Letters and ‘coordinated attacks’ – the events unfolding at Carsome

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Hi readers,

You know what the problem is with touting a tech startup as a unicorn? We feed into the narrative that a company can be too big to fail. That’s the debacle at the moment with Malaysia-based Carsome.

The used-car platform made headlines for being the country’s first unicorn in 2021.

But fame comes with a price. When Carsome laid off staff last year, it was put on the back foot, and that unicorn shine dulled.

The platform has been actively engaging the media to say that the worst is over and that they have put in an “accelerated profitability plan” and are on the path to break even.

But these statements are now under the spotlight too after we picked up on a letter written by Carsome that had petitioned Malaysia Deputy Finance Minister Steven Sim to recommend the company as an investment to state-owned investment firms and agencies.

Carsome refuted our report, denying that it solicited or petitioned the minister for funds, even though that wasn’t what we reported. And, just as things couldn’t be any weirder, its chief of staff took to Twitter to say a few things in defense of the company and went on to allege that there were “coordinated attacks” by a rival group. I covered these in a follow-up story published last week.

There’s a lot that needs to be said about the events unfolding at Carsome, more than can be covered in a short note to you. But here are a few things we need to bear in mind: The firm is claiming that it is cash rich, but it has embarked on a bridging round for its initial public offering.

That it had to write to the minister means that there’s a certain sense of urgency as well. The Malaysian firms that Carsome wants to raise money from have their own respective investment committees. So why not write directly to them instead?

Also, one name mentioned in the letter, Khazanah Nasional, is also a Carsome shareholder. Why does Carsome need to be recommended as an investment to an existing shareholder?

Malaysia has a real FOMO problem when it comes to tech unicorns because it “lost” Grab. But note that since then, the country has been slow in enacting proper policies that foster innovation and risk-taking. All that it wants is to have unicorns.

So Carsome’s letter naturally divides opinions: Some say no for fear of government-linked entities betting on bad companies; others say yes because the country needs unicorns and can’t afford to lose more.

I’d say we need to accept that until Malaysia gets things right for the startup ecosystem, fortunes will be sought elsewhere, with talent domiciling in countries that have put better structures and systems in place.

The country needs to work on making its tech/startup ecosystem more vibrant — long-term stuff — instead of worrying about whether Carsome will continue to be a local champion.

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