Malaysia’s Cradle Fund revamps strategy to wean startups off grants

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Malaysian government-owned Cradle Fund unveiled a new grant product today, while scrapping two previous ones as part of its shift toward equity investing.

The new product, Cradle Investment Programme 300 (CIP300), is a pre-seed program that provides up to US$69,400 in financial and “value-added” assistance to entrepreneurs who want to kickstart their businesses without giving away equity.

CIP300 was the offshoot of a revamp in Cradle’s grant strategy. A spokesperson told Tech in Asia that the agency has junked two previous grant products – CIP Catalyst (up to US$35,000) and CIP500 (up to US$116,000) – after suspending them late last year. “[They] will no longer be available,” she said.

Cradle wants to lessen startups’ dependence on grants and the lower amount CIP300 offers will encourage them to seek other funding options such as crowdfunding, angel or VC investments, it said.

“By weaning startups off grants, Cradle intends to introduce outside investors earlier ensuring local startups have the discipline, professionalism, and focus required to propel them to the next level,” the agency explained.

Equity investing

But it’s not going to leave startups hanging in the air after the pre-seed stage. It has DEQ800, an equity product worth up to US$185,000 that’s meant to be “the next step for early-stage startups to scale up.”

Launched last March, DEQ800 is Cradle’s latest initiative toward equity investing and allows it to invest on its own. Before that, it could only snap up stakes in startups under a co-investment program, where it matches any funding given by its investor-partners.

“We want to help startups to grow in Malaysia and go global by helping them navigate from the very start – right from idea stage – all the way to series A,” said group CEO Nazrin Hassan.

CIP300’s key feature is a range of value-added support for recipients such as an intensive mentoring program throughout the funding period, opportunity to be matched with potential investors, training in innovation and commercialization, participation in Cradle business and networking events, as well as media and public relations.

The investment product targets ICT, non-ICT, and other technology-based fields such as semiconductors, life sciences, and clean technology.

Eligible to apply are Malaysian individuals or incorporated companies operating less than three years. For each grant award, Cradle expects at least 60 percent to be allocated for commercialization costs, and the rest for product development and other costs.

Converted from Malaysian ringgit. Rate: US$1 = RM 4.32.