Covid or no Covid, growth accelerator picks 10 companies for investment

ScaleUp Malaysia general partner Aaron Sarma

Partners of ScaleUp Malaysia with cohort 1

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ScaleUp Malaysia, an accelerator that focuses exclusively on growth stage companies, will be investing RM200,000 each in 10 out of the 20 companies that made up its cohort 1 that was formed in December last year. This investment is meant for the companies to grow and scale their businesses with a focus on regional and global expansion.

The companies that will be receiving the investment are ATX, AutoCraver, Batik Boutique, GOLOG, Iimmpact, Kwikcar, AOne, BiiB, Agiliux and Tripcarte.

ScaleUp Malaysia general partner Aaron Sarma says the final decision was not easy but ultimately, its investment committee selected companies with teams and products best positioned to scale into large markets.

He says this announcement is particularly cheering because in Malaysia, ScaleUp is one of the few organisations deploying capital in a time of Covid-19 and lockdowns when so many businesses are panicking and going under.

The funds for this investment, he adds, come from private sources. “The fund for cohort 1 is from individual angel investors. Future cohorts may be opened up to corporate investors.”

Sarma says this accelerator differs from others because it focuses on later stage companies.  “Most accelerators focus on early stage companies, that is, people who are looking for a product market fit or to build solutions from scratch.  Their programmes focus on early stage needs like product development, choosing a co-founder, choosing a technology and how you set up the company.”

ScaleUp, on the other hand, is a growth accelerator. “We made sure that every company that joined our programme had a product in market and was already generating a minimum of RM300,000 in revenue per year.

In fact, says Sarma, more than half the companies that were selected to be among the 10 receiving the investment, have revenues of more than RM1 million per year.

“They’re slightly more mature, which allows us to focus on certain things like management issues, finance issues, strategy, positioning and the way they do their PR and marketing. 

“They don’t really need to learn how to build their product. They focus instead, on how to scale their business,” he points out.

In December last year, ScaleUp had announced the 20 companies that had been accepted into its cohort 1. It worked with these companies for four months before the pitching session that would determine which of the companies received the RM200,000 investment.

As the pitching session happened smack in the middle of the Movement Control Order (MCO), it had to be done virtually. This raised some concerns.

“We were not sure whether doing a remote virtual pitching session was the best way to showcase the companies. But we are in an MCO and obviously our companies need support at this time and the investment would be beneficial to them. So we decided to proceed with the investment panel and the decision to invest,” says Sarma.

In a typical pitching session, there are a lot of non-verbal cues such as body language that investors would pick up on. In a virtual pitching session, this would not be possible. 

So the ScaleUp partners did a webinar with the 20 companies to coach them on how to make the pitch in a virtual setting. “We provided training on how to do online pitching and how to position themselves because they wouldn’t be able to rely on the things you usually rely on with a physical pitch.”
 
The virtual investment panel went off better than expected. ScaleUp distributed information on each company to investors beforehand. “So when we did the pitch, the investment panel members had all the info they needed in hand. 

“The companies did really well; they really brought their A-game to the pitch and it was very difficult to select the top 10. In the end, we backed the companies we thought could scale given the kind of situation we are in (Covid-19 pandemic and lockdowns).”

What about the 10 companies that didn’t get picked for investment? “They are still part of ScaleUp and still invited to all our training programmes. They can call on individual partners to get coaching.”

As for the 10 that did get picked, their engagement doesn’t stop at investment. Sarma says the coaching for these companies is supposed to last for 24 months in total. “We feel it’s important to have somebody with them on a day-to-day or a month-to-month basis, helping them with specific issues pertinent to their companies. There is a lot more work to be done.”

Sarma adds that besides investing in these companies, it will help them with follow-up investments. “We already have interest from other investors, so we’re helping these companies prepare their financials and documents for the eventual pitches they do. We will also help them in terms of structuring their deals with other investors.”

What businesses are the investee companies involved in?

ATX is a digital payments service provider that provides a solution to help micro SMEs participate in the digital economy. It has been around for eight years. AutoCraver provides a cloud-based end-to-end management software, Turbo, for car dealers to facilitate car sales.

Batik Boutique is a gift brand that creates social impact by empowering the B40 segment through education, training and job creation while GOLOG is an on-demand cold chain logistics platform that uses data and machine learning to digitise the traditional supply chain.

Iimmpact provides a solution that enables digital payments to over 100 billers inclusive of mobile top-ups, utility bills, entertainment portals and local councils while Kwikcar is a peer-to-peer car-sharing platform.

AOne is an educational platform for learning centres to manage their classes, teachers and students through scheduling, fee collection and process automation while BiiB is a community platform that creates gamified virtual events for runners and transforms running into a team sport.

Agiliux is a cloud-based insurance platform with extensive policy and claims management capabilities while Tripcarte is a travel technology company that provides a distribution platform for travel activity and tickets to tourist attractions.

ScaleUp Malaysia is run by six partners — Dr V. Sivapalan, Renuka Sena, Tay Shan Li, Andre Sequerah, Xelia Tong and Sarma. “Dr Siva and Renuka have been running Proficeo and the Coach and Grow Programme for several years now. Xelia was vice president of investments at Cradle Fund and Andre, Shan Li and I are entrepreneurs who have exited our businesses,” says Sarma.