Startup advice from a banker

• Startups often lack ability to appreciate risk and manage cash flow
• Digitisation not just about technology, but customer experience

RAJA Teh Maimunah (pic, left), chief executive officer of AmInvestment Bank Bhd, believes that the future of the startup ecosystem is great.

“We will see a lot more corporate sponsorship; a lot more government-linked corporations, banks are moving into this area. I also see M&As within the startup ecosystem, more mature startups buying into younger ones and the trend will continue,” she says during a session titled ‘Malaysia’s Unique Mix: Start-ups, Banks and Islamic Finance’ at Finnovasia 2017 in Kuala Lumpur.

However, she also noted that it is a highly competitive landscape for startups and that ‘you are going to get failures’. She cited the example of Hello Roaming, which closed down for lack of funds.

She said that while banks don’t think the way startups do, startups often don’t have the ability to appreciate risk and manage cash flow.

“They come with an app, but they need to look at funding in different phases. They have to take bite-sizes and digitisation is not just about technology, but about customer experience. It has to be revolutionary and make customers’ life different,” she said of startups and their ideas.

According to Raja Teh, startups could come up with 200 brilliant ideas a month, but not all are going to make life better. “Give an idea that is really going to make a difference,” she urged.

While it’s great for startups to have big ambitions and reach for the stars, she said it’s not bad to behave more institutional-like as they grow bigger, but not to allow bureaucracy to hamper their ideas. “The biggest threat to banks is not fintech, it’s legacy. That’s when we (banks) lose out.”

That said, governance structure is important for startups, she said. “You may be able to raise your first and second million, but investors want to see return on investment and return on equity.”

“You have to manage hubris. Sometimes you need to listen to someone else, manage money and respect your investors. If you have a dream to reach a US$10 billion IPO, no one will be happier for you than your investors,” she advised.

When asked if what the regulator is doing is enough to support the fintech ecosystem, Raja Teh replied: “Well I would say that we’re not doing nearly enough. Everyone wants to embrace fintech, bankers panicked a few years ago. Then we looked back last year and realised that it is the big guys Google Pay, Alibaba, that are disruptive.

“For banks, it is difficult to embrace fintech. Disruption from within is not natural for banks. Digitisation of processes and customer experience, we can’t quite do it all. At the end of the day, the reality is we haven’t moved very far. Fintechs are nowhere near interested in taking over banks, just chipping away at what is profitable. Fintechs are coming into areas like remittance,” she shared.

“It is quite difficult for fintechs overnight, quite difficult for us to be imaginative, so the only solution is to ‘get married’,” she added.

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