Finance Ministry agency Cradle Fund to gradually move into co-investing model


Nazrin:

PETALING JAYA: Cradle Fund Sdn Bhd, an agency under the Finance Ministry, will gradually move into the co-investing model from a pure grant-model.

“Co-investment means we will match the investment made by an investing partner or angel investor ringgit to ringgit. And since we are moving away from the pure grant model, we will be taking equity in the companies that we fund,” said Cradle Fund group chief executive officer Nazrin Hassan.

In the current pure grant-model, Cradle disburses the funds in tranches on its own and does not take equity.

As one of the plans to keep deal flows in Malaysia, he said it would be a value proposition to investors in neighbouring countries as the cost of doing business was much lower in Malaysia.

“Instead of the start-ups heading to other locations for funds and setting up their businesses there, it would be more cost efficient to build their business in Malaysia while getting co-funded by a foreign investor,” he told StarBiz.

Cradle Fund intends to have about 50% of funds as co-investments by 2017.

To kick things off, it would start working with its regional partners and angel investors that are registered under Malaysian Business Angel Network (MBAN).

“We’ll start with the first three deals in 2014, which would give us the experience of co-investing with partners and angel investors and we’ll learn from that,” he said.

This is part of the plan by the Economic Planning Unit (EPU) to reduce Government grants to a minimum while funding for start-ups would move towards market-oriented instruments such as loans, venture capital (VC) and co-investment.

Another major initiative in 2014 include the operationalisation of Cradle Seed Ventures (CSV), with funds from Cradle and MYEG Services Bhd to mine for deals and select the recipients of CF1.

CF1 is a private-public initiative between the Finance Ministry, through Cradle and MyEG Services Bhd. The partnership, where a memorandum of understanding (MoU) was signed on October last year to set up Cradle Seed Ventures Fund 1 (CF1) saw Cradle Fund investing RM40mil and MyEG RM20mil.

“We would be getting the necessary approvals from Finance Ministry in January and will be operational in the first quarter while looking at potential deals at the moment,” he said.

He said they were looking to invest in between 15 and 25 deals for the period of eight years with between RM1mil and RM3mil per deal.

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