Asean Angel Alliance Summit 2018: Changing the world one investment at a time

• Angel investors play a vital role in fueling change for the future
• Sharing of Angel Networks from around Asean insightful

THE world is changing rapidly and the pace technological change is unprecedented. According to a whitepaper by ARM, the architects of the ARM family of CPUs, there will one trillion Internet of Things (IoT) devices by 2035 and this signals an incredible change in nearly every industry and sector.

“Entrepreneurs will be at the forefront of driving this change and this creates an opportunity for angel investors to be part of this change as they need funds to change the world,” said Dr Sivapalan Vivekrajah, president of the Malaysian Business Angels Network (MBAN) during his opening keynote at the Asean Angel Alliance Summit 2018 in Kuala Lumpur.

Indeed, behind every successful large technology startup, there is an angel. Pick any from the top of the tech world from Apple, Amazon, Facebook or even Google, he said.

Likewise in Asean, Angel leaders from eight of the 10 Asean nations shared the state of angel investing in their countries. Below, in alphabetical order, we present what each Angel leader said about the state of angel investing in the country they are based in.

Cambodia’s huge potential growth

Lem Chansamrach, the managing director of Cambodia Investor Club, shares that the country is “at the stage of growing startups.” He urges investors to look to Cambodian startups for investment opportunities: “The challenge for us is the mindset of investors. If they take the time to communicate with our startups and entrepreneurs, opportunities may present themselves.”

Acknowledging that Cambodia’s startup scene is still it its infancy, Lem said: “We just started building our ecosystem. There are not many players in the field.”

Nonetheless, he believes that angel investors should invest in early-stage startups as they present “huge potential growth”.

The fintech sector is particularly popular among entrepreneurs and investors in the country. “We have more than 50 fintech companies which include online accounting systems, payment solutions and payment gateways.”

As for the e-commerce space, Lem shares that challenges include logistics, market penetration and payment solutions.

“However, Ali Baba recently came in to set up a logistics hub. This marks a good start for e-commerce starting next year.”

Providing a closer look to startups within Cambodia, Lee shares, “Our local players WeGo and PassApp compete closely with Grab.”

Indonesia looks to the social enterprise model

ANGIN (Angel Investment Network Indonesia) managing director David Soukhasing similarly found that passionate founders tend to be successful. Even when facing failure, they never give up. This, in turn, has made them inspiring for other would-be entrepreneurs.

Regardless, Soukhasing notes that angels should look at the startups’ profitability early to ensure that they are on track to being independent and sustainable. Another observation he had was that within Indonesia the social enterprise model makes sense given the success of Indonesian fundraising platform Kitabisa.com.

As much as everyone wants to focus on the success stories, ANGIN is aware that to be successful one needs to learn from the failures of others.

It launched a research titled “The Downs of an Indonesian Tech Startup Journey” in an effort to understand what causes failure be it change in regulations, lack of infrastructure or change in management.

“We need to do more research so as to give more data to support the investment network. By giving feedback, we can understand the problems faced by most Indonesian tech startups and share it with the ecosystem so everyone can learn and not make the same mistakes,” he said.

In terms of government involvement in incentivising investments by angels, Soukhasing said that the Indonesian government is looking at incentives, matching systems, and funds but much of it is still in the discussion phase.

There is also talk of tapping on high net-worth overseas Indonesians and how they can help fund the digital economy in the country. Though again, Indonesia is still far behind what Malaysia and Singapore are doing in this space he noted.

Malaysia banks on teamwork

Representing Malaysia on the panel of speakers was Xelia Tong, vice president of grant division (CIP300) and head of angel tax incentive office at Cradle Fund Sdn Bhd.

Xelia began by presenting the milestones of the Malaysian angel investment community from 2011 to 2018. “Cradle has been in the ecosystem for the past 15 years supporting early-stage technology startups. While doing this, we continued to identify the issues in the ecosystem and innovate ourselves.”

“Sooner or later, we realised we couldn’t play this game alone,” Xelia shared. In 2011, Cradle appealed to the government to introduce the angel tax incentive to encourage more private investments.

The tax incentive was approved in 2013. Today, investors can receive an RM500,000 tax incentive on investments made into qualified startups. Then, in 2014, the Malaysian Business Angel Network (MBAN) was founded.

“In 2015, we realised that one of our roles is to highlight the interesting and innovative ideas startups and entrepreneurs are working on to people who conventionally invest in other avenues – such as property and the stock market,” Xelia said, which resulted in MBAN’s pitching sessions every last Friday of the month that is still going strong till date.

Another significant milestone in 2015 was when the Securities Commission of Malaysia issued the framework on equity crowdfunding (ECF) providing further support in terms of private investments. “Six ECF platforms were given licenses to begin operations.”

Fast forward to 2017, the government announced a further extension of the tax incentive to 2020. “This is because the hard work we have put in talking to the government and also because the private investors are just starting to develop interest in this space.”

Shedding light on the profile of investors in Malaysia, Xelia says: “Sixty-six percent are between ages of 30 to 49 and are mostly male business owners. The average size of investment is no more than RM100,000 (US$24,000). Statistically, most local angel investors invest with at least three other investors.”

One positive point Xelia highlights is that many angel investors are actively involved in mentoring the startups rather than just giving out funds. “It is driven by many different reasons – whether to safeguard their investments or just to give back to the community.”

To those interested in becoming angel investors, Xelia says: “There are two main ways. One way is via ECF platforms and the other is through angel clubs. The difference is that when one invests through ECF, they are passive investors whereas those investing through a club are more involved in mentoring the startups.”

Myanmar a greenfield for investors

Myanmar Angel Network adviser Samuel Bool shared how the country is still a relatively greenfield for angel investors. "Myanmar is a big market with a population of  over 50 million people, there is a big chance to build a valuable company in the country," said Bool.

 But it presents its own sets of challenges as the country is a collection of different regions each with its own language and culture.

 Many startups or businesses in Myanmar are also currently taking ideas from larger markets like from Malaysia or Singapore and deploying that same idea in Myanmar. Bool is hoping that entrepreneurs would be more daring and think of more innovative ideas.

Bool believes that Myanmaris entrepreneurs that are looking for regional expansion should get their home market right first before they expand or relocate to Kuala Lumpur or Singapore.

The Phillipines is ready for disruption

Sharing about the angel investing and startup scene in Phillipines was James Lette, the executive director of Manila Angel Investors Network (MAIN), the largest angel investors network in the country founded in 2016.

In addition to providing capital, MAIN also mentors entrepreneurs, shares expertise and contacts. “We do this because enabling the startup ecosystem in the Phillipines, not only benefits our portfolios, but also benefits the development of the country.”

About the startup landscape in the country, Lette said: “Phillipines is a massive market with its population of 110 million people and its growing rapidly. The population is relatively young with an average age of mid-20s. Its predominantly English-speaking, well-educated with a great pool of talent.”

“It’s a digitally-savvy nation with internet users projected to double up from 50 million in 2015 to close to 100 million in 2025. For good or bad, Filipinos spend the larger chunk of their time online compared to other nationalities,” he says, adding that the nation is known as social media and mobile texting capital of the world.

Seeing that it is a market that is yet to be heavily disrupted by technology, Lette believes it sets the stage for startups and angel investors. “There’s lots of potential. My understanding is that there are 100 active startups and growing at the moment.”

As for popular sectors, Lette labels fintech as a “fertile spot”. He highlights an interesting fact, “It’s a largely unbanked population with a cash economy. One in 10 Filipinos live abroad which results in US$2.5 billion a month in remittances coming back into the country.”

In terms of untapped sectors, he identifies smart cities as a potential space to explore. “Its one of the fastest urbanising countries in East Asia. That presents some problems to solve such as the traffic congestion it is renowned for.”

Singapore a launchpad to the region

Bansea chairman James Tan sees that there is a lot of opportunity in Southeast Asia and angel investment is actually getting more sophisticated these days. Many are viewing Singapore as a viable launchpad into the region.

From Tan’s observations, having hard-working founders is a consistent trait found in successful startups. Also, angles that invest their time in their startups and remain always on call to lend a hand, helped as well.

He did, however, point out that entrepreneurs often fail as they don’t raise enough funds in time. “Some don’t understand finance and are unable to handle their own finances,” he pointed out.

Tan also cautioned angels to really get to know the founders who they invest in as there have been a number of cases where founders were not coachable.

Bansea has also been supported by the Singapore government from its early stage and it also helps that there is a Tax Deduction Scheme for angel investors that invest a minimum of S$100,000. He admits that Malaysia has done a better job in promoting its Angel Tax Incentive and that Singapore could take some notes from it.

Thailand needs micro VC funds

To set the stage, Robert Lomnitz, the director of Bangkok Venture Club, shares: “Thailand has a population of 68 million people with a large mobile penetration of over 90 million mobile phone subscriptions. The average Thai person spends about 3.5 hours a day on social media.”

With Thailand’s economy largely dependent on its agriculture and manufacturing industries, Lomnitz adds, “The government of Thailand has moved slowly to Thailand 2.0 and 3.0 where tech startups and automotive component manufacturing came on to the scene. Much more recenty, there has been a push by the government to move to Thailand 4.0 which is all about more technology, innovation and value-added services.”

As a result of this, there has been an exponential growth in the Thai startup ecosystem. “From 2012- 2017, the number of VC firms in the country has increased from one to over 100 while available VC capital has increased from around US$67 million to over US$350 million.”

Albeit this large increase, Lomnitz draws attention to the fact that Thailand started from a very low base: “So in absolute terms, Thailand is still in a very nascent stage compared to most Westen markets.”

Speaking about Thailand’s startup and investor ecosystem, Lomnitz describes it as “robust but aberrant and in some cases, dysfunctional” in comparison to other ecosystems. He explains, “About 65-70% of all the capital available in Thailand comes either from the government or from corporate venture capital. It is very much skewed towards large, later stage investments.”

Because people are looking for later stage deals, the funding rounds of Series A, B and C are much larger. “Nobody thinks it’s really worth the time and energy to manage a small US$10- 15 million micro VC funds which is exactly what is required in most of these Asean markets,” Lomnitz shares, highlighting a pain point in the Thai market.

Vietnam reduces red tape

HATCH Ventures chief financial officer Dinh Thanh Hang presented her insights into the angel investment scene in Vietnam telling how  the Vietnamese are very interested in technology be it big data or Artificial Intelligence.

"The mentality of the Vietnamese angel investor is they don't want to lose the opportunity to invest in a fast-growing startup," said Hang.

But she also shared some sobering news that there have been plenty of failures in Vietnam. HATCH has observed that at least 100 startups have failed in the last five years.

Hang said the biggest challenge for entrepreneurs in Vietnam is they run out of cash as they are unable to find the right investor at the right time. As early as five years ago, it was difficult for venture capitals to set up in Vietnam due to strict government regulations that required them to have large capital upfront but the rules are slowly changing.

 Still, she is of the opinion that startups should not be too eager to push out their expansion plans. To her a startup needs to be successful in their home country first before moving out to the next market.