Startups and VCs: A two-way street

• It’s not just about the funding for startups
• Important to create communities to boost ecosystem

THE two-day GIST Startup Boot Camp Malaysia at Universiti Tun Abdul Razak in Kuala Lumpur from April 23-24 saw 10 startups and the entrepreneurs behind them, the shortlisted candidates from last October’s Silicon Valley Comes to Malaysia (SVC2M) symposium, going head-to-head.

SVC2M had brought together Valley luminaries such as YouTube co-founder Jawed Karim, LinkedIn co-founder Konstantin Guericke and California-based venture capitalist with technopreneurs in Malaysia. Participation had a unique twist: You had to submit an idea, and the top 1,000 were invited to the symposium.

That two-day event, which included some stirring and eye-opening keynote addresses, involved mentorship and a sales pitch competition as well. The 1,000 were whittled down to 100, and these were invited for a two-day weekend boot camp where they got further coaching to refine their ideas.

And then we were left with the top 10.

These were the 10 at the GIST Boot Camp. The prize? A “full scholarship” to attend a one-month visit to Silicon Valley itself, where the winning startup would get further coaching from the technology world’s icons, networking opportunities with more venture capitalists (VCs) and access to resources that could help propel their ideas and business forward.

GIST – the Global Innovation through Science and Technology – is an initiative funded by the US State Department and implemented by the non-profit CRDF Global. The GIST Boot Camp was co-organized with StartupMalaysia.org with support and sponsorship from the Multimedia Development Corporation (MDeC), Microsoft and Nokia, among others.

Yes, another matchmaking event between entrepreneurs and VCs; yet why do we see so few marriages coming out of these events? Or rather, why do many entrepreneurs still complain about a lack of funds?
 
Bridging the gap
StartupMalaysia.org founder “Dash” Dhakshinamoorthy concedes the point: “Everywhere we go, we meet entrepreneurs who complain that there are not enough funds or funders; while VCs complain that there are not enough good ideas out there.”

“StartupMalaysia was founded to bridge this gap, to bring them together and spark a ‘Startup Renaissance’ in Malaysia,” he says.

Dinesh Nair, Director of the Infotech Industry Cluster at MDeC, recently posted on the WebCamp KL Facebook group that entrepreneurs should recognize that VCs want to make money, and will go where the returns are clear.

In another FB posting, he laments, “Had three simultaneous robust discussions on startups and entrepreneurship on FB. Increasingly so, it leads me to reiterate that startups must be sustainable and profitable, but too many founders see the big exit as their goal and not building a company which can outlast them. Therein lies the problem.”

As for lack of funds, GIST Boot Camp keynote speaker Dr Harry G. Harris, President and Founder of HealthCare California – who is even older than me and created his startup after retiring from the US public sector – did a Cuba Gooding Jr paraphrase and said, “Go Get The Money!!”

You don’t necessarily need a VC; for some businesses, a bank loan would do. If you have the collateral, of course – this may be worth it if you don’t want to give away a stake in your company.

In the Microsoft-commissioned documentary “Ctrl+Alt+Compete” that focuses on the start-up lives of five companies –Aboutone.com, LiquidSapce, POPVOX, Guardly, and Supergiant Games – one of the biggest takeaways from that movie: Just as VCs and angel investors make reference and background checks on the companies they are thinking of investing in, startups should do the same with the investors – you don’t want a VC or angel investor who thinks only in terms of quarters, and who wants a cash-out when the going gets tough.

But it’s not all doom-and-gloom. Some of us may remember the original dotcom boom and the days of Boo.com (no need for a business plan, just a PR and marketing blitz) and Malaysian VC pioneer Dr V. Sivapalan bringing the “First Tuesday” concept to Malaysian shores. The complaints were the same then – risk-averse VCs and entrepreneurs looking to an IPO exit strategy above all else.

“Doc Siva” continues to fight the good fight as Founder of the Technopreneurs Association of Malaysia (TeAM).

The good news is that despite all the complaints, the Entrepreneur-VC ecosystem is evolving and maturing, a point brought up by Dinesh’s boss and CEO at MDeC, Datuk Badlisham Ghazali, although he too laments at the conservative views of the local banking industry.

“It’s a two-way street, and it is maturing in Malaysia,” he says.

Badlisham notes that there are a host of grants and funds made available by the Malaysian Government.

“But they’re ‘all over the place,’ and we need a coherent one-stop centre where entrepreneurs can get all the information they need on who qualifies for what grants, and the processes needed to apply for these.”
 
Winners pumped up
The overall winner from the Bootcamp pitching competition was Piktochart, a web-based application that lets users create graphics from their own data sets in a very DIY kind of way, which gets the full scholarship by GIST and StartupMalaysia to attend the one-month YouNoodle Bootcamp in Silicon Valley.

Three winners got partial scholarships – OctoApp, SecQMe and Voucherers. Another, FanXT, will be fully funded for a two-week program in the United States covering Washington D.C., Boston and Silicon Valley with the GIST team to meet funders.

“We are still hoping to send as many of the top 10 teams as possible,” says Dash. “To date, we were able to secure funding for only three of the 10 but we hope to raise additional sponsorship to fund the travel of the remaining teams. We would like to invite any potential sponsors to get in touch with us.”

Meanwhile, StartupMalaysia cofounder Rebeca Hwang, urges the winners to keep an open mind during their Silicon Valley visit.

“Have an open mind, take in the constructive feedback and absorb all that Silicon Valley has to offer. This will be an intensive experience where teams will be meeting top investors and founders in the bay area. They will need to be prepared to work very hard, open to pivoting as many times as necessary and to make as many connections as possible.

“This will be the beginning of a vibrant connection with Silicon Valley, so teams need to come prepared to build long-term relations,” she adds.
 
An important role still
Malaysia has yet to give birth to a global startup – no FB, no Twitter, not even a Napster, which may have failed as a sustainable business but which did revolutionize the music industry.

This doesn’t mean networking events like the GIST Boot Camp or SVC2M are a waste of time – certainly not to the startups who received the mentoring that allowed them to fine-tune their ideas. It is, after all, a constant process of innovation and improvement.

More importantly, from the passion and energy at such events, communities are being built.

“I was pleasantly surprised when I heard that the 100 startups from SVC2M formed their own community, Startup@Mamak, and they meet on the first Thursday of every month to exchange views, information and learnings,” says Dash.

Dato’ Saifuddin Abdullah, Deputy Minister of Higher Education – and patron of startups in Malaysia – believes that communities like these, as well as pitching competitions – are the way forward.

“We need to create communities of people enthusiastic and passionate about entrepreneurship; and I use the term ‘communities’ in a very loose sense. They do not have to be formal entities, we just need to bring people together,” he says.

I have been to a few such events in the last few months, and he’s right. There’s always something in the air when these people come together. You may not get the funding you need, but you get loads of feedback and lots of good advice. And the energy and passion that Malaysian entrepreneurs possess, if nothing else, is damned infectious.
 
“The journey from October has been truly a rewarding one for me – it has strengthened my belief that Malaysian entrepreneurs are no different from other world-class entrepreneurs – they are competitive and have the hunger to succeed,” says Dash.

In this sense, practice makes … well, if not perfect, at least improvements.

It’s a two-way street. There’s lots of traffic. And they don’t meet in the middle. But there are intersections.