The funding climate is changing at a scale that is unimaginable, say venture capitalists, who feel that startups should aim to build a “war-chest” of funds and even go beyond borders to raise capital.
Betting against the traditional model of ‘bootstrapping first and obtaining funding later’, startups should look at raising capital with the first six months – yes, that early in their companies’ life cycle, and this was among the key takeaways from the recent panel discussion, which was part of DNA Disrupt: The Year’s Highs and Lows.
Next six months are critical
Pointing out the climate of global uncertainty and the pockets of economic distress across sectors and markets, the venture capitalist (VC) Chok Kwee Bee advised startups to secure funding within the “next six months,” while the momentum for funding (startups) was still high.
“Startups looking to raise funds, should do so within the next six months,” she said, adding that entrepreneurs should use the next six months wisely, securing the funds they seek while the momentum for funding is still strong among venture capitalists (VCs) and other funds.
Explaining this urgency, Kwee Bee, who is Teak Capital Sdn Bhd managing director said: “We don’t know when the market will fall. You need (to acquire) a war chest; so that anything happens, it can take you through another 18 month or two years.”
While she urged entrepreneurs to up their ante and be more aggressive in chasing opportunities and growth in their businesses, she also cautioned them to spend their funds wisely and to focus on building a great product.
“I think many burn too much money for online marketing when they should look at areas that can deliver sales or make improvement in the products,” she said at the DNA Disrupt: The Year’s Highs and Lows panel session.
Cradle Fund Sdn Bhd CEO Nazrin Hassan said there is an active interest in regional VCs for Malaysian companies. Citing Cradle’s one-to-one matching initiative under its co-investment strategy, he said that after concluding five co-investment partnerships this year, there were still another eight to nine (partners) in the pipeline looking to seal deals.
“Malaysian companies are going out there and getting more visibility,” he said, noting that with the limited number of VCs in Malaysia, the strategic move for startups is to go regional when seeking funds.
He acknowledged the fact that Malaysia start ups have to resort to funds from other countries for further growth. “We don’t compete. We leverage on our neighbours, on the VCs they have there,” he commented.
Nazrin lamented the lack of participation from local private sector in providing venture capital. “We need the private sector to drive the startup scene (but) everyone is still relying on the government. Not only the entrepreneurs but the VCs are also looking at the government for their funds,” he said.
Nazrin pointed out that Singapore has seven times more VCs than Malaysia, many of them are not Singaporeans but are registered there and they raise funds from around the world.
The question is, he noted, how to improve the deal flow in Malaysia. “In Malaysia, if we take out the government funds, there is not much left.”