Intres Capital Partners, the manager of the MYR100 million ($23.38 million) Axiata Digital Innovation Fund (ADIF), has committed MYR12.5 million ($2.92 million) in its first batch of investments in six digital startups.
The venture firm, set up this year to manage ADIF, announced it will be disbursing that first round of investments into six technology companies domiciled in Malaysia, namely Tripfez, Maideasy, Easyparcel, Easyuni, SPOT News and Supahands.
The investees are from a variety of sectors like travel, domestic cleaning services, delivery, education, media and virtual assistant services.
The first round of funds will be mainly utilised for customer acquisition activities and expansion into new markets, Intres Capital partner Kamarul Nizam Kassim said, in a media briefing.
He noted that the six were selected for investment, out of over 180 that the firm screened through.
“These businesses, which offer compelling and innovative services via web and mobile platforms, have demonstrated reasonable traction prior to our investment, and we believe our investment will assist them to scale up more rapidly,” he said.
Intres Capital may add follow-on investments into these six companies, if their performance warrants it, Kassim added.
“The MYR12.5 million is not all that we are investing. This is a moving figure, we may invest more depending on the performance of the companies,” he explained.
Although MAVCAP chief executive officer Jamaludin Bujang declined to reveal the individual amount invested in each company, they noted that the investment size ranged between MYR3 million and MYR5 million per deal, based on cash requirements of 12 to 18 months for the businesses.
Bujang added that the fund takes 20 to 40 per cent stakes in the investee companies.
ADIF was announced in November last year as a MYR100 million fund. It currently has a MYR50 million commitment from telecommunications giant Axiata Group Berhad and MYR20 million from Malaysia’s largest venture capital firm Malaysian Venture Capital Management Bhd (MAVCAP).
ADIF’s strategy is to invest in businesses with products and reasonable traction, which are ripe for Series A stage funding and above.
However, the funding stage term is not clearly adhered to as some among the six investments announced are receiving this injection as their first round of funding, which they perceived to be more appropriately termed as their seed funding.
Growing the fund
Intres Capital is currently in talks with two corporates to get more investors on board to participate in the remaining MYR30 million to hit the fund’s corpus target of MYR100 million.
Axiata Group chief corporate officer Idham Nawawi said the fund is still looking for potential partners, “could be corporates, or other financial entities, who want to keep tabs on the digital space in Malaysia”.
“It is an opportunity for other corporates (to be informed of the developments) to incorporate this into their own strategy as well,” he said.
Bujang noted that Malaysian corporates have traditionally been cold towards venture capital investments.
“The funding ecosystem for startups in Malaysia does not have enough corporate participation, they are largely focused on their own interests. We are in talks with some corporations and, Axiata being a trailblazer, I can tell you that some corporates want to learn from them,” he said.
He added: “With Axiata’s reach and network, we want to bring these companies out into the region. That’s the only way to build these companies. (Similarly) we want Axiata to be part of the investment decision-making so that perhaps in time they could also go on their own as a corporate venture capital investor.”
The fund managers in Intres Capital are roped in from Teak Capital and QuestMark Capital, who engage an investment committee that include representatives from Axiata and MAVCAP for its investment decisions.
Bujang said the investment committee will be busy scouring deals in the Malaysian startup ecosystem.
“We will be very active, at least in the next two to three years, choosing investments. Chances are we are going to do another six deals next year,” he said.
By 2020, ADIF aims to fund and nurture a substantial number of Malaysian-owned digital services businesses and targets to build up to five regional champions.
“Within the next five years, we want to build more companies like JobStreet, we want more regional internet company champions from Malaysia,” Nawawi said.
Teak Capital managing director Chok Kwee Bee noted that Malaysia has a proven track record of starting regional companies, citing iProperty, which was recently sold to Rupert Murdoch’s REA Group in Southeast Asia’s largest venture capital deal at $414 million.