This article first appeared in Digital Edge, The Edge Malaysia Weekly on May 3, 2021 - May 9, 2021

When Tay Shan Li and Lavinie Thiruchelvam founded Babydash, an online baby store, in 2011, e-commerce marketplaces such as Shopee and Lazada were not yet a thing in Malaysia. Despite this and the fact that neither had ever run a company before, they went ahead and started it, secure in the belief that it was just the thing caregivers needed.

But it took three years for Tay to leave her day job at CIMB Group, where she had worked in corporate finance and investment banking, to join Lavinie in running Babydash full time. Along the way, the two had to pick up a lot of skills, such as how to pitch, plan and secure funding to scale the company.

She left Babydash in 2014, relinquishing her equity, to return to the corporate world, but by this time, she had already been bitten by the entrepreneurship bug and longed to get back in the game.

It was then that she received an offer to join ScaleUp from Dr V Sivapalan and Renuka Sena, both of whom were highly regarded mentors in Malaysia’s start-up ecosystem.

Now, the professional training and coaching specialist uses her talent to groom technology start-ups, studying their business and financial models, figuring out what needs to be tweaked or changed.

ScaleUp’s other mentors are Xelia Tong, who headed investments and the angel tax initiatives at Cradle Sdn Bhd; Aaron Sarma, founder of Vidi and non-executive director of AirAsia.com; and Andre Sequerah, co-founder of telco engineering company Aexio.

“I’ve been grooming people and building teams even while I was working in the corporate world. It’s a bit geeky, but I like figuring out how companies make money. I enjoy looking at projections, a company’s cash flow and how to [create] something to make things better, or even how to improve returns.

“And, I like looking at different types of businesses, as opposed to just looking at one business for a long time. I enjoy thinking through the problems, helping solve problems, thinking through growth strategies,” Tay says.

Start-ups, once they cross the ideation, market validation and commercialisation stages, often find themselves stuck. And this was the gap ScaleUp wanted to focus on, says Tay. Most of the accelerators in the country tend to cater for early- and ideation-stage start-ups.

“These start-ups have validated their products and services, and they are generating revenue, but to scale their operations, they need to think about growth strategies, more funding and marketing channels,” she says.

The companies that ScaleUp helps already have an established product market fit and a revenue of at least RM300,000 a year. But, Tay adds, these companies are also run by only a handful of people and their resources are stretched. Most do not even know where they need help.

“They just need a bit of help to either tweak the product or think through their marketing strategies. Sometimes, they need to rethink how they are raising money or even if they are pitching their companies correctly,” Tay says.

However, she adds, ScaleUp wanted to do more than just coach these companies. “Before, we would coach them and they’d go do their own thing. Now, we take a stake in these companies so we have some skin in the game, which means we are fully incentivised to ensure these companies succeed.

“Our conviction paid off as companies that focused on building the right fundamentals were better able to weather the storm.”

The coronavirus pandemic, for example, has presented the opportunity for many of these companies to grow more quickly now that digitalisation has become a necessity.

“We work with companies from very different industries in ScaleUp Malaysia. We have companies in e-waste, agritech, edutech and more. And, many have the potential to scale beyond our borders,” Tay says.

While companies focusing on remote services, logistics and e-commerce were obvious winners, the ones who were able to tweak their proposition to cater for current needs also showed marked growth, she asserts.

One of ScaleUp’s portfolio companies, Neupulse Sdn Bhd, which owns community running platform BiiB, saw a lot of success in the virtual running space. As on-ground runs and events were prohibited, there was a huge demand from sponsors wanting to support virtual sporting events, she shares.

The platform tracks participation through partner apps — Strava or MapMyRun.

“When the pandemic hit, marathons like the ones organised by Standard Chartered and others couldn’t happen anymore. So, they organised virtual runs and it’s all tracked on your smartwatch. The platform is quite unique because there’s a lot of gamification involved in the app.

“There was one called Race of the Stars: Fit with Music, where people could join local influencers and celebrities or create their own teams to reach their running goals. Sponsors like Universal Music created playlists for the runners as well.

“Then, there is the #TeamRunStreak challenge, where you have to clock in your runs with your team and if a member fails to continue his streak, the team’s streak will fail. There are many other challenges, and many ways to organise the runs,” she says.

My AOne Learning Sdn Bhd is another company that managed to pivot as a result of the Covid-19 pandemic. AOne is an edutech company that provides back-end cloud services to learning centres and runs an online marketplace that links lesson providers to students.

The Movement Control Order (MCO) put immense pressure on the marketplace as people were not able to move freely to provide or attend classes. But AOne spotted an increased demand for online classes, so it launched an online learning software instead.

“It’s an interesting model but they were hit very badly during the pandemic because learning centres were shut down. However, they took advantage of that situation and [realised] it was a good time to sell online learning software and back-end software to help businesses that were still using excel sheets to keep accounts.

“Now they’re moving overseas and very quickly expanding to the Philippines and Indonesia,” says Tay.

The pandemic has changed mindsets, she adds. “My mom, who is in her 70s, uses Grab to order the stuff she needs. We don’t have to touch and feel everything before making a purchase.

“People don’t work from the office as much anymore, so most businesses aren’t necessarily tied to a physical location, which is why, geographically speaking, you can set up a business anywhere. And people have become more open to digital solutions in general, whether it’s e-commerce, ordering food online or ordering massage services online.

“The performances of these companies show that companies that are resilient, agile and have strong fundamentals can survive,” she says.

To date, ScaleUp Malaysia has had two cohorts and invested in 21 companies. In the first cohort, 10 companies received RM200,000 each. For the second group of 11 companies, ScaleUp not only invested RM250,000 in each, it also teamed up with Singaporean venture capital firm Quest Ventures to help them expand regionally.

Tay says more funding is needed to ramp up the ecosystem. “In general, I believe, we started looking at building the start-up ecosystem late and the grants weren’t enough. It is much better today, but what would it be like if we had started [growing the ecosystem] six or seven years ago?

“For example, Mavcap’s (Malaysia Venture Capital Management Bhd) entire fund size was US$5 million when companies in Singapore and Indonesia were raising that amount in their Series A funding. That’s how little was invested 10 years ago,” she says.

Although Malaysia is a great place to start a company because of the relatively lower cost of running a business here and its multilingual population, which makes it a great testbed for Southeast Asia, venture funds are still drawn to Singapore, which began to establish a start-up ecosystem much earlier, Tay points out.

“A quick search showed that there are 50,000 start-ups in Singapore versus 3,000 in Malaysia. That’s because they funded start-ups a lot earlier than we did. It is not that we are lacking in talent; most of our local talent are just drawn away due to better propositions overseas.

“This is why I think funding is a big part of growing our local ecosystem,” she says.

Apart from funding, there also needs to be a strong support system for local creations. “Look at how China supports Huawei and Korea supports Samsung. We need to be able to support our local equivalents the same way.”

“We have a company called Quadby, which is a social media platform dedicated solely to college and university students across the country, that aims to replace Facebook, for example.

“Essentially, its thesis is that students today want to communicate on a platform that does not include their parents. Quadby is in quite a number of universities in Malaysia and I don’t see why it would not be able to expand regionally, with the proper support,” she says.

It is important, she adds, to share more local success stories to encourage others to become entrepreneurs as well.

“There just aren’t that many success stories. Then again, there’s a gap because there are not enough people helping start-ups get to the scale-up stage. So, it’s all part and parcel of helping companies get from that ideation to scale,” says Tay.

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