SAM SHAFIE & KASHMINDER SINGH

CO-FOUNDERS OF PITCHIN

ABOUT THIS EPISODE

With equity crowdfunding allowing access to everyday individuals to be part of the startup investment scene, we’re seeing more Malaysians becoming entrepreneurs. However, Malaysia’s only produced one unicorn (Carsome in July 2021) in comparison to our Southeast Asian neighbours who forge further ahead. Listen in on what Sam Shafie and Kashminder Singh (fondly known as Sam and Kash) from pitchIN - the leading equity crowdfunding platform in Malaysia - has to say about why we’re lagging behind and what we can do to accelerate the growth of Malaysian startups.

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GUESTS ON THIS EPISODE

EPISODE TRANSCRIPT

Kashminder Singh 0:00

We have an amazing number of startups or companies. SMEs in Malaysia are totaled at around 900,000 plus - almost a million SMEs. And we know that if you look around, we sometimes see more shop houses than houses in Malaysia. Right? So on that aspect, I think, the entrepreneurial spirit is there, the desire to do things is there.

Hardesh Singh 0:27

Welcome to The Bawatana Podcast where we unearth stories on startups, ideas, and the culture of creating and making things here in Southeast Asia. That opening soundbite was from Kashminder Singh, we just call him Kash. He's the Co-Founder and Chief Strategy Officer of pitchIN, which is the biggest equity crowdfunding platform here in Malaysia. You'll also be hearing from Sam in this episode, Sam is the CEO and Co-Founder of pitchIN.

Ayesha Rahman & Hardesh Singh 0:56

Can we give him a soundbite too? Okay! Cue soundbite from Sam.

Sam Shafie 1:00

It's not just the companies that needs to up their game. The relevant stakeholders in the country, they also need to up their game.

Hardesh Singh 1:08

We decided to create this podcast for a very simple reason. There are more talents and more money pouring into startups. And we think we are on the cusp of something very exciting in Malaysia. A big part of this is due to equity crowdfunding, where everyday people like you and I can invest in startups without having to be a venture capitalist. So it's quite appropriate that our very first guests on this podcast are Sam and Kash. We talk to them about the opportunities and challenges in the startup ecosystem. There seems to be a lot of promise, but also, as Sam says, everyone still needs to up their game. One other thing about this podcast - the original conversations are taken from a live session that we hold monthly on Clubhouse. We then edit these live conversations together with our own insights and additional sound bites to present this version that you're listening to now, just thought you should know, in case you're wondering why the audio quality differs. And you might also hear a little bit of ruffling and background noises here and there. And this is Ayesha.

Ayesha Rahman 2:10

Hey guys, I'm Ayesha and I spearhead the content and business development stuff over here at Bawatana. I'm pretty much the opposite of Hardesh - extroverted, which means I'm too talkative and not very shy. And yes, this particular episode features a conversation from a Clubhouse session that took place in April this year.

Hardesh Singh 2:27

Ayesha will be my co host on this series. And she is a millennial, by the way, that context will be helpful when you listen to the rest of this episode. And probably this entire podcast series. Let's get into it.

Ayesha Rahman 3:14

Okay, Hardesh. Can you share with me a little bit more about why you wanted to start Bawatana in the first place?

Hardesh Singh 3:19

Yeah. So, you know, I've always been interested in entrepreneurship. You know, I've done a few things myself as well. But you know, it suddenly felt like there was a lot more opportunities but the same time I thought, rather than me trying to do everything myself, the smarter way will be to just, you know, fund other people and let them buy me coffee in return for mentoring, and let them do all the heavy lifting. And I think it's probably turned out to be the better decision. But related to that, with Bawatana, we felt that the time was right. There was just so many more young Malaysians who wanted to go into entrepreneurship, there's a lot more, I guess, willingness to take on risk. And to carve their own paths. It's suddenly a really exciting time to be actually tagging along for the ride.

Ayesha Rahman 4:16

I did a little Google search the other day and we had about 26% Gen Z's and 30 odd percent of millennials. Lots of fresh ideas coming about so we're definitely way past the stage of mom and pop shops here in Malaysia. And this is what Kash has to say on the state of entrepreneurship in Malaysia today.

Kashminder Singh 4:33

It must be stated that Malaysians are very entrepreneurial. We have an amazing number of startups or companies. So the SMEs in Malaysia are totalled around 900,000 plus - almost a million SMEs. We know that if you look around, we sometimes see more shop houses than houses in Malaysia. Right. So on that aspect, I think the entrepreneurial spirit is there. The desire to do things is there.

Ayesha Rahman 5:07

So according to the Companies Commission of Malaysia, last year alone, we had about 389,000 businesses that got registered. This year, we're already at 203,000. And we've only just, I mean, we're in the middle of July at the moment. So we can only imagine what those numbers look like at the end of the year. I think also, there's just been a growing realisation among people, especially with millennials and Gen Z's of being able to sort of carve their own life. I mean, we've left behind the baby boomer notion of being able to, like, you know, graduate, get married, and then go and work a stable job to be able to provide for our families. So I think we're feeling the benefits of it, you know, our parents have sort of done that hard work for us. And we're able to sort of leave school and basically leave the nest in a much more comfortable position. So the the risk appetite is definitely growing, the willingness is growing. I think being in a startup is now considered cool. So we have got lots more people wanting to be in it sooner rather than later.

Hardesh Singh 6:13

So that goes back to you know, when you're asking me earlier about why we set up Bawatana, and I think it sort of validates the timing, you know, of wanting to look at companies to invest in. I think there's a lot more ideas out there a lot more people that are investable but at the same time, you know, every one of these companies, at least the ones with good ideas and there are quite a few of them are going to need money, right? So all that money has to come from somewhere. The question I have is that is there going to be enough money? Is there big enough a pool of money, you know, to be funding all these startups right?

Kashminder Singh 6:51

About whether there's money or not, there's a lot of money, we all know that. Right? Just to give you an example, if you were to listen to advertisements of a digital asset exchange, I've been hearing on the radio or even one of those roboadvisory companies, all of them manage funds now in excess of billions of dollars.

Ayesha Rahman 7:11

In the Securities Commission, their most recent annual report from last year. In terms of alternative fundraising, the total funds raised last year increased to 631 million whereas previously in 2019, it was just 444 million. So that's pretty amazing. For equity crowdfunding and peer to peer financing, it actually recorded a high growth of 43%, which is you know, an incredible growth. So there is funds. And I think the more exciting question for me is, where are these funds, I mean, I'm intrigued to find out where this money is suddenly coming from because when the pandemic hit, I thought everybody would want to be saving their money, but on the contrary, they're spending it. So on pitchIN last year, they did about 36 deals, and they raised close to RM16 million. That's more than three times their raise in 2019. So the interesting part here, I think, for me is it's not so much the percentage of startups that got into pitchIN and managed to make a deal there, I think it's the percentage that didn't quite make it. Here's what Kash has to say about the startups that don't make it onto their platform.

Kashminder Singh 8:20

I think we can also divide whatever companies that come to us into sub categories, right. And some of them without saying that they're good or bad, I think many of them come to us at too early at a stage, some really at the very, very early stage of just being an idea. At that point, our experience tells us that very few companies would get funded on an idea. In fact, as far as I remember, only one company - Sales Candy. Other than that, it's pretty hard, I think, for a company with just an idea to go straight to the crowd to seek for funding. So that's one group of companies and we really hope to see them again later when they grow a bit more. Our advice to them generally, is to at least execute something. So that's one category of companies that we see. The other one would be companies that maybe I think when you look at them - and this is something that we don't make any judgment right - so when we say that we onboard them, actually really you can say that because we democratise this whole process, you can say that, to a certain extent the process that we do that decides whether they finally get live or not, because many of them from this second group of companies maybe in terms of execution, in terms of the numbers and in terms of maybe their revenues and all that may not be to the expectation of investors, and we sort of validate that by sometimes putting them out in a very early part of our process to some investors and the feedback would be very valuable to these companies and then maybe the second group of companies who don't end up being on boarded. Again, we do welcome them back again, because so many of these companies maybe at the first round, may go back and fine tune their processes, businesses may become better, or they may change their offers and stuff like that.

Hardesh Singh 10:30

You know, in the late 90s, right, when we had this vision called a Multimedia Super Corridor, which was really part of Vision 2020 back then. And it so happened that that was the same time where I was just about going into university, you know, so I'm acutely aware of the thinking at that time, because it was very tech driven, right. And, you know, for someone like me, it was looking at what the opportunities were, suddenly everyone wanted to go into IT, you know, to study IT, to study computer technology, which I think was great, right. But bear in mind, that was 25 years ago. And, you know, you look back now. And the whole impetus of that was to really build the startups. Okay, so granted, there was no such thing as a unicorn back then - no one used that lingo. But the idea was to really build successful startups to attract investors. And it was going to be our engine of growth. So looking back, you know, I can't help feeling that, you know, 25 years on, it feels like we've sort of dragged our feet a little bit, we are nowhere near where we should have been. But the vision was to put it bluntly, to be the Silicon Valley in the east, right? So we actually posed this to Sam and Kash as well, because I think they've been in the scene longer. And this is what they had to say.

Sam Shafie 12:02

I suppose in terms of foresight, in terms of what we wanted to become as a country, we had the foresight. Way back in the 80s, looking to the East, getting the guys to come in to invest. We had a booming ecosystem in terms of technology, like electronics and whatnot. You would have thought that coming from there, we would be moving into the 90s and year 2000 and beyond with greater promise compared to all our neighbours in this region. Having said that, again, I think the discussion is that, why haven't we seen really - again, this is not a knock to all of our peers and friends who are running startups in Malaysia. But we haven't seen really, really deep tech companies coming out of this country. A lot of these are service oriented. I think Kash will agree with me that since we first started investing in startups in 2015. In terms of the kind of companies that we've seen for the last five years, nothing has changed. It's the same thing that we've seen. Again, that got me thinking right. Why are we not - this development that we see in other countries in the US where the startups that are service oriented are not there anymore. And that's where we see a lot of money is now being pushed into really, really deep tech companies, space tech, even finding replacement for food, and it's not seen here. So again, echoing what Kash mentioned, there's a lot of issues to discuss, a lot of things that need to be fixed. I remember reading, I think, if anyone wants to read something, someone has tried to attempt to address this and you could probably read Dr Siva's article in Digital News Asia. So go there, just Google it, you can probably read it. It's probably a fair description of what's wrong, and what needs to be fixed. The people responsible, I think they need to be able to listen to people in the industry, so that they could actually have a fair and also targeted knowledge about what's hampering our ecosystem from moving forward because again, like I said, five years down the road, we've not seen anything else apart from one or two companies like AeroDyne. They probably bring a fresh take into our ecosystem. But other than that, we are still looking at similar companies we saw way back in 2015.

Hardesh Singh 15:05

Okay, so, you know, I guess there's a different way of looking at it. So there's an acknowledgment that probably a lot more needs to be done. But at the same time, when you look at it regionally, it feels like, there's also a race, right? And the race is to produce unicorns. And I guess I'm in two minds about you know, whether it's a legitimate pursuit or not.

Ayesha Rahman 15:32

Yeah, I mean, if we're going to be looking at this chase right. So according to Malaysia's Digital Economy Blueprint, our goal is to be able to create or at least attract five unicorns to set up in Malaysia by 2030. But we've only just gotten our first. So Carsome has just gotten their first unicorn status, which is fantastic, but we're lagging further behind than all of our Southeast Asian friends. So we've got about 17 unicorns in the region. Singapore already has eight, you know, Indonesia has got six, Philippines and Vietnam have already gotten their first one. But where are we? I think we're far behind and it makes me wonder, what's our prospect? You know, what does the future look like for us? In an article that was written by Dr. Siva, and that was published on Digital News Asia, he shares that though we do have companies that have the potential to become unicorns, I think what's happening is that they're not receiving enough support, nor are they receiving the right kind of support to be able to get them there. So we also spoke to Sam and Kash about what the state of unicorns are in Malaysia, and this is what they have to say about it.

Kashminder Singh 16:47

Okay, I think, unicorns, for me, I always say, let's work towards getting a lot more companies going bigger and bigger. Let's look at how many unicorns we have, right? So how many $500 million companies do we have? How many 100 million dollar companies? So I think those are the kinds of things that we have to go through. And for me, it's always never a fair comparison, you know, because the ease at which startups in America can get funding far surpasses whatever funding even has, to the best that pitchIN has done, we have raised RM140 million for companies. But you know, it's been a very difficult journey over 5 years. But if you look at America, until very recently, a startup will just have to say I'm a startup and people will throw money at them. Right? So the sheer force of money being thrown at the people coupled with the fact that if we face a brain drain, America is the reverse, right. They've got some of the best brains arriving into that country, or being educated there. So they do end up with a lot of successful companies. But I think, for me, I never worry about you know, oh, yeah, we should have a unicorn, we do have a unicorn if you ask me. If you ask me, Jobstreet was ours. And Jobstreet is a unicorn, as far as I'm concerned, right? So we do have very, very good companies. But the question is, why not more? And I will say, don't worry about that, I will say worry about growing a lot more successful startups, the unicorns will come over time.

Sam Shafie 18:32

Yeah obviously, it helps in terms of marketing the country, and that's what Singapore is doing the best in terms of marketing it is as probably the base of what you see unicorns in this region. So it helps in terms of marketing the country, and attract talents to come. Growing a unicorn in any country will require talent from all over the world. That's how countries like the US, Singapore and Europe has performed - not done by local talents entirely, but also a mixture of foreign and local talents. So it propels the country. But I think most importantly, I think we need to fix some of the issues that we have locally, in terms of resource and money. And Kash pointed out quite correctly that in the US, it takes a former entrepreneur who has successfully raised or successfully exited his original company. And later when he sets up a new company, even without starting, they're probably thrown millions and millions of money just because they wanted to back those founders. We have also a number of successful founders who have done quite a number of companies, but they themselves find it difficult to actually raise money. Again, money talks, right? Without money, you can't really grow out of the country. And that's where I think, where countries like Singapore and Indonesia are doing far better than us.

Hardesh Singh 20:21

This would be enough to summarise the main point - that we just need more money for startups. But there may be another way of thinking about this. And it has to do with making investing itself equitable. It turns out that just as there are fewer female founders who get funded, there are also fewer female investors.

Sam Shafie 20:43

I do remember when I was a committee member in MBAN, the Malaysian Business Angel Network, again, the percentage between male and female angels were far and beyond. I think, if I remember at that time was like nearly what 80:20. So obviously, there's a lot of work to be done in terms of creating a scenario where we would probably get more female investors to come in, because I do feel that they would bring a lot to the table in terms of helping companies.

Hardesh Singh 21:22

We thought that this was such an important topic that we decided to do a whole episode on it. Here's a soundbite from Elain Lockman. She is the CEO of Ata Plus - another equity crowdfunding platform.

Elain Lockman 21:35

We don't have many female-led LPs, you know, so I think that's one of the core reasons why in this region, you hardly see any women-led VC funds compared to those in the States or even in Europe.

Hardesh Singh 21:56

So why are there fewer female investors? And what does that mean for female founders? Make sure you listen to our second episode coming up on The Bawatana Podcast. The Bawatana Podcast is produced by me - Hardesh Singh.

Ayesha Rahman 22:12

And assistant produced by me - Ayesha Rahman.

Hardesh Singh 22:14

With editing, mastering and original music by me.

Ayesha Rahman 22:18

If you would like to catch our live conversations, you know the raw versions that we use to produce these podcasts, you can follow Bawatana on Clubhouse. These sessions take place usually on the last Friday of every month. Also, you can read our blog at www.bawatana.substack.com, where we feature our thoughts, opinions and predictions on the latest happenings in the startup and venture capital scene over here in the Southeast Asian region. But the easiest thing you can do is just follow us on Facebook and Instagram at @bawatanaco and you'll be able to catch all our updates on our Clubhouse sessions, latest newsletters, new podcast episodes and upcoming events.

Transcribed by Otter