The BIG Accelerator & Mentorship Gap
By Gopi Ganesalingam, Vice President (Enterprise Development Consulting), Malaysian Digital Economy Corporation (MDEC)
At Malaysia Economic Development Corporation (MDEC) our passion lies in all things digital, with a focus on businesses that leverage on internet technologies.
The development of the digital economy has opened up a new pathway for entrepreneurs wanting to start a business. We have seen this first hand by partnering with and promoting over 3,800 Multimedia Super Corridor (MSC) status companies.
Previously, businessmen, as they were called (and not entrepreneurs), typically started a business to meet an existing visible demand in retail, distribution or manufacturing in their general geographic area. Today however, talented and resourceful entrepreneurs are able to leverage on the internet for both global as well as domestic business.
It is a matter of how good they are at ideation and building their business frame as they embark on a voyage of discovery, that would determine their level of success. This is where the germination of the idea initially evolves as an experiment with a value proposition, then later as it is tested develops into a business.
Like in a traditional business, an online businessman needs to win against the competition. This is most easily done by having a significant technological advantage, possibly protected by patents, but often that is not possible.
To win you need to grab the biggest market share in the shortest time so that customer acquisition costs can taper off and the focus can shift to profitability. Scale is necessary for these businesses to achieve profitability, so for the initial phase the team is 100% focused on a “customer grab”. That’s the path taken by the shared economy companies of Uber, AirBnb and Grab. Uber and AirBnb have raised over US$40 billion for their global roll-outs!
Grab, or MyTeksi, as it was first known in Malaysia, was established in 2012 by Harvard Business School graduates Anthony Tan and Tan Hooi Ling. It was initially a social mobile application built to assist customers to book regular taxis.
Tan has said, “Malaysia is a market that we understood very well, and we spent many months identifying the problems of both passengers and drivers”. When the application was launched in June 2012 its purpose was to “improve the lot of the taxi-drivers”.
A year later, GrabTaxi, as it was known outside of Malaysia, expanded into the Philippines, Singapore, and Thailand, becoming very much a for-profit commercial enterprise. Renamed Grab, Grabcar was launched in 2014 and competition with Uber has been intense. Grab has been quick to react, raising a further US$600 million which comes after the US$350 million raised in August 2015. Soon they will have raised over US$1 billion, pushing its valuation to over US$2 billion, the first Malaysian Unicorn!
In the Indonesian market, Grab also competes with Go-Jek Indonesia, which oddly enough was started by Nadiem Makarim, a classmate of Tan at Harvard in 2009. Makarim with others started Go-Jek as a call service for ‘ojek drivers’ for a pickup in the Jakarta area. While Makarim was away at Harvard, Go-Jek was run by the other founders.
When Makarim returned to Jakarta, he setup Rocket Internet in Indonesia, following a meeting with founder and CEO, Oliver Samwer. After serving at Lazada and Zalora for a while, and trying another venture, Makarim returned to Go-Jek, with a bag-full of cash and bought out his cofounders.
Critical to the success of Go-Jek has been their access to cash, that allowed them to hire an “A” team with successful scale-up experience. CFO, Kevin Aluwi is from Zalora where he was head of business intelligence and was most recently with Setipe.com, an online dating site. Aluwi brought rich experience of data-analytics and scaling-up. In these businesses, achieving scale is critical, and you need people with that specific experience. In fact, Samwer and his brothers started Alando an auction site, which was acquired by eBay within four months and he stayed on to run the German-speaking markets.
Unlike businessmen of the past, who relied on investments and loans for capital expenditure, investors today are funding entrepreneurs for market expansion or customer acquisition. If you have a strong value proposition, the market offers growth potential. If you have a management team in place, funding is available.
Garena Interactive Holding Ltd is an example. This Singapore-based online game publisher formed in 2009 first added a social platform (BeeTalk), then a top-up mechanism (AirPay) and finally an online sales platform (Shopee). They raised US$170 million this year in their Series-D round, led by Khazanah Nasional, which valued the company at a mind-blowing US$3.75 billion – Asia’s most valuable technology company.
To add to the pool of companies, we at MDEC are now casting our net more widely into the region as we find there are many talented entrepreneurs interested in the support that we can offer them here in Malaysia. These hot-shot companies want to be part of the MSC digital economy and are responding to CEO, Dato Yasmin Mahmood’s mantra, “MDEC wants to be the wind beneath the wings of these hot-startups, and help them soar.”
Startups do seem to be able to get funding but what they lack is access to and availability of top-notch executives with relevant experience in high-growth companies. As Nash said, “One of the pieces of advice that I give to friends and former colleagues in private equity is that at some point in their career they absolutely must do what I’ve done and spend at least three to four years in a senior leadership position in a high-growth company.” There is no substitute for hands-on experience.
This is where US startup companies have a huge advantage over our guys. They have loads of experienced people available that can work with startups either available from the incubator or via the investor network. I saw this first hand recently when MDEC coordinated a study tour for 21 MSC companies to the Silicon Valley.
Let me tell you about the three incubators, all in the Silicon Valley, that we visited. Galvanise has six campuses, with 340 partner companies and they have experts conducting courses, plus access to over 40 mentors. I am just naming three of the mentors; Whitney Bouck, SVP Global Marketing & GM Enterprise, Box; Luke Beatty, Head of Product, AOL, and; Adam Boushie, Enterprise Territory- Manager, Google.
Plug And Play boasts the success stories of PayPal, Dropbox, SoundHound, and Lending Club. Finally, we visited Boot Up World which offers, space, training and access to mentors for a monthly fee, starting at US$499! They connect experts and mentors to startups in six-key areas; Go-To-Market Strategy, Sales, Marketing, Brand Strategy, Capital Strategy and Mergers / Acquisitions.
Looking past the physical space, all the incubators have access to highly qualified mentors and a pool of talent for hire. Whether it is for scaling up IT infrastructure, logistics, sales or marketing, it doesn’t matter. If you have a need, they can get an expert in either as a mentor, or a direct hire. Now that is what I call a major competitive advantage.
In summary, if we are going to get our companies on the regional and global stage, we need to support them in three key activities;
- Regional exposure – our companies need to be regularly marketed in the ASEAN region. That is something that MDEC is already actively engaged in.
- Funding – Although it does seem that local companies are able to attract large-scale funding.
- Access to high-quality experts, which right now is a major pain point. We just don’t have a ready pool of experienced talent within the eco-system or at the incubators.
Hence this is a shout-out to all the experts out there. It does not matter if you are working in a large tech-company or even a traditional one. Find an incubator to support and bring your talent and expertise to help out with startups, or we are not going to be able to close the BIG accelerator gap!