Last year was a defining year for Cradle Fund Sdn Bhd. After several years of faltering due to a lack of direction, the Ministry of Finance (MoF)-owned pre-seed fund became its own entity in July 2007, after being a subsidiary of Malaysia Venture Capital since its inception. Cradle CEO Nazrin Hassan took the helm just three months after that. His first task? Housekeeping.
“The initial days were very challenging. When I came back (Nazrin was a co-founder of Cradle), the programme was rather stagnant. I spent the first two months cleaning up the company. The reason I returned to Cradle was because the industry was asking whether the programme still existed. We had to work fast. By 2008, the fund money was transferred to Cradle and we started to actively build our new product, CIP Catalyst, which was launched in March 2008 and funds ideas by up to RM150,000. The first batch of applications for Catalyst came in May. A lot of last year was about turning the programme around and letting people know that Cradle is still out there,” says Nazrin.
Previously, Cradle had only funded ideas by up to RM50,000, which Nazrin felt was not attractive anymore considering that it was no longer the only pre-seed fund in town. There was also the MSC Pre-Seed Fund administered by Multimedia Development Corp Sdn Bhd (MDeC), which had been giving out RM150,000 grants to technology entrepreneurs. As a result, Catalyst was introduced as an alternative to what MDeC had to offer.
Launching the product has been the toughest challenge, says Nazrin, because he had to manage the different views and demands of his team as well as the stakeholders in the MoF. However, he credits the discourse as a constructive one. He adds that Cradle has received strong support from various levels at the MoF.
Besides Catalyst, Nazrin has been busy jumpstarting outreach programmes with entrepreneurs and other industry players in a bid to bring the funding ecosystem back into focus. He started a strategic partnership unit that focuses on building working relationships with technology companies and other government-linked companies (GLCs) to increase collaboration and cooperation.
“At the end of the day, it is not only to increase the number of applications. We want to increase the number of quality applications as well. That’s why it is important to bring back the mentor programmes and commercialisation partner programmes. For instance, our strategic partnership with Celcom for mobile developers. Celcom gives validation to the technopreneurs’ ideas and we can be assured that the idea is commercially viable,” says Nazrin.
Before he took up the position at Cradle, Nazrin was an executive director at the Technopreneurs Association of Malaysia (TeAM) and had spent years lobbying the government for funds to be set up for technopreneurs. After his first year as Cradle CEO, Nazrin believes that the main difference between being the CEO of a GLC and a director of an independent non-profit industry organisation such as Cradle is that the latter allows him the ability to implement.
He adds: “The influencing of the decision-making process has been done better and it allows me to make things move a lot faster.”
Recently, the Economic Planning Unit (EPU) called for the rationalisation of the many government funds under the jurisdiction of various ministries. As a result, the funds have been consolidated and streamlined under eight categories. During this process, Nazrin says there was voluntary effort to merge with the MSC Pre-Seed Fund, but the deal fell through because some of the pre-conditions could not be met. Hence, the EPU recommended that Cradle could be the sole pre-seed fund in the country moving forward.
However, Nazrin personally feels there is no harm in having two pre-seed funding vehicles in the industry, but he points out that the final decision lies with the EPU. “Frankly, we are just happy to have survived,” he smiles.
Last year alone, up to the closing of October’s batch of applications, Cradle gave out RM11.4 million for 80 ideas, compared with 53 approvals in 2007. Of the 80 ideas, six were under the RM50,000 programme while the other 74 approvals were under CIP Catalyst.
This year, Cradle has RM30 million in drawdowns from the MoF and has put together a set of strategies to strengthen itself as well as local technopreneurs. Firstly, it wants to look at strengthening and deepening Cradle’s mentor bank by improving the quality of mentors Cradle makes available to its applicants, says Nazrin.
“Previously, we provided support to our applicants by identifying the domain expertise that they lacked and plugged in a mentor who is a specialist in that area. This year, we are looking at putting together a more rigorous filtering process for mentor selection and we are searching for all-round mentors as well. The availability of good mentors is vital if we want to increase the quality of applications and improve the education of technopreneurs,” he says.
There will also be a reorientation for the organisation to ensure that every unit within Cradle has KPIs (key performance indicators) that are linked to the commercialisation pathway of applicants. Presently, only the Ideas Bank unit oversees this critical area but Nazrin intends to seek the involvement of the entire organisation in this process moving forward. “The commercialisation target for 2009 is 50% — 5% more than the current 45%. I think we will be able to reach this target soon,” he says.
Last year only saw 31 seed funding deals in Malaysia, 28 of which were funded by Mavcap (Malaysia Venture Capital Management Bhd). “The seed venture capital industry is presently in the worst situation ever,” says Nazrin. But having said that, he moves to dispel a common misconception that the industry holds of VCs (venture capitalists). “A lot of times, we expect the VCs to fill the angel investor’s role. This is undue expectations and no VC will be able to do it,” he stresses. As a result, Cradle intends to fill this gap in the funding chain and has submitted an application to the MoF to set up a new fund targeting seed ventures.
Looking back on 2008, Nazrin feels the best thing that happened was the National Innovation Plan implemented by the Ministry of Science, Technology and Innovation. Of this, he says: “This has become a cohesive platform on which GLCs and government agencies can work together. There is more synergy between agencies right now and there is a better understanding between us because we are able to debate issues behind closed doors. Because of this, we tend to see each other’s perspectives better right now.”

Toh Mei Ling is a contributor to The Edge