Malaysia budget: Expect fewer goodies for tech and startups

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 budget for 2023 will be tabled on February 24. Let me break it to you from the get-go: Lower your expectations.

Prime Minister Anwar Ibrahim is expected to table this year’s federal budget on Friday, February 24. Pic credit: Sadiq Asyraf/Prime Minister’s Department

If you feel a sense of deja vu, I don’t blame you. Budget 2023 was tabled in November last year by a different government, which lost the general election shortly after.

And now we have a new budget under Prime Minister Anwar Ibrahim.

The new version will need to be tabled again. The bill will also need to pass through the lower and upper houses of Parliament for it to be gazetted.

Anwar isn’t compelled to follow his predecessor’s budget blueprint, so he can revamp the whole exercise however he sees fit.

While we wait for specifics, I’d like to make a call to manage expectations, since the budget also has some bearing on the tech and startup space.

Austerity on the horizon?

At the moment, we know that Anwar is
not going to bring back
 the Malaysian version of the value-added tax, AKA the good and services tax (GST) – for now at least. The unpopular GST was abolished in 2018.

Anwar also wants to embark on
fiscal consolidation
. This is a policy that a government employs to reduce deficits and debt.

The signs point to Anwar turning on austerity mode. For instance, members of parliament recently woke up to the shocking news that their yearly allowance for their constitutions had been slashed from 3.8 million ringgit (US$884,000) to 1.3 million ringgit (US$302,000). This allowance is used by members of parliament and their staff for outreach programs and aid for their constituents.

Also, because taxes fuel government spending, even tech-related programs, such as the
DE Rantau digital nomad visa
, will now require expatriates to file their taxes in Malaysia. Previously, it was proposed that the visa exempted digital nomads from paying taxes during their one- or two-year stay in the country.

Smaller startup purse

Direct startup funding may take a back seat. In the previous version of budget 2023, the old government allocated 467 million ringgit (US$100.4 million) for that purpose. Here’s a recap of startup-related items in that version:

364 million ringgit (US$77.9 million) for research and development under the education and science, technology, and innovation ministries

50 million ringgit (US$10.7 million) for Cradle Fund, the coordinating agency of Malaysia’s startup ecosystem

10 million ringgit (US$2.1 million) for a VC fund to finance high-tech companies in the electrical and electronics industry as well as the renewable energy sector via equity injections

20 million ringgit (US$4.3 million) for Mranti Technology Park, the country’s research and innovation accelerator, to develop health technology and smart manufacturing

16 million ringgit (US$3.4 million) to state agency NanoMalaysia for the development and commercialization of nanotechnology

7 million ringgit (US$1.5 million) for Malaysia Techlympics 2023, a series of coding competitions for young Malaysians that tackle themes ranging from AI to sustainable innovation

There’s a high chance that this list won’t stay the same. I’m guessing items like the VC fund will not be tabled this time.

Government-owned tech agencies will also be expected to continue old programs since money has already been allocated. But there may not be fresh funding. Even if there is, it’ll be smaller than earlier.

Also, government agencies may not be keen on investing – even in unicorns. Drone services provider Aerodyne, for instance, received around 25 million ringgit (US$5.8 million) in
investments
 from the government in 2020. That isn’t going to happen this time around.

That said, tech startups should still keep an eye out for research and development funding.

Digitalization policies under previous governments usually benefited large firms, according to the
World Bank’s Malaysia Economic Monitor for February 2023
.

Anwar’s focus will be on poor households and SMEs, based on my conversations with government folks. So there’ll definitely be opportunities for tech startups to snap up funding, especially for testing out solutions for both of these groups.

Status quo government?

One of the prevailing sentiments about the new government is that Anwar may not try to rock the boat too much policy-wise.

This means that there’ll be a similar approach to affirmative action policies as in the past, with the Malays, the country’s largest ethnic group, being a priority. This is not to say Malaysians of other ethnicities will be left out, but the focus will be on the majority.

Perhaps the true game changer would be if the country can ease bureaucratic processes for foreign investments. It’s worth noting that in Malaysia, foreign investments have
two stages
: realized and approved.

The former consists of typical investment announcements, i.e., proposed investments, while the latter is when a foreign investor directly owns at least 10% equity in a Malaysia-domiciled company.

The time to get from one to the next can be lengthy, and this is where many investments die because of the bureaucratic nightmare that investors have to deal with, besides economic and political risks.

I’m guessing this government might throw some incentives or perks to lure foreign investments. But that won’t help as much if investors have a hard time getting their investments approved.

Currency converted from Malaysian ringgit to US Dollar: US$1 = 4.29


Top Carsome, Capital A execs back events-booking startup

Kuala Lumpur-based Eventda is an online bookings platform targeting the meetings, incentives, conferences, and exhibitions (MICE) industry. / Photo credit: Eventda

Top executives from prominent Malaysian tech firms Capital A and Carsome are backing a Kuala Lumpur-based startup.

Eventda, which touts itself as an “online booking platform of meeting rooms, training rooms, event and co-working spaces,” counts Dabraj Singh and Ravi Shankar as advisers and shareholders. Singh is the chief strategy officer of AirAsia’s Super App, a wholly owned subsidiary of Capital A. Shankar is Carsome’s chief marketing officer.

Eventda
 plans to raise money via equity crowdfunding platform
Ata Plus
. The startup is targeting the meetings, incentives, conferences, and exhibitions (MICE) industry, where users can go online and book spaces for such events, according to the pitch deck seen by
Tech in Asia
.

Image credit: Eventda

According to company filings, Singh and Shankar joined Eventda as shareholders on June 11, 2021 and December 31, 2021, respectively.

The startup is run by Yovindra Kanezin and SP Sanjay. An aide to a former transport minister in Malaysia, Kanezin later took up a job at PayPal as a risk analyst before moving to Eventda full time. He is also an Eventda shareholder.

Sanjay is currently the growth marketing manager of AirAsia and digital marketing chief of Netart-India.

Eventda is looking to raise between 500,000 ringgit (US$117, 000) and 1.5 million ringgit (US$352, 000) through Ata Plus.

Despite incorporating in 2016, Eventda’s company filings show it made zero revenue for the years 2017 to 2019.

But in its pitch deck, Eventda said it had signed a “5+3” years contract with a Malaysian government agency, Human Resources Development Corporation (HRD Corp). The deal involves providing HRD Corp with an e-venue platform, allowing companies certified by the agency to source and book rooms for training programs.

Eventda also claims it grew the business by securing partnerships and growing its inventory over the last year. It did so with only two full-time employees, two interns, and a cash-burn rate of 162,000 ringgit (US$38,000) for fiscal year 2020.


Healthtech firm WhiteCoat grows revenue 3x, aims for profitability in SG

(From left) WhiteCoat COO Clara Leow, WhiteCoat founder and CEO Bryan Koh, and Minister Desmond Lee / Photo credit: WhiteCoat

Telehealth firm
WhiteCoat
 generated over S$10 million (US$7.7 million) in revenue last year, more than tripling the figure from 2021. This year, the startup plans to double that amount.

The Singapore-headquartered company, which was founded in 2018 by
Bryan Koh
, is also targeting profitability in its home market by the end of the year.

In 2022, the firm expanded into Indonesia and Vietnam. It aims to also reach profitability in these markets within their first four years of operations. It is also looking to expand its insurer- and corporate-focused B2B model into Malaysia and Thailand.

“We will also continue to evaluate and seize expansion opportunities in other parts of the region where we can establish payer partnerships and where there is market receptivity toward telemedicine,” a spokesperson for the company told
Tech in Asia
.

The firm has started its series B fundraising round, in which it looks to raise US$25 million. WhiteCoat previously closed its series A at
US$10 million
 in a round led by the GEC-KIP Technology and Innovation Fund.

In addition to its primary care offering, WhiteCoat has also recently launched pediatrics, obstetrics, chronic disease management, and mental wellness services.

This news comes after the firm opened up its regional headquarters in Singapore.

See also:
This Indonesian healthtech firm checked out of hospitals to run clinics

Currency converted from Singapore dollar to US dollar: US$1 = S$1.30.


Grab scouts for engineers in Malaysia

Image credit: Grab

Grab Malaysia
 is looking to hire several engineers for its engineering center in Kuala Lumpur.

It has openings for a number of roles in the vertical – including head of engineering, director of engineering, and lead software engineers – according to a
LinkedIn post
 by
Fadrizul Hasani,
 CTO of Grab Digibank Project. The super app has already hired over 60 engineers in the country, he said.

“We want to build the best digital bank (and the best bank!!) and more importantly to cultivate engineering talents in the country,” Hasani wrote.

GXS Bank, a joint venture between Grab and Singtel,
won a digital bank license
 from Bank Negara Malaysia in April last year. The entity has just appointed banking veteran
Muthukrishnan Ramaswami
 as its group CEO.

See also:
Making sense of Grab’s cloud kitchen shutdown in Indonesia


Genesis bankruptcy: Luno Malaysia assures funds are safe

Photo credit: Luno

The Malaysian arm of crypto exchange
Luno
 is denying that customer funds are intermingled with its parent, crypto investment firm Digital Currency Group (DCG), or its subsidiaries. This includes Genesis, a lending firm that
filed for bankruptcy recently
.

Kuala Lumpur-based industry insiders raised this concern with
Tech in Asia
 despite Genesis not being approved by the local regulator, Securities Commission Malaysia (SC).

Luno is Genesis’ sister company and lending partner. In the case of the latter, Luno users were able to sign up for a savings wallet that let them earn interest on crypto. In turn, the crypto assets in those savings wallets would be used by Genesis for its loans. But the savings wallet was not offered to any Malaysian customers.

In November last year, Luno took steps to ensure its customers had access to their savings wallets after Genesis decided to temporarily suspend redemptions and loan originations.

One source told us that there were concerns that funds from Luno Malaysia were mixed together with those from other countries – which had access to Genesis – in a single wallet.

However, Luno Malaysia country manager
Aaron Tang
 told
Tech in Asia
 that all customer funds on the platform are not interlinked with DCG or any of its subsidiaries.

“Most importantly, irrespective of how Luno as a business is funded, customer funds are always segregated from corporate funds,” he said.

Tang assured customer funds are maintained with its “appointed trustee partner” per SC requirements.

DCG, a crypto conglomerate, is among several firms entangled in the fallout from the collapse of FTX, formerly one of the world’s largest crypto exchanges. This led to DCG’s lending unit, Genesis, filing for bankruptcy.

See also:
Tracking the ripple effects of FTX’s collapse

Aside from the Genesis debacle, Luno also
laid off 35% of its global workforce
 last week.

Tang told
Tech in Asia
 that internal redundancies had no impact on customers and operations. “I believe it’s also important to reiterate to everyone that customer funds are safe and operations continue as normal,” he added.

Updated (February 10, 12:53 p.m. SGT): This article was updated to include additional information on Luno’s savings wallet.


The lowdown on Malaysia’s digital nomad visa

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.

So you want to be a digital nomad in Malaysia but need some details. Well, I’ve got you covered today.

The country launched DE Rantau, a visa dedicated to these nomads, in October 2022. There’s an
FAQ
 by the program’s coordinating agency, the Malaysia Digital Economy Corporation (MDEC), that you can check out.

Key information to remember from the get-go: It costs US$212 (1,000 ringgit) per applicant and half of this amount for each dependent. The visa is valid for 12 months and renewable for an extra year.

There are some perks, including multiple entries to the country and the option to bring along your immediate family as you ply your trade here.

But there are some teething problems: The visa only covers Peninsular Malaysia, so if you want to travel to Sabah and Sarawak, you need a tourist visa.

More importantly, MDEC hasn’t been able to fix a major issue: the ability for a digital nomad to open a bank account with a local branch. Only yesterday was MDEC able to
solve
 the ever-important income tax residency status. Spoiler alert: you need to pay tax.

Also, some noted that the waiting time for the DE Rantau is longer than usual. Yep, typical Malaysian problems.

Oliver Woods (in the blue batik shirt) receiving his DE Rantau visa on January 20 this year / Photo credit: Malaysia Digital Economy Corporation

That said, some have tried to apply and have received their visas. Oliver Woods, who coincidentally is the country’s first digital nomad, is an example. Woods hails from New Zealand and has been in Malaysia for nearly a decade.

His first job here was as a social media lead for advertising agency Leo Burnett. In 2016, he moved on to work on various online ad projects – he has a digital marketing firm in Vietnam and made that country his home base, until recently.

Currently, just like other Malaysian digital nomads, Woods is still liaising with MDEC to sort out visa-related problems.

You may be thinking, why bother applying if the visa’s this problematic? Well, Malaysia is known for its multilingual workforce, good infrastructure with well-connected airports and steady internet connection, and relatively lower cost of living even in the capital, Kuala Lumpur. And let’s not forget, the country is a gastronomic delight, even better than Singapore.

Anyway, below is my conversation with Woods, which has been edited for brevity and clarity:

What motivated you to apply for DE Rantau?

When I applied last year, I was already a digital nomad and had been traveling a lot. I was in Vietnam, then visited Malaysia, and then New Zealand to reconnect with family and friends. But I always wanted to make Malaysia my home base and from here, travel around the region.

The program looked really attractive. And, I must admit, there’s also an element where I thought it would be cool to be a legal digital nomad.

Can you walk us through the process?

Initially, it felt quite intimidating. But looking back, it’s not that different from a lot of other visas anywhere else in the world. I was one of the first few applicants, so there were definitely some technical issues.

The biggest challenge was the wait – I waited for about three months. There was reasonably good communication between myself and MDEC, but there were definitely periods of silence.

I’d say that was my biggest stress factor during the application process. There were times when I wouldn’t hear from them (MDEC) for a few weeks.

I had to really follow up with emails every week. I was also calling them all the time. Aside from the processing delays, it was actually a pretty easy process and everything was done digitally.

What was the main pain point about the delay? The approval timeline?

The main frustration was the long duration for application processing, which was said to take four weeks maximum, plus another week for immigration. I think a lot of people, myself included, took that information at face value.

But, now, I run a
Facebook group
 and a WhatsApp group for the digital nomad community. We’re hearing that there are a lot of approvals but also rejections, so I take that as MDEC accelerating the processing time.

The other side to this delay is the fact that they (MDEC) are rigorously checking people to draw in those with caliber. Applicants need to be serious entrepreneurs or professionals in the digital domain, whether you are a UX/UI designer or a content creator.

What can digital nomads bring to a country like Malaysia?

A well-structured program like DE Rantau requires a relatively high level of credentials. You need to furnish proof – client invoices, CVs, etc. – to show that you’re serious. The aim is, after all, to attract skilled workers, especially in the tech sector.

Initially, one of the challenges was Malaysia’s immigration approach, which has been quite restrictive and limited to high-tech workers.

But with DE Rantau, there’s a potential easing of approvals, so it’s a good way to introduce high-tech talent into the market that can either contribute to existing enterprises or even build a pipeline of products for the digital economy.

The program’s a nice way of plugging the gaps in terms of skill shortages in the digital space.

Finally, any tips for aspiring digital nomads?

Number one, make sure you don’t just hit the minimum requirements. Give as much information in a well-structured, well-documented manner. I assume that some rejections stem from people who didn’t make it easy for MDEC and the immigration department to process those documents.

Make sure that each document is 100% accurate. Don’t cut corners and don’t do it in a hurry.

Also, try to go above and submit as much documentation as possible. One of the things they ask for is client contacts. So aside from the contracts, provide invoices, purchase orders … double down on everything and give extra layers of proof.

Even when uploading your degrees, try to add certificates and awards. For instance, in advertising, you might have been involved in projects that have won awards before. Mention them.

Your goal in your application is to prove that you’re a high-caliber person who wants to contribute to Malaysia’s digital economy.

The other thing that’s really important is to stay in regular communication with MDEC. Email them probably once a week and call them frequently. The good news is the hotline works, and MDEC staff are great to talk to and amazingly helpful and considerate.

So be positive and keep the conversation going with MDEC until you get your visa.


Sea says it will add over 2,000 jobs in Malaysia

Shopee’s parent company
Sea Group
 said it will generate over 2,000 jobs in Malaysia, which is a rather surprising announcement in this cost-cutting environment.

Sea Group founder and group CEO Forrest Li / Photo credit: Sea Group

The company made the commitment during a meeting with officials from Malaysia’s Ministry of International Trade and Industry at its headquarters in Singapore.

Accordingly, Sea plans to open a global cloud computing center and a new warehouse for Shopee in Malaysia. It also looks to set up
cloud

services as well as

data

hosting

and

processing in the country.

The cloud center is slated to be open in the first quarter of 2024. While the company didn’t share a timeline for the ecommerce warehouse, it will be a 1.4-million square-foot facility to be located in Bukit Raja, Klang. The ministry said it will be among the biggest of its kind in Malaysia.

Sea reportedly
had to cut
 7,000 jobs, or 10% of its workforce, last year amid slower growth for all of its segments.

It’s also estimated that the firm’s
share price dropped by almost 80% in 2022.

See also:
Why Sea’s shares jumped 36% after its Q3 results


Malaysia gold-trading firm HelloGold to shut shop

Malaysian investment platform
HelloGold
 is closing its doors in its home country and Thailand on February 2 due to the tough macroeconomic climate.

The decision was made as HelloGold’s services were “no longer commercially viable,” CEO and co-founder
Robin Lee
 said in an email to depositors.

HelloGold founder and CEO Robin Lee / Photo credit: HelloGold

The firm’s customers are still free to buy and sell gold through its platform, but any remaining gold held after 7 a.m. Malaysia time on February 2 will automatically be sold at noon the same day.

Customers on HelloGold’s Smart Saver product, which automatically trades gold at lower rates, will have all their gold transferred to their regular HelloGold accounts by 12 noon Malaysia time on Firday.

“We expect that the platform may experience high traffic following this announcement and therefore apologise in advance for any inconvenience caused,” the company said.

See also:
Why are Gojek, Bukalapak, and Tokopedia gunning for digital gold?

HelloGold was founded in 2015 by Lee and Ridwan Abdullah, who’s also the firm’s strategy lead. The company said it was the first Shariah-compliant platform for buying and selling gold.

It joins the growing list of startups in the region that are shutting down, including the likes of
Singapore’s UglyFood
,
Malaysia’s Kaodim
,
Indonesia’s TokoTalk
, and
Vietnam’s Propzy
.


Malaysia can be a global SaaS leader, says this VC

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.

Today’s column is the second and final installment of my interview with Kevin Brockland, the managing partner of Kuala Lumpur-based VC firm Indelible Ventures.

Photo credit: Wikimedia Commons

In the
previous segment
, we discussed, among others, his initiatives in putting Malaysian startups on the map as well as why the country is a good place – even better than Singapore – to establish a startup.

Today, we dive into some of the issues he’s faced being a VC in Malaysia as well as deals he’ll be keeping an eye out for.

The following interview has been edited for brevity and clarity:

Where will you be putting your money this year?

I’m quite big on B2B
SaaS
. I think there’s a huge opportunity for companies in Malaysia because of the knowledge set that comes from so many multinational corporations that have these different enabling factors to be able to service not just the region but the globe.

There’s a number of companies here in Malaysia that are building default global products that can be sold, that are building out these great product-led growth motions.

And there’s a number of those that are up and coming. There’s some that I missed because they are just too big for me. But that’s an area that I’m really excited about because, especially when you start talking about the nearby markets within Southeast Asia, they’re starting to come around. And we’re going to start seeing a similar trend that we’ve seen in other parts of the world where the level of adoption within enterprise is going to start gaining pace and accelerating.

I believe that Malaysia is very well-positioned to be one of the leaders in the enterprise SaaS segment for the region. And because of the low cost base, we can actually leverage the growth that we get here and then turn into creating globally competitive products that can then penetrate other markets across the globe.

For the most part, some of the big players out of the US and Europe may set up a representative office in this part of the world. But they’re not a huge focal point. So we have this opportunity to build up and then leverage that position to move outside.

It’s similar to what I brought up earlier about Malaysia going into other markets. If we wait too long, these big players are gonna end up coming in and entrenching themselves.

But if we can be the ones that entrench and then leverage that position of strength in order to move out, we can actually play those dynamics to our benefit.

Tell us some of the problems you faced when setting up shop here.

If I was setting up during the non-Covid period, I probably would have tried to just go off with a tourist pass and be in and out, and do the visa runs.

But it wouldn’t pan out because if I have my children here, they need a registered visa in order to be able to go to school.

One of the biggest headaches, however, is just being allowed to be in the country. Not an easy process. I had the assumption that it would be a more open door.

How did you overcome those hurdles?

Kept emailing, kept calling. The visa that I was on was expiring and I had to leave the country for four months while I was still trying to launch and run operations.

But I couldn’t physically be in Malaysia because I was still waiting and waiting for my visa to be renewed. The whole process was just quite difficult.

I had investors backing out because why is someone going to invest in a country that doesn’t even want a manager there or makes it so difficult to do so? That throws up red flags, right?

Thoughts on being domiciled abroad?

If you look at most large companies in Malaysia that have gotten large sums of money invested in them, I’d venture to bet that most of them have a holding company in Singapore or elsewhere at the demand of their investors.

But having the operations, having the core team, having all of that in the country – that’s what actually matters. That’s where you create the brand of a Malaysian company. If all the team moves, that’s a different story.

But the core team, core management, founders, etc. are in Malaysia, and they form the country’s tax base. Those are the people spending and working in the economy. Those are the ones that are stimulating all the rest of it – all the relative effects that you’re trying to generate by creating the startup.

As for holding companies domiciled elsewhere, it’s not unique to hear the same thing happening in most places around the world. If you look at Latin America, most of those companies will domicile in the US. When you look at Europe, most of those companies will start domiciling in certain hubs.

What’s your advice for early-stage startups?

Founders need to realize that it has never been easier to set up a startup but it’s never been harder to succeed.

The barrier to entry to put a minimum viable product out is significantly harder these days. The demands on execution are significantly higher. The bar is being raised. And because of that, it’s harder to raise capital.

That said, there’s an abundance of capital. When you look at Asia Pacific, you’re starting to see an increasing allocation.

There is a lot of money in the ecosystem and there’s going to be more coming into venture because family offices are now waking up and starting to allocate. And if just 1% allocation of that big pool of family office wealth comes into venture, you’re talking about an impact on that ecosystem in the tens of billions of dollars, if not more, and some of the statistics might not even be capturing it all.

So there’s massive pools of wealth that are going to end up coming in, but there is a lot of competition. When you talk about from now and the next few years, companies will need to level up their capabilities.

That means trying to hustle, trying to engage the community, developing learnings that you get from engaging with other entrepreneurs, and getting trusted partners on board – especially people that have been there and done that, as well as those who have connections in other markets. Because it’s really tough but not impossible. So focus on improving those founder skillsets.

Has the prospects of an economic downturn affected you as a VC?

If we look at the VC industry as a whole, there are a number of impacts such as the denominator effect, where a portion of the portfolio decreases and drastically pulls down the overall value.

You’ll also see first-time funders and a number of funds get washed out and not get renewed.

You don’t have to generally worry about institutions but when you talk about emerging fund managers – those who are on their fund one, two, or three – or high-net-worth individuals, maybe some corporate VCs, family offices … these entities are generally more sensitive to economic conditions.

This means that things could end up affecting the cash cow component of their lifestyles. And then when they look at some of the obligations that they’ve made, they may end up resisting or shrinking back. Or maybe they agreed to commit but then they end up pulling back.

So there are a number of nuances. But when you look at the VC industry as a whole, more money is being allocated into it. So there’s still a space for people that invest well and are good at what they do.

So I like to think that I fall into that last category of the ones that are good at what they do. But that’d be me patting myself on the back. I’ll have to let my performance speak for itself.


Apple seeks staff for Malaysia retail push

Apple
 has started recruiting staff in Malaysia, signaling the US tech titan’s retail foray into the country,
Bloomberg
 reported.

The company is searching for store managers, store leaders, account managers, and technical specialists, among other roles. Though the openings do not indicate a specific city base, it’s likely that Apple will set up shop in Kuala Lumpur, the country’s capital.

This marks the third Southeast Asian market where Apple has built physical stores.
Singapore was the first
, with the doors to its first location opening in 2017. The following year, Apple followed up with a shop in Bangkok, Thailand.

To date, the firm has
522 shops
 worldwide, with over half of them located in the US.

So far, Apple is one of the only tech giants to steer clear of mass layoffs. Though the company
expanded its headcount
 by 17,000 between 2020 to 2021 and announced a hiring freeze, it has not announced any plans to cut jobs.

See also:
Startup allegedly lied about Apple, LVMH investment; axed most of its staff


Tony Fernandes thinks Capital A will be worth 4x more. Is he right?

A few days into the new year, Capital A CEO Tony Fernandes
took
 to LinkedIn to inform his readers that he wanted to “prove everyone wrong.”

Image credit: Timmy Loen

The businessman claimed that by the end of the year, Capital A would be worth four times what it is.

“China is open. 150 planes back. 54 to go. Digital companies and red aviation services are very profitable,” he wrote.

When we
covered
 Capital A last year, Fernandes was busy hyping up the group only to face a funding setback: Its 500 million ringgit (US$118 million) loan backed by state-owned financial insurer Danajamin fell apart.

Capital A, however, inched forward to close out 2022 but not without turbulence.

Flights gradually picked up, with Kuala Lumpur-based equity analysts bullish on the aviation sector, but Capital A’s aviation arm, AirAsia, has been
criticized
 for delays and last-minute cancelations.

The group was also
slapped
 with the Practice Note 17 (PN17) status – a label given to financially distressed listed companies by the Bursa Malaysia.

PN17 companies are given a timeframe to submit a financial regularization plan, which is basically a roadmap that spells out steps the company will take to ensure it remains a
going concern
.

Amid these developments, investors familiar with Capital A’s business investors speaking to
Tech in Asia
 say they were also skeptical of the firm’s digital business, which Fernandes has been touting to be the next big thing after Grab and Gojek.

The Capital A CEO even
said
 it could dethrone both unicorns as Southeast Asia’s e-hailing champion.

But two Malaysian investors tell us that the firm has to face fierce competition at home as well as the screeching halt of easy money it saw in 2022.

Capital A’s rivals have had a head start, and the group’s major digital business lines need cash to burn. “Which they don’t have. If not, Capital A wouldn’t be labeled PN17,” one of the investors said.

Questionable food delivery biz

One of the earliest cracks in Capital A’s digital armor came on New Year’s day when Singaporean daily
The Straits Times

wrote
 that AirAsia Food no longer operated in the city-state.

The publication reported that it had discovered this after placing an order on its website by keying in an address in Singapore. A message appeared saying the address was outside the service’s coverage area.

The news publication added that the web service asked users to “check (the service) out” at several Malaysian locations, such as Sri Petaling in Kuala Lumpur and George Town in Penang.

The
Straits Times
 tried to order via AirAsia Food over 12 consecutive days, from December 20 to 31, 2022. It found a successful order could not be placed and neither did AirAsia Food answer its queries.

Some Malaysian consumers speaking to
Tech in Asia
 also expressed doubt over the service, saying they couldn’t place an order despite keying a local address.

Tech in Asia
 has reached out to Capital A for comment but has not received a reply at the time of publication.

Enter: the lone bullish voice

Not all investors or analysts are bearish on Capital A’s digital ventures, however.

One equities analyst who drew attention last year was Maybank Investment Bank analyst Samuel Yin, who valued the group’s digital assets at 5.66 billion ringgit (US$1.3 billion) or 94 sen (21 cents) per share — more than the group’s market value of 2.37 billion ringgit (US$550 million) that day when the stock closed at 57.5 sen (13 cents).

At the time of publication, Capital A’s shares are trading at 69 sen (16 cents), giving the group a 2.87 billion ringgit (US$660 million) market capitalization.

Business publication
The Edge

questioned
 the valuation as Capital A’s digital arm was still burning cash. Also, at 5.66 billion ringgit, its valuation was much higher than that of other profitable companies on the Bursa Malaysia.

Yin told
The Edge
 that the 5.66 billion ringgit valuation only took into account two components of Capital A’s digital arm: the AirAsia Super App and Teleport.

“In July 2021, when CapA acquired Gojek’s operations in Thailand in return for a 4.76% stake in airasia Super App, the deal valued Airasia Super App at US$1 billion. Similarly, Teleport’s acquisition of DeliverEat for US$9.8 million in August 2021 valued the logistics unit at US$300 million,” he explained to
The Edge
.

But 2021 was also the year where listed tech darlings saw their valuations
marked down
.

He went on to defend his estimate by saying that Grab and Sea – while commanding billions in market value – do not have positive
EBITDA
.

On the other hand, the Airasia Super App reported positive EBITDA in the third quarter ended September 30, 2022, with Teleport also reporting positive EBITDA, supported by increased bellyhold capacity, which is the vacant space in the bellies of passenger aircraft after passengers’ registered luggage has been loaded.

Yin maintained that position in his latest report, published on January 9. He tells
Tech in Asia
 that by the end of this year and early part of next year that his valuation “is not very difficult to support.” He opines that it’ll be the other way around, i.e., how can Grab and Goto justify their valuations?

Aside from being EBITDA positive, Yin explains that the Airasia Super App is akin to Traveloka or Booking.com where the main focus is to bundle rides with travel, unlike Grab, which pairs food and rides.

“If you look at super app, the business, which is travel and tourism, is increasing. Just to give an idea, during 2Q 2022, when the country and ASEAN reopened, they were already EBITDA positive. This is significant to me because Grab, GoTo, and Sea can’t churn out EBITDA.”

The logistics gambit

Other Kuala Lumpur-based analysts remain skeptical. One analyst told us that valuations are likely to be lower now than in the previous two years as easy money has gotten harder to come by.

Even giants such as Grab and Sea are delaying funding because figures are unlikely to be as high as they were last year, he said.

Another analyst said that while Teleport may be able to undercut its competitors, the local logistics space is heating up as price wars are afoot. “However, that (Teleport) seems to be one of the most outstanding ones in Capital A’s arsenal,” she said.

Last month, Teleport said it
raised
 US$50 million from “large institutional credit investors” to fuel growth. It also recently poured an
undisclosed amount
 into
Kargo Technologies
, an Indonesian trucking marketplace.

But competition in the Malaysian logistics sector is fierce. For example, Nationwide Express was delisted from the Bursa Malaysia and
ceased operations
 on November 16, after 37 years, ostensibly due to heavy competition. The firm retrenched 1,100 staff members.

Among other
reasons
 the entry of newer, tech-savvy players, such as J&T Express, Lalamove, and Ninja Van and delivery services from deep-pocketed ecommerce platforms such as Lazada and Shopee, has led to the decimation of logistics’ old dogs in Malaysia.

But since Teleport is tied directly to Capital A’s aviation arm, AirAsia, there might be some upside that other logistics players lack.

Teleport relies on AirAsia’s network, and it also has its own fleet of delivery partners. Other competitors with similar business models include DHL and FedEx.

Fernandes wrote in a LinkedIn post on Monday that anyone in Kuala Lumpur can use Teleport for next-day parcel deliveries to Singapore for a flat rate of 40 ringgit (US$9.28).

“That is almost 80 percent cheaper than our closest competitor for next-day cross-border delivery,” he wrote, adding that services in other cities such as Bangkok, Jakarta, and Manila will be available soon.

For context, DHL announced on September 26, 2022, that it would raise prices by an average of 7.9% for its services, starting January 1.

If there’s one business in Capital A’s arsenal that needs some attention it is BigPay, opines Maybank’s Yin.

“The business has been loss-making for quite a while. They told us they are going to integrate the backend with Super App to incur less cost. Big Pay will also complement the app where you can buy a ticket and hotel, and you can get to the hotel with an AirAsia ride and then use BigPay for transactions. So that’s the environment they are trying to set up.”

Digital to supersede aviation

While the consensus may be split on Capital A’s digital arm, some research houses remain bullish on its aviation business, AirAsia.

Equities analysts from two institutional investment banks — Maybank and Hong Leong — said a combination of easing jet fuel prices, higher fares, the reopening of China’s borders, and more aircraft returning to service will help Capital A break even around the third quarter of this year.

But everything comes down to Capital A’s plan to return to the black. The group plans to inject or transfer AirAsia to AirAsia X (AAX), the former’s listed long-haul sister, in exchange for shares that will then be distributed among its shareholders.

Capital A is supposed to provide more details on the spin-off any time between the end of this month and early February, with the exercise to be completed by July this year.

Barring any unforeseen events, this means that Capital A will be a purely digital company, consisting of maintenance, repair, and overhaul (Asia Digital Engineering), logistics (Teleport), digital (Airasia Super App), and fintech (BigPay) businesses.

AAX will be rebranded as AirAsia Group and consist of six airlines: AirAsia Bhd, Thai AirAsia, AirAsia Indonesia, AirAsia Philippines, AAX Malaysia, and Thai AAX.

Yin is projecting that for now, Asia Digital Engineering will generate the most earnings but the super app will outstrip that. He is betting that Capital A will return to the black by the third quarter of this year.

This could also likely mean that Capital A will be pursuing a separate spin-off listing in the future, once its PN17 status is fixed. That would meet Fernandes’
timeline
 for a US listing sometime this year.


Malaysia is a better place than Singapore to found a startup, says this VC

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.

Kevin Brockland runs Kuala Lumpur-based Indelible Ventures, a seed-stage venture fund. He is also one of the more bullish voices for Malaysian startups – at least from the viewpoint of my LinkedIn feed.

Kevin Brockland runs Kuala Lumpur-based seed-stage fund Indelible Ventures / Photo credit: Kevin Brockland

But Brockland isn’t Malaysian, he is American. And, he has been in the country since 2015 when he worked as the principal investment officer and director for the Media Development Fund until 2021. He would go on to found Indelible Ventures shortly after.

Naturally, he has drawn a fair share of curiosity from the VC and investor space over here, simply because tech ventures here aren’t as hot as in neighboring Singapore – or even Indonesia and Vietnam.

What is he doing here then? From my perspective, the Malaysian scene is a bit uneventful. Local champions with the ability to compete abroad are an exotic species, with a number of promising players moving abroad to countries like Singapore at the behest of their investors.

Brockland, however, thinks differently. Besides putting his money where his mouth is, he has also launched a podcast called SEA of Startups to showcase Malaysian talent and is also looking to relaunch the Founder Institute in Malaysia. The famous Silicon Valley pre-seed accelerator was here for some time but has gone dormant. Brockland wants to reboot it.

We had a good chat recently about his Malaysian adventure. I’ll be splitting this into two parts. Today, we talk about his podcast and the pros and cons of the Malaysian startup ecosystem.

The following interview has been edited for brevity and clarity:

Why did you decide to start a podcast on Malaysian startups?

I’m an extremely obsessive podcast listener, and when I listen to a lot of podcasts in the startup space, they’re hugely valuable. You can extract a large amount of information and value by listening to some of the conversations.

And if you listen to the podcast, I kind of follow the same format, starting from the origin story of a startup and really trying to get a read on how the companies have been built and developed over time. So there are practical takeaways for other founders.

When I launched the podcast, there were two priorities. Priority one is to send these podcasts through to my own mailing list of investors, who are primarily based outside of Malaysia.

The intent there was that I felt people outside of Malaysia don’t know much about the success stories here.

So, when somebody says, “Hey, what do you think about putting capital in Malaysia?” the response is generally one of two things, depending on which part of the world they’re from.

“Where’s Malaysia?” – if you’re talking to an American, because we’re not so good at geography. Or it’s “Wait, they actually have a startup ecosystem?”

And that’s a problem. I think that there’s a branding and marketing problem where people just don’t really see those stories being highlighted, and you don’t necessarily get to know how good the understanding and some of these entrepreneurs are.

Priority two is other founders who listen to it. Hopefully, it’s going to be useful because I think that there is a lack of community and knowledge sharing within the startup ecosystem.

How do you select interviewees?

I’m about six months in, so I’ve done around 20 or 30 interviews so far. Only three of those are my investees.

So as nice as it would be for me to turn this to highlight my own portfolio – or as we say in the business, “to talk my own book” – I want to highlight the fact that there are other companies out there, whether they fit my criteria or not.

Because I take a view of, let’s call it the rising-tide-lifts-all-boats mentality.

Because where we’re at right now is a lack of awareness that the Malaysian ecosystem as a whole is creating enough entrepreneurs to become a focal point for capital.

That’s because there are a lot of other countries and cities with a very high volume of entrepreneurship.

And when you talk about early-stage companies, funds are trying to circle around volume because it’s a numbers game when it comes down to it – and there are also costs associated with it.

If I’m an early-stage fund, and I say that I need to do 30 to 50 investments over the course of, say, two to three years, then by necessity, I have to be centered in an area that can crank out that kind of volume within my defined criteria or specialization, as most are not generalists.

Then to add an additional city that’s only contributing five of that 50… it’s hard to make the justification to come in for a small check size. So what’s happened is that players don’t really enter Malaysia other than for larger check sizes. Unless an individual has a direct relationship or some other connection in order to make that draw.

But generally speaking, these days, people don’t cross borders for small checks.

Malaysia’s startup ecosystem didn’t happen overnight so why aren’t we getting more headlines abroad?

It’s a complicated question with a number of different causal factors. But, I’ll say on one end of it, it comes back to the volume aspect. I think what we failed is in creating, improving, and enabling the environment to produce volume.

And for me, personally, I look at Malaysia because of all of the enabling factors as being able to be kind of a Singapore too. To be honest with you, I tell some Singapore startups that I know that Malaysia is actually a better place to start.

Because if you’re talking about building a business and selling in Southeast Asia, which country’s population is more representative than most others within the region?

Malaysia is more representative. Singapore is representative if you’re trying to sell to New York, Shanghai, Los Angeles, or London.

And I love Singapore, don’t get me wrong. I don’t want to knock them. They’re awesome.

They’ll always be kind of number one in the region and they have this characteristic where they’re a magnet for all capital, talent, etc.

But if I’m looking at starting a business where capital is constrained, a lower-cost area like Malaysia provides all of those enabling characteristics such as infrastructure and language capability.

There are more MNCs (multinational corporations) in Malaysia than there are in Singapore – because Malaysia is a larger country – but we may not have all of the marquee names as in Singapore.

Because of these, we have the knowledge set that comes from people who have worked at some of these MNCs – we expats who come and want to set up their own businesses.

If you talk to most expats, they absolutely love Malaysia. They may not love some of the hurdles and the hoops that they have to jump through, but when you talk about the people, most of them will say “absolutely fantastic,” which is why it gets ranked so highly in expat surveys.

But Malaysia is an ideal destination to reach Southeast Asia and also be able to sell to the rest of the globe.

I see it as a great starting point because you have enough diversity within the domestic market to be able to find product-market fit and then start replicating in other markets.

What’s the core challenge that companies face in expanding abroad?

My viewpoint is that companies have a tendency of focusing too long on the domestic market and wanting to become number one in the Malaysian market.

But the problem with that – from an investor standpoint – is that they are looking at this from the viewpoint of the size of the addressable market – and Malaysia is basically the size of a city in China.

So you can’t build a hundred-million-dollar business and grow revenue, or at least it’d be very unlikely to build that off of Malaysia alone.

From a tech standpoint, and by necessity, you have to look at going international. I think what happens is that a lot of founders spend too much time focusing on the domestic market.

And, I’ve experienced it firsthand where some of the advice that is being given to these individuals (founders) oftentimes ends up pushing that same focus of going into more states within the country to get farther along.

That may work for certain types of products, like consumer products. But, if I’m talking about a fast-moving tech startup, if I take too long, neighbors are watching, and they’re building.

So there’s this aspect of wanting to solidify my position well enough to where I have excess cash to go take the risk in a new market.

And I understand the mentality, but if I wait too long, my neighbor is now building up their own product or there are multiple competitors doing the same. They’re solidifying their position.

By the time I’m ready to go, it’s too hard. It’s much more difficult. Now they’re entrenched. Now the switching costs, now the barriers to entry, now all these other factors become more challenging.

Why do we not have more global names? It may be that we’re producing volume but they’re becoming national champions, not international champions.


Malaysian biotech firm banks $5.7m in series A round

Biogenes Technologies develops, produces, and markets
synthetic antibody
 diagnostics products via its proprietary platform. The biotech firm is headquartered in Malaysia and plans to enter Indonesia and the Philippines this year.

Funding details

Funding amount:
 $5,700,000

Other investor:
 Pembangunan Ekuiti

Stage:
 Series A

Source

More details

Biogenes Technologies
→

The company was founded in 2015 by
Adrian Joseph
.

Stage

Amount (US$)

Investors

Seed

Undisclosed

Antler

Series A

$5.7M

Pembangunan Ekuiti Sdn Bhd

Total

$5.7M

See also:
Series SEA: Who’s investing in the region’s biotech startups?


Malaysia’s GHL extends Grab’s PayLater to offline merchants

Kuala Lumpur-headquartered
GHL
 has expanded its partnership with Grab Malaysia to extend the super app’s buy now, pay later solution for offline merchants.

Photo credit: Grab

Besides
online merchants
, offline merchants can now also offer Grab’s PayLater for in-store purchases via GHL.

Consumers who use the BNPL service can pay the full amount of the purchase in the next month or four monthly installments with zero interest. They also can earn GrabRewards for those transactions.

See also:
BNPL struggles amid global recession – except in Southeast Asia

Founded in 1994, GHL provides payment gateway solutions and in-store payment terminals to help merchants in processing online and offline transactions. It has been listed on Bursa Malaysia since 2003.

The firm operates in Malaysia, Philippines, Thailand, Indonesia, Singapore, and Australia. It is processing more than 1.5 billion ringgit (around US$350 million) worth of transactions per month.

GHL counts All IT Hypermarket, Astro GS Shop, and consumer electronics retailer Senheng as its clients.

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.31 ringgit.


Navigating the Malaysian funding landscape in 2023

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.

First post of 2023. Let’s go.

One of the complaints I usually get from newbie founders – and even from some slightly seasoned (and at times saltier) ones – is how complex fundraising is. That, and if they are operating in Malaysia, the lack of options when it comes to investors.

But with a new year and a newfound optimism, there’ll be founders who’ll try their luck to snatch some money, be it to scale their business or last another year.

What better time than to talk about the legal aspects of fundraising and some of the trends and landmines that are common here? One of the people I know who has worked with startups of all shapes and sizes is Izwan Zakaria.

Photo credit: Izwan Zakaria

He runs Izwan & Partners, a law firm that helps startups and tech companies do business and raise capital in Malaysia and overseas.

In 2021, he was consulted by the World Bank and co-authored a
study on assessing the startup financing ecosystem in Malaysia
.

Izwan is also a familiar face in programs run by state-owned Malaysian Global Innovation & Creativity Centre and Malaysia Digital Economy Corporation.

Here’s our conversation, which has been edited for brevity and clarity:

What are some issues you are still seeing that’s common among founders today?

Izwan:
 A common phenomenon is that a lot of founders underestimate the timeline that is needed to complete the fundraising.

A lot think that when they have successfully pitched to a venture capital firm or even a corporate investor, they soon realize that the money doesn’t come the next day or after the next week.

A series of things need to take place until you see the money in the bank account. Sophisticated investors – from sovereign wealth funds to family offices to corporates – do extensive due diligence that lasts from three to six months.

If the founder or the company has limited cash runway, they need to work backward to know from the moment they start fundraising to when they are actually going to see money in the bank account.

For practical purposes, we always tell clients that the amount of effort you need for fundraising – whether you are raising US$1 million or US$1.5 million – is the same. And it will be additional time and energy you’ll put in on top of your regular work.

So you need to sit down and consider carefully that when you start the exercise, it’s going to be very emotionally exhausting. Because for a lot of founders, it deviates from the day-to-day functions of running the startup.

For first-time founders, this process will be overwhelming. You get those 20-page questionnaires where the startup needs to disclose documents or make sure all representations made in the pitch deck can be substantiated. This is where investments can get delayed – when founders don’t have figures or claims made in writing or if they are reproduced haphazardly.

The second problem is that a lot of the time, startup founders don’t look for a lawyer until there’s a legal problem or roadblock. So a lot of these issues are only discovered during crucial times like fundraising.

Ultimately, it’ll be embarrassing for founders during important discussions such as valuations because no investor in their right mind will want to inherit a startup’s legal problems, for example.

How early should startups look for legal help?

As soon as possible. Not only when you have signed a term sheet. A lot of mistakes we’ve come across with startups is that a lot of founders get very excited after spending months or even a year going around pitching competitions, talking to hundreds of VCs. And when they settle on one, they may end up with an investor like a VC who might be unfamiliar with industry best practices and terms.

If you are working with reputable investors, you should be okay, because terms may be industry standard. But when founders settle for a new VC, they may end up receiving terms that aren’t aligned with industry best practices. So having a lawyer at the early stage is important.

Also, from a documentation standpoint, as the founder, you are at the highest negotiating position during the term-sheet stage. So once you’ve already signed the term sheet, you are indicating that you’ve pretty much agreed to the principal terms.

Bringing a lawyer afterward may also mean the chances for you to deviate or negotiate the drafting of the actual main document, such as the shareholders’ agreement, are lower considering the principal terms have been agreed upon beforehand.

But I think a lot of founders need to understand that it’s not just about the investor assessing the company but also the founders taking time to research the investor to make sure they’re aligned with the company’s long-term goals and values.

See also:
Here’s how founders can do their due diligence on VCs

What are some investment trends that are gaining ground over here?

There are two instruments being used: one is the
Simple Agreement for Future Equity
 (SAFE) by Y Combinator and the other is
Keep It Simple Security
 (KISS) by 500 Global.

The documents are available on their websites. But the caveat is that these documents have gone through multiple variations and changes over several years. Different versions have their nuances. And we find that a lot of founders do not appreciate the complexity or the technical aspects of these instruments, because they’re “templates”.

For example, because the investor is taking a risk of investing in the company without agreeing on a valuation upfront, the investor is managing downside risks by having these two commercial clauses: discount rate and valuation cap. And a lot of founders somehow either don’t appreciate or understand the implications of both clauses.

Also, KISS, for example, is usually a quasi-debt instrument with a 5% interest rate and it has an 18 months’ maturity from its issue date.

Not understanding how they work could cause complications down the road. Signing a SAFE document means you can receive the money tomorrow because there’s no requirement for you to issue the shares today, since there’s no valuation that has been agreed upon yet.

But, after six months or a year, when you receive funding or go through priced rounds where there’s already a valuation being agreed upon, this is where the SAFE investor will get their shares issued at a discount rate.

Say a company is valued at US$1 million but the valuation cap is US$800,000. The SAFE holder will get shares at US$800,000. In other words, the founder or company will end up issuing a lot more shares than what they had envisaged.

While it may be easy to get funds through a SAFE, it may backfire down the road if the founder isn’t clear in terms of, say, the dilution that might take effect.

In Malaysia, and even Singapore, it’s common to see SAFE-style investments as opposed to KISS. To be sure, negotiating a SAFE or KISS deal can be stressful due to a lack of local awareness on the technical aspects of these documents.

But in Malaysia, despite SAFE being increasingly common, the Securities Commission has not clearly come up with a formal announcement as to whether or not it is permitted.

It’ll be good if the regulator can be clear in terms of the instrument because in more mature jurisdictions, such as the US, SAFE is also used for equity crowdfunding, known as “CrowdSAFE”, to avoid the hassle of valuing the startup.

What’s your take on Malaysian startups seeking fortunes abroad?

We do know that there are Singapore-based VCs that require Malaysian investees to domicile their holding company to the city-state. And we have helped some investees do this.

It’s quite normal because for the foreign investor, they may view having the holding company closer to where they are domiciled as better, especially in managing legal and political risks.

This, of course, boils down to the founders themselves and their ability to negotiate. It can also be challenging considering contractual leverage is more toward the investors’ side because this involves money.

As much as we’d like to try and preserve local companies to stay here, we need to be practical at the same time. Whether we like it or not, we have to follow where the money is and most of the time it’ll be Singapore.

And when it comes to setting up tech companies, there are usually several jurisdictions that are internationally recognised for a startup’s holding company to be domiciled, namely Singapore, UK, and the US. Reasons can be from just being comfortable with domiciling there to an efficient tax regime or better regulatory safeguards for investors.

Finally, your thoughts on the Malaysian funding ecosystem?

Securing government funding is more challenging now because of competition.

There are corporations such as state-owned oil company Petronas or family-run conglomerates such as Genting and Sunway that are always looking for investments. But they also represent a handful of corporations venturing into this space.

But Malaysia still has a long way to go. The country’s target is to see at least 5,000 startups registered by
2025
. We have around 2,000 or so as of end-2020, according to
government data
. Then you also have to consider that our gross domestic product is much lower than Singapore or Indonesia and they, too, also have a higher number of high-net-worth individuals.

There are more millionaires in Indonesia than over here, so they have more disposable income and can participate in risky investments such as angel investing.

But that is where the funding gap is right now over here, especially at the pre-seed stage.


Fintech unicorn Xendit enters Malaysia, invests in local player Payex

Xendit
, an Indonesia-based fintech unicorn, has started offering its payment gateway solutions for SMEs in the Malaysian market.

It concurrently announced an undisclosed investment into
Payex
, a Bank Negara Malaysia-licensed payment gateway provider.

Xendit founder Moses Lo / Photo credit: Xendit

In a statement, Xendit said that its entry into Malaysia could help more local businesses expand to other Southeast Asian markets. The firm has appointed
Jason Siew
 as its general manager in the country.

With its expansion into Malaysia, the fintech firm is now present in three countries, having been operating in the Philippines since 2020. It is eyeing Thailand and Vietnam as potential new markets.

The development comes after Xendit secured backing from Penjana Kapital, a fund supported by the Malaysian government, through the
Dana Penjana Nasional program
 in 2021. In the same year, Xendit raised a
US$150 million
 series C funding round that put its valuation into unicorn territory.

See also:
New unicorn Xendit, rivals double down on regional play

Founded in 2015, Xendit offers a payment gateway service that enables startups and SMEs to process digital payments. It currently has over 3,500 active customers including the likes of Traveloka, Wise, Ninja Van, and Grab.

In May last year, the fintech firm
raised US$300 million
 in a series D funding round led by Coatue and Insight Partners.


Malaysia-based enterprise solution bags $1m in seed money

WorqApp helps teams and businesses implement enterprise execution. It uses tools to assist in communicating, collaborating, and boosting engagement for high-impact initiatives. The company is headquartered in Malaysia.

Funding details

Funding amount:
 $1,000,000

Stage:
 Seed

Source

More details

WorqApp
→

Stage

Amount (US$)

Investors

Seed

$1M

Malaysian and foreign investors

Total

$1M

See also:
3 developments to watch in Malaysia’s tech space in 2023


3 developments to watch in Malaysia’s tech space in 2023

Today’s column will be the last one for the year. And just like that, I’m also celebrating my first anniversary with
Tech in Asia
. Believe it or not, it’s the first time in a long time that I haven’t been sued over my reportage.

Ninja Van and other tech-savvy logistics firms have disrupted the Malaysian courier scene to the point of putting older players out of business. Photo credit: Ninja Van

Not that I’m pining for a suit – in case some of you want to get creative – but it’s certainly a respite. Calm before the storm, perhaps? Maybe. For now, I’ll wind down knowing that 2022 has been kind to me.

Writing today’s column comes with a major limitation: There’ll be no talking heads as many are holidaying. But cadence is the bread and butter of a weekly column, so we’ll just have to dance, even if it’s with two left feet.

As we ring in the new year in nine days, here are three developments I’ll be watching out for as part of my coverage in 2023:

The last-mile logistics race to the bottom

This is a tale of incumbents and disruptors. The former consists of older logistics players and the latter of tech-savvy upstarts.

The old dogs have been taking a beating over the past couple of years – not only because of the Covid-19 pandemic but also due to a so-called price war that is afoot, especially in the courier services space.

Some that have had to bear the brunt of this competition were or are industry stalwarts.

Nationwide Express was delisted from the Bursa Malaysia and
ceased operations
 on November 16 after 37 years, ostensibly due to competition. They retrenched 1,100 staff members.

Another listed player, CJ Century Logistics Holdings,
sold
 its loss-making courier arm last year for 7.5 million ringgit (US$1.7 million), while other public companies, GD Express and Pos Malaysia, have posted consecutive quarterly losses over the past three years despite heavy demand for courier and last-mile delivery services.

The main reasons: newer, tech-savvy players such as J&T Express, Lalamove, and Ninja Van or ecommerce platforms such as Lazada and Shopee that have launched their own delivery services – aside from the pandemic, of course.

How long can the newbies burn cash to capture market share? Will they eventually stumble like their older counterparts? And what will the country’s regulators do about Pos, a state-owned company?

To truly understand the last mile, you need to step outside the Kuala Lumpur bubble and venture to places like Ipoh, Malacca, Kuantan, or even Kota Kinabalu and Kuching.

It’s amazing how ecommerce has boomed in Tier 2 cities, but herein lies the challenge: How do you make it commercially viable? Transporting goods to these cities is no easy feat.

I have tried using courier services, including foreign-owned ones, whenever I’m around these parts of Malaysia and it’s usually a lean team servicing a huge area.

Ipoh, for example, is the capital city of the state of Perak, the second-largest state in Peninsular Malaysia after Pahang.

The nearest logistics hub, where parcels are processed by couriers and customs (especially for duties), is the state of Penang, located more than 100km north of Perak.

Courier companies will then deliver parcels and other items from Penang to Tier 2 cities in northern Malaysia, including Ipoh.

More data leaks?

Three Malaysia-based tech companies either had the misfortune of dealing with a data breach this year or said they had experienced one.

Firstly, payment gateway iPay88 said that a “sophisticated intrusion by an unidentified party or parties” led to the leak of credit card information from online transactions.

Malaysia’s central bank, Bank Negara Malaysia,
ordered
 iPay88 to beef up its cybersecurity controls.

Secondly, Temasek-backed StoreHub denied a leak despite a misconfiguration in one of its Amazon Web Service servers, which left data exposed.

Cybersecurity blog SafetyDetectives
noticed
 the vulnerability and alerted StoreHub.

But StoreHub
said
 an internal probe showed no data was downloaded maliciously. It added that the server problem was solved within a day after being alerted by AWS via email on February 3.

Lastly – and more recently – a group of hackers known as Daixin leaked data of 5 million AirAsia passengers and staff on November 12. AirAsia is the aviation arm of Capital A.

The leak was deemed serious enough for the Malaysian Communications and Multimedia Commission, the industry regulator,
to step in
 and hold discussions with Capital A’s management. Investigations are ongoing.

Fahmi Fadzil, Malaysia’s new communications and multimedia minister
said
 better data security policies will be a key focus of his tenure.

It remains to be seen whether he’ll introduce policies or laws that lead to punitive measures against “leaky” companies.

But data is gold and many tech companies are fuelled by it. Mitigation will be crucial. Malaysians, in particular, have had their data leaked from different sources, including the electoral roll.

Imagine receiving an unknown call thinking it’s important, only to find out it’s a scammer.

Consolidation of government-backed VCs

This has been on the table for a long time, but never really got going.

The problem is twofold: heavy government presence by way of investments in the tech and startup space as well as overlapping mandates.

Some discussions were
underway
 in 2019, but that never amounted to anything more.

The following year, after a change in government, the state-owned fund of funds Penjana Kapital was launched, adding another participant to an overly crowded space.

Penjana’s progenitor, Tengku Zafrul Aziz, who’s now the international trade and industry minister, said in a
LinkedIn post
 last week that he plans to launch another such fund to draw in foreign investment – which means even more entities potentially joining the party.

Investors I spoke to say that government overreach in the space is turning out to be a negative influence as they are usually asked to invest in a state-backed fund.

What these investors want instead is help from related agencies to cut down on paperwork and bureaucracy and to be connected to other startups, among other things.

Other investors also told me that many Malaysian founders are still in the mindset of relying heavily on government help.

I don’t know much about founding a startup, nor am I going to wade into the debate of whether less or more government is good.

But the fact is, many government VCs have not been able to fulfill their mandates despite the heft and privilege given to them.

Not long ago, I wrote about Mavcap’s
uninspiring run
 investing in startups and its inability to raise a local VC class, which was a crucial element of its mandate.

Mavcap is the largest state-backed VC, with a total portfolio value of about 5 billion ringgit (US$1.29 billion).

Penjana seems to be stepping up to the plate here. Again, why have two entities when one can do the job?

Cradle, going by the past two federal budgets, has been earmarked as the coordinating agency for tech and startups. Maybe they should take the lead?

Some states, such as Penang, are moving toward
less government involvement
, but state agencies have been
criticized
 for overcrowding, too.

If Malaysia doesn’t solve these systemic issues, we’ll always be front and center of tech and startup “brain drain” news like when we lost Grab.

Recall that the ride-hailing giant began in Malaysia only for Singapore to poach it. Grab still maintains a sizable workforce over here — because it’s cheaper (it is what it is) — but we no longer have the joy of calling Grab a Malaysian company.

It’s only “Malaysia-born,” the term local English-language media use for people or companies that were at one point Malaysian.

Before I sign off, I’d like to circle back to something lawmaker and former second finance minister Johari Abdul Ghani pointed out during Monday’s parliamentary sitting: Malaysia has been losing out to its peers in terms of economic growth.

From 2018 to 2021, Malaysia’s GDP shrank by 0.1%. Yes,
shrank
. In that same period, Indonesia grew 11.8%, the Philippines 19.3%, Thailand 9.7%, and Vietnam 24.2%.

The entire region, except Malaysia, recorded positive growth. We have been lagging for a long time – I hope we do better next year.

I’d like to also take this opportunity to wish a Blessed Christmas to those celebrating and Happy Holidays to all. See you in 2023.

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.


UK company acquires Malaysia’s Propay Partners for APAC push

Human resources tech firm
Activpayroll
 has acquired Malaysia-based
Propay Partners
 to accelerate the former’s growth in the Asia-Pacific region.

Activpayroll CEO Jason Allen / Photo credit: Activpayroll

Activpayroll said
in a statement
 that prior to this deal, it had partnered with Propay Partners, which offers payroll outsourcing and employee mobility services, for more than a decade.

Founded in 1999 by
Alison Sellar
, UK-based Activpayroll offers global services in employee payroll, human resources, international payments, and employee mobility to over 1,200 companies across 154 countries. The firm currently has 18 offices across five continents.

Meanwhile, Propay Partners was founded in 2001 by
Manish Mehta
 and
Raj Kumar Paramanathan
. Covering multinational companies in Asia, its clients include Siemens, General Electric, Unilever, Coca-Cola, and BMW.

The global human resource tech market is
set to reach
 US$38.4 billion by 2030 at a compound annual growth rate of 5.7%.

See also:
Blue-collar HR firms rake in revenue, could weather recession


What could change in Malaysia’s tech scene post-elections

Sign up for the Daily Newsletter, sent exclusively to our premium subscribers. We break down the big and messy topics of Asia’s tech and startup community.
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Hello reader,

At university, I did a double major in communications and political studies. Communications was always going to be my top choice, and the second major was a toss up between politics, sociology, and linguistics.

Shout out to the University of Melbourne for having introductory lectures that help undergrads figure out what majors they wanted to commit to. That year, the linguistics lecture was canceled, the sociology one was just okay, but the politics session really caught my attention. It was also a nice little bonus that I got the same lecturer for a US politics module that I took a couple semesters later.

So yes, I do have a general interest in politics, albeit mainly in the mechanisms of the various forms of government and how they’ve been employed. I had no intention of being a politician myself. In the words of Obi-Wan Kenobi, “I’m not brave enough for politics.”

This academic interest has persisted, so you can imagine my delight when I started reading my colleague Emmanuel’s
Dan Lain-Lain
 weekly column, which looks at the goings-on in the Malaysia tech scene and comes with a healthy dose of current affairs, policy, and politics.

With elections in the country having concluded just recently, it’s been very intriguing to read about how the political shifts could affect the country’s tech sphere. The latest edition of his column likens the new government to a startup. Read on to see what that means exactly.

Today we look at:

Malaysia’s new
“startup” government

The US$1 million seed round of a Vietnamese B2B F&B ordering platform

Other newsy highlights such as a Malaysian nutrition company’s US$270 million SPAC and Akulaku potentially getting US$200 million from Mitsubishi UFJ Financial Group

Premium summary

Politics and tech in Malaysia

Image credit: Timmy Loen

Chances are that most people aren’t thinking about the tech scene when it comes to the recently concluded Malaysian elections. But hey, that’s what specialist publications like
Tech in Asia
 are here for: to find angles that may have been otherwise overlooked.

Today, we take a look at some of the latest developments in the country and why its new government is akin to a startup.

Unprecedented makeup:
 With the government formed by a coalition of three parties – each with markedly different ideals – the composition of its ministers and the coalitions that they represent are a first for Malaysia.

More touchpoints:
 The digital communications and science and innovation ministries – both helmed by first-time ministers: Fahmi Fadzil and Chang Lih Kang, respectively – are likely to engage the startup space in some capacity, especially for research and development.

New focus?
 Economic affairs minister Rafizi Ramli, who runs an AI startup called Invoke Solutions, has hinted that Malaysia will move away from being a commodities-driven market, which it has been since forever. So there’s a glimmer of hope that we’ll see a more lively startup space with a greater emphasis on tech and digital policies as well as funding.

Read more:
3 things about Malaysia’s new ‘startup’ government

Startup spotlight

Who wants to be a millionaire?

Image credit: Timmy Loen

Oda, a B2B F&B ordering platform, has
raised US$1 million in a seed funding round
 led by Touchstone Partners.

The Vietnam-based company was founded by Jin Lee in 2019 and caters to businesses in the hotel, restaurant, and cafe industry.

Money matters:
 The fresh capital will be used to improve the user interface of Oda’s app, further build up its big data analytics capabilities, and upgrade its core tech.

Making connections:
 Oda connects buyers and suppliers through its management software. This allows users to bulk order fresh food, beverages, and ingredients, cutting food waste and saving on time and costs.

Partners:
 The firm says it connects over 120 suppliers with nearly 500 customers in Vietnam. These customers include Belgo, Baemin Kitchen, and Lacaph.

See also:
Ex-Grab VN head launches robotics startup

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Quick bytes

1⃣
A healthy sum

Wellous, a Malaysia-based nutrition company, has entered a merger agreement with special purpose acquisition company Kairous Acquisition. After the the deal is completed, Wellous will be publicly listed on the Nasdaq.

The merger consideration is
worth US$270 million
 – an amount that will be payable through the freshly issued securities of the merged entity, valued at US$10.10 per share.

2⃣
That’s a lot of backing

Ant-backed Akulaku may snap up
US$200 million in funding
 from Japan-based Mitsubishi UFJ Financial Group (MUFJ), according to a
Bloomberg
 report that cited sources.

The MUFJ investment is likely to boost Akulaku’s valuation to US$1.5 billion. While talks are ongoing, the funding deal could still fall apart.

3⃣
We tryna ban TikTok again?

Senator Marco Rubio, who represents Florida, has introduced a nine-page bipartisan bill to
ban TikTok in the US
, citing concerns over the safety of Americans,
South China Morning Post
 reported.

TikTok’s user data collection methods – along with the Chinese law forcing information to be shared with the ruling party – has become a cause for concern in the US. A TikTok representative said that the bill is “politically motivated” and “will do nothing to advance the national security of the US.”

4⃣
Perfect 10

Aktivolabs, a Singapore-based healthtech startup, has
raised US$10 million in a series A funding round
 led by Adaptive Capital Partners, Seeds Capital, and Japan-based Mitsui. HH Investments and Govin Capital also participated in the round. The deal pushed the firm’s total funding raised to date to US$12.6 million.

Founded in 2017, Aktivolabs uses real-time data from smartphones and wearable devices to predict and prevent chronic diseases.

5⃣
Plug in US$9 million

Plugo, a Singapore-based website building platform, has
raised US$9 million in a series A funding round
 led by Altos Ventures, with participation from BonAngels Venture Partners and Access Ventures.

Founded earlier this year, Plugo enables Indonesian sellers to build their own online stores, integrating payment, logistics, and marketing services.

6⃣
Pay the creators

Postype, a South Korea-based content creator publishing platform, has
raised US$7.6 million
 in a round led by Sui Generis Partners and joined by Shinhan Venture Investment and We Ventures.

Postype helps creators monetize their work and connect to fans. Artists can publish paywalled content on the platform as well as accept donations and create memberships.


Indonesian D2C beauty brands go international

Welcome to The Checkout! Delivered every Thursday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in ecommerce. Get it in your email inbox by
registering here
.

Hello there,

On weekends, I often accompany my girlfriend to shop for skincare and other beauty products. Even in this ecommerce age, she likes to go directly to stores to see and test the products first.

Many beauty retailers offer this experience, including Sociolla. While it’s known first and foremost as an ecommerce firm, it has had an offline strategy as well, opening several stores across cities in Indonesia.

Sociolla has since deployed that same tactic in Vietnam, its first overseas market. More than that, though, it has also brought over a couple of Indonesian beauty brands with it.

In this week’s Big Story, my colleague Budi dissects how having a retail partner like Sociolla helps these brands cut down on complexities. Plus, even though there are ecommerce platforms that offer cross-border services (including Shopee and Lazada), there is an advantage to Sociolla’s model, which is an offline presence.

That said, having a retail partner is not necessarily the only route for international expansion. Considering Indonesia’s scale, there is also an argument for winning the local market first.

Meanwhile, for this week’s Hot Take, I examine Blibli subsidiary Tiket.com’s expansion to Malaysia. It’s a reasonable move for the Indonesian online travel agent at first glance, but questions abound.

—
Jofie

THE BIG STORY

Indonesian D2C beauty brands build foundation for regional expansion

Image credit: Timmy Loen

Brands have leveraged Sociolla’s network to gain exposure in Southeast Asia, and targeting certain beauty niches may have given them an edge.

THE HOT TAKE

Questioning Tiket’s ambitions to enter Malaysia

Tiket.com’s office in Jakarta / Photo credit: Tiket.com

Here’s what happened:

Tiket.com, a subsidiary of Indonesian ecommerce firm Blibli, has expanded into Malaysia.

As in Indonesia, Tiket will also offer online travel agent (OTA) services in the country.

The company established Global Tiket Malaysia on December 7. However, there is no further information on when the service will be launched.

Here’s our take:

Tiket initially announced its aspirations for
regional expansion
 in 2019, but it’s likely that the pandemic put a wrench in its plans.

Now might be the best time to revisit this goal – not only is the travel industry recovering, but a part of Blibli’s roughly
US$510 million
 in IPO proceeds has been
earmarked
 for Tiket (as well as its other subsidiary, supermarket chain Ranch Market).

At first glance, the company’s choice of Malaysia as its first overseas market makes sense. According to the
e-Conomy SEA report
, the gross merchandise value of the industry in Malaysia is projected to hit US$8 billion in 2025, up from US$5 billion in 2019. This is slightly smaller than the projection for Indonesia (US$10 billion) and Singapore (US$9 billion).

However, questions arise once we look deeper. Tiket’s compatriot, Traveloka, expanded to Malaysia in 2015, along with several other regional markets. Yet, Malaysians still prefer players such as Agoda, Booking.com, and Trivago, according to a
Rakuten Insight survey
.

This is also confirmed by third-party estimates, which place Traveloka below Agoda, AirAsia, Booking.com, Trivago, and Trip.com in terms of monthly active users so far this year.

Perhaps the struggle for Traveloka has been to differentiate itself from what global players offer. Apart from Malaysia, the company also has a presence in Singapore, Thailand, Vietnam, and the Philippines.

It is believed that Traveloka’s success in Indonesia is because it offers native payment methods such as bank transfers and e-wallets, in addition to its strong brand in the country.

However, this method may not be so successful in Malaysia because
credit card penetration
 is higher than in Indonesia. This means that Traveloka does not have a big differentiator compared to Agoda, Booking.com, etc.

For Tiket, a big competitor is AirAsia owner Capital A. The company has launched a
hotel booking service
 in Malaysia, which will certainly be a direct challenge for Tiket considering Malaysia is AirAsia’s home market.

For now, though, Tiket has shared scant details about its expansion plans, but it’s likely that it will have to come up with a different playbook than Traveloka if it wants to win these overseas markets. But how much is Blibli willing to invest, especially as a newly public company?

Blibli’s IPO prospectus showed that the company only had a runway of less than 1 year as of June 30 this year.

See also:
Is Blibli’s IPO a risk worth taking?

But from another angle, Tiket’s expansion may just be about achieving parity with its rival. In Indonesia, the
Rakuten survey
 revealed that Tiket is in second place among the most popular OTA apps, just below Traveloka.

If it cannot take over the top position from Traveloka in Indonesia, then at least it has made similar inroads for a regional expansion, which could boost its parent firm’s reputation among retail investors (at least in the short term).

Could it also be about more than just Tiket? Perhaps the company’s entry into Malaysia can serve as a testing ground for Blibli as well as its parent firm Djarum Group. The conglomerate has had a presence in Malaysia before with its video-streaming platform Mola TV.

For now, Blibli’s ecommerce unit is unlikely to follow Tiket’s steps to expand overseas. As the company laid out, it will focus on strengthening its
omnichannel services
 in Indonesia, aiming to open 300 offline stores across the country by 2024.

–
Jofie

NEWS YOU SHOULD KNOW

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

1⃣ JD.id, the Indonesian joint venture of Chinese ecommerce major JD.com and Provident Capital, has
laid off 30%
 of its staff, or around 200 employees.

2⃣ AnyMind Group, a Singapore-born ecommerce enabler, has decided to
delay its listing plans
 on the Tokyo Stock Exchange due to “risks and disclosures” in its business activities.

3⃣ Vipshop, one of China’s largest discount retailers, officially
launched its services
 in Southeast Asia on December 8.

4⃣ Paris-based Vestiaire Collective, the luxury fashion platform helmed by ex-Lazada CEO Maximilian Bittner, has
secured a US$79.1 million
 credit facility from Crédit Agricole CIB, Societe Generale, HSBC, Bank of America, and Goldman Sachs.

5⃣ Shein, the Chinese fast fashion retailer, is
exploring moving beyond its conventional business
 of selling its own brand apparel into a marketplace platform that will enable other merchants to sell directly to customers.

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!


Of Malaysian banking granddads and disruption

This isn’t one of those posts about an elderly person being scammed by a phishing text or some get-rich-quick scheme. Those stories are a dime a dozen, but we’ll save them for coffee-shop talk.

Public Bank founder Teh Hong Piow. Pic credit: Public Bank

On Monday, Public Bank founder Teh Hong Piow died. He was 92 years old. Teh founded the bank when he was 35 years old and it grew to become Malaysia’s second-largest bank by market value on the local bourse, outmatched only by Maybank.

Fun fact: Teh was born in Singapore but came to Kuala Lumpur for work. I know, I know, such tales are rare these days because the reverse is more common: Malaysians running across the causeway to that island of milk and honey (or money). But I digress.

I remember Teh because he was not only a mainstay in any top billionaires’ list but also because he ran Public Bank conservatively.

It’s a shareholders’ favorite as the stock has always yielded generous dividends and the bank has always outperformed its peers on a number of metrics, such as return on equity, cost efficiency, and asset quality.

All this was due to Teh’s “boring” style of running a bank. In fact, he was media shy even by bankers’ standards. I could never secure a one-on-one with him no matter how favorable the interview pitch was.

But Teh’s death also shines a spotlight on bank ownership and this is what I want to talk about today.

The privileged few

There are only three men who have been given the right to own more than 10% of a local bank. Teh is one of them. The other two are Hong Leong’s Quek Leng Chan and Ambank’s Azman Hashim.

All three men founded their banks and are afforded this exemption by Malaysian banking laws.

Why? Because they held outsized control of their companies before Malaysia’s central bank, Bank Negara Malaysia (BNM), enforced a law on bank ownership. This exemption is called the grandfathering rule.

Here’s the catch: This privilege cannot be passed down – not even to family members. In Teh’s case, none of his family members are in the business, so there’s no succession there. As for Quek and Azman, they are getting older, but it’s still too early to tell whether their children or grandchildren will take up the business.

Industry folk I spoke to think that Teh’s shares, which are worth 19.9 billion ringgit (US$4.49 billion) at the time of writing, will be put in a family trust. How that will be configured around ownership laws will be an interesting case study.

Spanner in the works

But time is running out for Malaysia’s banking grandfathers. Besides the family-trust route, the other option is to sell one’s stake, as is the case with Azman of Ambank.

The Malaysia corporate scuttlebutt went into overdrive in May this year, with talk that Grab was
eyeing that piece of the pie
, which in turn could give them control of Ambank.

This isn’t a farfetched idea. Grab has been moving upstream in many of its services. It acquired Malaysian supermarket chain Jaya Grocer and added another layer to its food delivery business. So why not a bank? After all, Grab is part of one of six consortiums awarded a digital banking license by BNM.

Grab- and Singtel-owned GXS Bank will
hold
 a 55.5% stake in the consortium’s Malaysian digital banking venture.

But here’s the thing: Grab can’t take over Azman’s stake. It can only buy up to 10% of the latter’s shares. If the super app wants to control Ambank, it’ll need to work with proxies or friends.

The other substantial shareholder also looking to sell its stake in Ambank is Australia and New Zealand Banking Group, which owns 21.68%. But the same ownership rules apply to prospective bidders – only a 10% stake for an individual shareholder.

An aside – only because we’re talking banks – Tong Kooi Ong, the father-in-law of Grab co-founder Anthony Tan, was a banker and he ran Phileo Allied Bank in the ’90s. But he had to let go of the bank. Tong had to
sell
 it due to an industry-wide merger initiated by BNM – a reaction to the 1997-98 Asian financial crisis. Phileo Allied was
acquired
 by Maybank in 2001.

Even though Tong, who now is mostly known for running the business publication
The Edge
, claims to have accepted reality and moved on, he still
wrote
 in September this year about how Malaysia lost its “first digital bank,” alluding to Phileo Allied and its “digital” offerings in the 90s.

A shot at disruption

Anyway, times are changing in the Malaysian banking world. As the sun sets on these grandfathers, it may spark a new dawn for many.

BNM’s award of digital banking licenses comes amid a perception that the banking sector is staid but is being challenged by digital disruptions on all sides – from loan aggregators to remittance service providers.

Malaysians are also pretty savvy and bold with some ditching local digital services for overseas ones such as Wise.

To BNM’s credit, the central bank has liberalized the digital banking space by allowing foreign entities to hold major stakes in digital banks and, ultimately, own the bank, meaning that these entities can form their own consortiums and appoint their respective board members.

As for traditional banks, the grandfathers will have to come up with a plan of sorts – no one lives forever. To be sure, the grandfather banks are only three of nine listed banks on Bursa Malaysia, so there are certainly other financial houses that are ripe for the taking either by way of merger or acquisition. RHB, one of the traditional names, is part of a digital banking consortium with Boost.

Also, tech firms sit on a trove of valuable data. Used-car marketplace Carsome, for instance, has an
extensive database
 of underserved customers, making it a valuable consortium partner of KAF Investment Bank, a digital bank licensee.

But, speculation aside, the end of an era here signals that maybe the banking sector could become more vibrant. With the old guard going and gone, newer local and foreign entrants will be able to fill in the gap with more innovative ideas and products – hopefully, that is.

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.


Malaysian nutrition firm enters SPAC deal for $270m

Wellous,
 a Malaysia-based nutrition company, has entered a merger agreement with special purpose acquisition firm Kairous Acquisition Corp Ltd. Following the completion of this deal, Wellous will be publicly listed on Nasdaq.

Team Wellous / Photo credit: Wellous

The merger consideration is worth US$270 million – an amount that will be payable through the freshly issued securities of the merged entity, which will be valued at US$10.10 per share. Through the deal, there will also be cash proceeds, which will be made up of Kairous’s approximately US$21 million in trust.

Founded in 2016 by Andy Tan and Henry Chin, the company develops, creates, markets, and sells health food and wellness supplements through its tech-enabled platform.

It lists 10 brands on its website, offering a variety of products – from its Immority anti-aging formulation to its Zenso weight management supplements.

The global dietary supplement market is
set to grow to
 US$240.9 billion by 2028 at a compound annual growth rate of 8.5%.

See also:
Exclusive: GFC leads $3m+ seed round in Indonesian health and wellness startup


Capital A’s logistics arm nets $50m funding

Malaysia-based
Teleport
, the logistics arm of Capital A, has raised US$50 million in growth capital from “large institutional credit investors,” the firm said.

Photo credit: Teleport

The fresh funds will be used to expand the company’s cross-border delivery capabilities in key Southeast Asian markets, onboard additional freighters, and build hubs in Indonesia, Malaysia, and the Philippines.

The firm also looks to invest further in tech that will enable customers to send products to anywhere in Southeast Asia within 24 hours. It recently poured an
undisclosed amount
 into
Kargo Technologies
, an Indonesia-based trucking marketplace, to help it achieve this goal.

Teleport was founded in 2018 and is headed by CEO
Pete Chareonwongsak
. The company said that it’s profitable and growing faster than in pre-Covid-19 conditions.

Within Southeast Asia, the startup has upped its market share in terms of cargo volume from 2% in 2021 to 9% in the third quarter of 2022, further growing its ecommerce business 6x year on year. Teleport is also currently serving Shopee, Lazada, and Zalora.

See also:
Series SEA: Who’s investing in the region’s logistics and transportation startups?