.

Photo credit: Capital A

The number of transactions made through the app also saw a 1,953% year-on-year increase for Q3. This represented a 139% growth from the previous quarter.

Capital A attributed this growth to the app’s travel vertical, seeing boosts in bookings through FlyBeyond, AirAsia flights, and its Hotels platforms. The company also said its ride-hailing arm, AirAsia Ride, also completed 550,000 trips in the quarter.

The company registered a 21% quarterly growth in its logistics business, Teleport, which moved 26,667 tonnes in Q3. Delivery orders through the business experienced a larger uptick, growing 136% in the quarter to 2.7 million deliveries.

Meanwhile, Capital A’s fintech arm BigPay saw its user base grow to over 1.2 million in Q3, representing a 48% and 4% increase on a year-on-year and quarter-on-quarter basis, respectively. The company said the improvement was on the back of new product launches, including that of its budgeting and saving tool Stashes.

See Also:
AirAsia Rides builds on Gojek’s operations to battle Grab in Bangkok


Behind Penang’s development as a tech hub

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Hello reader,

I recently got back from a two-week trip to New Zealand. While everything about the vacation was great, there was one thing I realized: I didn’t really eat a variety of food.

Sure, the beef and venison were delicious, with a fresh quality that could only have come from the free range pastures of local farmers. But I’m Singaporean. I need some spice and life in my food – if not, why bother living at all?

Now, Penang on the other hand…

I’ve never actually been there, but the Malaysian state is always in contention for being one of the best places in the world when it comes to food. If you ask me, I can’t believe I haven’t actually visited yet.

In today’s story, we take a look at Penang – although unfortunately (for me), it’s not a travel guide about where to find the best dining options. Instead, we explore its tech startup scene, which showed much promise some seven years ago. Today, however, things are different. What changed?

Today we look at:

What happened
 to Penang’s dream of being a tech hub?

A Singaporean biotechnology company going public.

Other newsy highlights such as a new code of conduct for Singapore-based BNPL players and GoTo Group’s possible controlled sale of around US$1 billion worth of shares.

Premium summary

Penang dreamin’

Image credit: Timmy Loen

Singapore and Malaysia have always had a friendly rivalry when it comes to food. I’m just kidding, but I’m pretty sure there are people who would actually fight each other over it.

That being said, there’s another similarity that Penang could have shared with Singapore: that of being a top global hub for tech startups. What happened to that vision?

Too many cooks:
 According to Khoo Kah Lee, a tech evangelist in Penang, the involvement of state agencies conflicted with his efforts, as their agendas were “not aligned.” Lee, also known as Curry, added that because Penang is a small state with a population of 1.8 million people, “it made no sense to have two groups (i.e., state vs. non-state [actors] working on the same thing.”

Silver spoon:
 All things considered, Penang actually had a great start. When Malaysia first began attracting global manufacturers to set up shop in the country in the 1970s, Penang was the location of choice due to its English-speaking workforce and connectivity with its strong port and logistics sector. Today, the state has a strong semiconductor industry and an extremely tech-savvy entrepreneurial class.

Missing ingredients:
 With all its resources, however, Penang still lacks in some critical areas, namely talent development, venture capitalist funding, and mentors. Large multinationals and local tech giants tend to get the lion’s share of new talent by offering attractive pay packages, and many young founders would rather consider Kuala Lumpur or Singapore for their headquarters instead.

Read more:
Twists and turns in Penang’s tech ambitions

Startup spotlight

Heal the world, make it a better place

Image credit: Timmy Loen

I love science fiction. And in many of the media or literature under that genre, one of the defining characteristics is how advanced biotechnology is.

For example, the plot of
Elysium
, a film from 2013, revolves around a dying man trying to get access to “Med-Bays,” which can heal any disease. While such concepts might be entirely fictional, we shouldn’t discount that biotechnology is making progress today. This is especially so with
AUM Biosciences
, a clinical-stage biotechnology company that recently announced it was going public.

Screw cancer:
 AUM Biosciences was founded in 2018 by Vishal Doshi. It uses an AI-augmented platform to develop targeted cancer therapies.

Nice:
 The firm plans to go public through a merger with Mountain Crest, a US-based special purpose acquisition company. The transaction is expected to close in the first quarter of 2023 and reflects a pre-money valuation of US$400 million for the company, with around US$69 million in gross proceeds.

If we hold on together:
 The merged companies will operate under a new entity called Holdco, with Doshi as its CEO. Additionally, a representative from Mountain Crest will join Holdco’s board of directors.

See also:
After pandemic growth, Indonesian biotech startup tests post-Covid waters

Quick bytes

1⃣
Run baby run

With its latest seed funding round,
Runchise
, an Indonesia-based restaurant management platform, hopefully won’t have to look back. Founded earlier this year, Runchise helps restaurant and franchise owners manage their stores in areas such as table arrangement, supply chain management, and point-of-sales processes.

The amount of funding was undisclosed, but Runchise has indicated that it plans to use it for hiring, product development, and marketing purposes.

2⃣
At the precipice
GoTo Group
 is fast approaching the end of its IPO lockup period, which concludes on November 30.

To avoid a potential drop in stock prices should investors decide to sell their shares en masse, the group is in negotiations with major investors, including Alibaba and SoftBank, for a controlled sale of around US$1 billion worth of its stakes. It has also sought advice from Citigroup, Goldman Sachs, and local advisers on the potential stake sale.

3⃣
No waffling about

Waffle, a Singapore-based customer relationship management platform for F&B businesses, is
looking to raise US$1.5 million
 in a seed funding round.

Founded in 2020, the company provides point-of-sale and integrated loyalty program solutions for local businesses. Additionally, it provides a dashboard for business owners to generate real-time data and customized reports.

4⃣
Regulate now, less pain later

In Singapore, a group of fintech players have
launched a buy now, pay later code of conduct
 to ensure ethical practices and protect consumers.

The group is guided by the Monetary Authority of Singapore and is made up of the Singapore FinTech Association and fintech firms, including Atome, Grab Financial Group, ShopBack, Ablr, Latitude Pay, Pace, Split, and SeaMoney. Some of the measures include creditworthiness safeguards, transparent fees and clear disclosures, ethical marketing practices, voluntary exclusion by customers, and financial hardship assistance.

5⃣
A full stomach

Thailand-based Infofed has
sold off a majority stake
 to metaverse firm Translucia.

The deal size was not disclosed, although it is estimated to be an eight-figure sum in US dollars. Together, both companies plan to set up an esports boot camp to make Thailand into a regional hub and develop esports content for Translucia’s metaverse.

6⃣
A clean line of succession

Unlike, say,
House of the Dragon
, Funding Societies, a Singapore-based fintech firm, announced the
appointment of Chai Kien Poon as country head of Malaysia
.

He will succeed Funding Societies Malaysia co-founder Wong Kah Meng, who’ll now be the company’s group COO. This means that Chai will be responsible for the company’s day-to-day operations in the country as well as scouting for local partnerships and initiatives, while Wong will oversee Funding Societies’ businesses across Malaysia, Singapore, and Thailand.


Taking stock of Vietnam’s undervalued agritech sector

Welcome to On the Rise! Delivered every Tuesday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in emerging tech. If you’re not a subscriber, get access by
registering here
.

Hi there,

As a kid, I spent most of my school summer breaks on my grandparents’ poultry and crop farm in South India. This half-hectare property gave me a glimpse of what a farmer’s life was like, and “backbreaking” is the word that comes to mind.

Every day, my grandfather and uncle would wake up around 5 a.m. to feed the chickens and cattle and start work on the field. They would then inspect the crops and assess for damage due to pests or bad weather. It was heartbreaking when an entire crop of mangoes and cashews for the season were destroyed because of heavy rain.

Those days seem to be in the distant past now, as more farmers today adopt agritech solutions that help automate tasks, monitor the environment, increase productivity, and reduce wastage of resources. Agritech startups have also gotten the attention of investors. In Indonesia, for instance, these players have seen an over 60% rise in funding amount till September 2022 to reach US$216.9 million, according to
Tech in Asia
 data
.

However, that doesn’t seem to be the case for Vietnam, as my colleague Huong highlights in this week’s Big Story. Only a handful of agritech startups in the country have raised external funding as they grapple with the slow adoption of technology among smallholder farmers, who are mainly concerned with domestic supply chain issues. Despite these challenges, investors see the promise in Vietnam’s agritech.

Speaking of promise, our other Big Story shines a light on the earnings of e-scooter startup Neuron Mobility. My colleague Shadine wrote about the Singapore-based company, which posted a 2.3x revenue growth in 2021 and expanded its operations to 22 cities from just seven a year earlier. Although Neuron exited South Korea just months after it launched there, it has seen rapid growth in Australia, Canada, and the UK.

Another thing that’s swiftly growing is the number of accelerators in Southeast Asia, which we take a deeper look at in this edition’s Making Waves.

— Collin

THE BIG STORIES

1⃣
The challenge and hidden potential of Vietnam’s agritech sector

Image credit: Timmy Loen

Agritech firms in the country face an uphill task to digitalize a fragmented industry.

2⃣
Neuron Mobility’s revenue doubles but losses widen

Photo credit: Neuron Mobility

The e-scooter firm exited South Korea in less than a year to focus on markets with high barriers to entry and low competition.

MAKING WAVES

Accelerators are not slowing down amid a funding winter

Image credit: Timmy Loen

Here’s what happened:

An increasing number of accelerators are launching in Southeast Asia.

These new players are seeing soaring demand amid the funding winter.

More sector-specific niche programs have been introduced this year, especially in Web3.

Here’s our take:

Southeast Asia is in the midst of an accelerator renaissance. In the last three years,
Iterative
,
Techsauce
,
Upturn
,
Visa
, and
Cradle
 were among the firms that rolled out their own accelerators in the region. Even US-based accelerator Techstars is targeting Singapore – it’s looking to
hire a managing director
 in the city-state.

These startup-building programs have always been sought after, but demand is set to skyrocket even during this funding winter.

Singapore-based Iterative, which launched in 2020, says that it has been receiving double the number of applications per batch, with its last cohort getting 750 to 1,000 requests. Icetea Labs, which is based in both the city-state and Vietnam, rolled out an eight-week accelerator program in August. It attracted 259 applicants, but only six were chosen.

This rampant demand has been met with a series of new program launches. Creating such programs has become easier, as the pandemic cast a spotlight on digitally enabled conferences, making geography less of a hindrance.

Furthermore, the diversification of startup verticals has driven up the need for more niche, sector-specific accelerators.

Whether it’s
BlueChilli’s
 Singapore healthtech accelerator, the
FEW ESG
 accelerator, or the
UOB Greentech
 accelerator, which all launched in Southeast Asia this year, these programs harness industry-specific skills to ensure that firms receive the most relevant guidance.

However, the greatest influx of launches seems to have come from the Web3 industry.
BNB Chain
,
Cronos
,
BRI Ventures
, and
Animoca Brinc Guild
 are among the newest accelerators in this ecosystem.

Image credit: TImmy Loen

This is unsurprising as the Web3 industry is one of the most popular spaces for innovation and is still at a nascent stage.

“In the crypto market, everything changes so quickly, so founders need the mindset to adapt to the change to be sustainable,”
Thi Truong
, Icetea’s founder and CEO, tells
Tech in Asia
.

Unlike most programs, Icetea’s accelerator asks startups for member fees instead of taking equity. Its goal is to bolster the ecosystem and create a network of applications to strengthen the Web3 economy.

Other companies such as Google have undertaken the same mission. After rolling out its Circular Economy program this year, the tech giant is looking to develop innovative solutions across sectors.

Starting with its Launchpad Accelerator, Google has since offered
global initiatives
 focused on gaming, women-led firms, climate change, and voice AI, among others. Google does not take equity or charge any fees.

“Startups are seeing new opportunities in certain industries [but] find that they don’t really have the know-how or the resources to capture that opportunity,” says
Thye Yeow Bok
, Google’s head of startup ecosystem for Southeast Asia and South Asia.

The presence of these niche sector accelerators has resulted in founders joining multiple programs at a time.

Iterative co-founder
Hsu Ken Ooi
 observes how “there’s a lot of accelerator-hopping in Southeast Asia,” which is “kind of unique” to the region. Maybe it’s common in other regions and around the world, but “in the US, it’s not a thing, you go to one or you go to none,” he tells
Tech in Asia
.

“Even though the programs are similar, there are founders who find different values in each accelerator. I’ve even seen a lot of our entrepreneurs join many other accelerators,” says
Syifa Zakia
, the Indonesia manager of Endeavor’s ScaleUp Program.

Image credit: Timmy Loen

However, accelerators can be distracting to founders, especially when they’re joining more than one. Since these events can last up to six months, they can take up valuable time that founders could be spending to run and build the company – crucial tasks in an economic downturn.

Plus, as more accelerators require membership fees, founders may not have the funds to spare in these tough times.

These programs also allow accelerators to take large amounts of equity – from 5% to 10% – at a relatively low cost. This is cumbersome when entrepreneurs are still looking to raise more funding even as they join multiple programs.

Yet demand remains high regardless of the drawbacks, and these accelerators have no plans to scale back even amid the poor macro conditions. Sequoia’s Surge and Endeavor’s Scale Up, for example, will keep their current capacities. On the other hand, Icetea Labs is bullish: It expects applications to double and is planning to launch two cohorts next year from just one. Meanwhile Iterative aims to expand its cohort size from 19 to 30 startups.

— Shadine

FYI

Twists and turns in Penang’s tech ambitions

The state is known for its robust electrical and electronics sector but has trailed Kuala Lumpur in digital and tech investments.

NEWS YOU SHOULD KNOW

Check out
Tech in Asia’s
 coverage of the emerging tech scene
here
.

1⃣
Matchday
, a new venture focusing on European football founded by e-scooter startup Spin’s founder Derrick Ko, has
received backing from
Play Time
 the new investment firm of soccer legend Lionel Messi. Based in the US, Play Time seeks to invest in startups and teams that revolve around sports and tech. It is also an investor in football-focused startup AC Momento.

2⃣ Singapore biotech firm
AUM Biosciences
 is
going public through a merger
 with US-based blank-check firm
Mountain Crest
. The merger is expected to close in the first quarter of 2023 and will give AUM Biosciences a valuation of US$400 million.

Image credit: Timmy Loen

3⃣ Indonesian co-working startup
CoHive
 has had its
debt payment obligations temporarily suspended
 by a court in Jakarta. If the East Ventures-backed firm can’t pay back its creditors and reach an agreement with them by the time the ruling expires, the judge will declare the debtor bankrupt.

4⃣
Shift4Good
, a VC fund dedicated to sustainable mobility, has announced the
first close of its Fund I at US$98.2 million
. In the next five years, it will back about 30 startups in their series A and B rounds, including firms in Southeast Asia.

5⃣ IPO-bound
Zoomcar
 has announced a
US$10 million financing
 in connection with its SPAC merger with
Innovative International Acquisition Corp
, a US-based blank-check firm.

That’s it for this edition – we hope you liked it! Do also check out previous issues of the newsletter
here
.

See you next week!