THROUGH THE LENS OF VISIONARIES: BUILDING UNICORNS 

Keynote Panelists: 

Jack, Zhang, Co-founder, group CEO, Airwallex 

Thomas G. Tsao (Co-founder, Gobi Partners) 

Moses Lo, co-founder and CEO, Xendit 

Sarita Singh, Regional Head , Stripe 

Lead discussant:  

Haslinda Amin, Anchor and Chief International Correspondent SE Asia, Bloomberg  

• On the issue of what investors generally look for, the panellists touched on the following : Thomas Tsao of Gobi Partners: 

Investors continue to be discerning and profitability continues to be important. Investors always  first look for startup founders who are motivated and dedicated - that they are not in the  venture to get rich quick. More importantly, investors always look for ideas that solve real  problems and favour especially start-ups that solve big problems. 

Jack Zhang of Airwallex: 

Consumers and businesses today are not really looking at buying financial services. It is more  accurate, in his opinion, to say they are looking to get efficiency - and this is where fintech comes in. His advice to startups building product was that, if their product is easy-to-use and  holds real benefits to the lives of people, investors would always be interested. 

Sarita Singh of Stripe: 

Investors are more likely to part with funds if they can see high traction in the startup’s product  – such as, a lot of people are buying the product, the company is growing every month. It is also  important that startups also know how they can show that traction and, in this respect, her  advice was : it is better for the startup to outsource the function of how to show the traction  and, on their part, solely focus on improving their product and driving customer take-up. 

• On the issue of how companies should look at scale, Moses Lo of Xendit, whose company  claims to grow an average 10% monthly, said he emphasises:

- People: Different levels that you scale up to will require different levels of people;  ensure you are always able to maintain your core culture, especially difficult when you  grow big. 

- Product : Constantly improve and plug in any holes you find. 

- Process: To keep on progressing, you have to keep on breaking your process (with the  intention to build an even better process) every six months. 

• On the issue of whether it is harder or easier to get money: 

Jack Zhang of Airwallex: 

- There is a fundamental shift in the investor world – venture capital’s share of this pot is  nowadays small because when hedge funds come in, they do so in a massive way and  this really has changed the game. 

 Sarita Singh of Stripe: 

- Investors are more savvy, more vocal in their demands and they will put their money  where they believe, such as climate change, for example. She shared the case of her  own company, Stripe, whose product is a carbon removal tool for businesses, as an  example of what investors want - the definition of doing well goes beyond profit, and  that doing well also means doing good.  

• Lead discussant Haslinda Amin picked up on the thought of the need to do good, and asked  Thomas Tsao how important this is. Thomas absolutely agreed, saying that, due to COVID,  there is now a realisation that if one part of the world or society is not doing well, then all of  us are not really doing well. VCs are now looking at Environmental, Social and Governance  (ESG) as a big part of their matrix, and important in the reporting. While ESG is considered  something of an optional item now, it will be a must going forward.  

Jack Zhang weighed in, agreeing that more and more are thinking of ESG. While there is  evidence that fintechs are putting more carbon-neutral thinking into their product, he  believes that a lot also depends on which part of the journey the company finds itself on – in  its early days, a startup is often spread too thin, but once it is able to scale up, there will be  more resources to put into ESG. 

• On the issue of innovations made in Asia which are not likely to be seen anywhere else in the  world, the panellists had this to say:

Thomas Tsao: 

He began by providing the reason why Asia is such a huge blank state for innovators – the  largest mega-cities are in Asia; Asia has very young demographics and a high incidence of  early adoption. Asia will lead the thinking in urbanisation and the re-thinking of how the  global cities of tomorrow will look like. While the last great phenomenon – consumer  internet – is running out of steam, he predicts the next big thing will be: 

(a) Digital transformation for the city, in areas like mobility, logistics, energy, etc. (b) That governments have to be digitally transformed. 

(c) A digital voting system, which will be a leading disruption to traditional politics. 

Jack Zhang: 

Innovation from now will happen in Asia and only then move out to the world – for example,  innovation in last-mile logistics that one simply will not see come out of Silicon Valley;  cryptoasset innovation began in China until the government there shut it down. He offered  two reasons why: 

1) More people in Asia have to work harder because they have no safety net 2) Asia’s large population provides opportunity to experiment and create scale. 

Sarita Singh: 

Different consumer trends in different parts of the world mean there will be different kinds  of innovation to build solutions that meet these different needs – e.g. e-commerce in Asia is  different from e-commerce in the USA; the use of and consumption of technology differs in  Asia and in the USA. 

• To the issue of whether unicorns are born or made, the panellists had these replies: Moses Lo: 

It is abit of both. Southeast Asia, with its big population, big economies and young people,  offers many opportunities to lead thinking and create change. Unicorns are born in  Southeast Asia because: 

(a) They reside there. 

(b) The unbiquitous work hard ethic found here.

Jack Zhang: 

What unicorns need are a combination of the right vision, the right idea and the right time.  But, from his own experience, he would add that one can have a good idea and good  execution but real hard work will still be necessary. 

Sarita Singh: 

She sees it not from a nature or nurture perspective but rather, what characteristics make a  unicorn - the most important of which is that they know what problem it is that they are  trying to solve and how universal that problem is. 

Thomas Tsao: 

The era of zip code investing is over – e.g. the Silicon Valley investor maxim that it isn’t  worth investing in anyone who does not reside within a 25-mile radius of the Valley.  Instead, it will be the problems of the emerging markets, where the big numbers are, that  will take centrestage and these issues will be solved by entrepreneurs in emerging markets  because they have the intimate understanding of the problems there. Due to this, he is also  convinced that, in the future, there will no longer be unicorns but they will all be decacorns  instead. 

CATALYSING THE NEXT WAVE OF INNOVATION THROUGH ALTERNATIVE FINANCE Panelists: 

Sam Shafie, CEO, pitchIn  

Dr. Wong Huei Ching, Director Corporate Planning & Strategy 

Karen Puah, President Fintech Association of Malaysia  

Ng Sai Kit, VP of Malaysia VC & Private Equity Association.   

Lead discussant:  

Kristina Fong, Private Sector Specialist, World Bank 

• Lead discussant Kristina Fong said that a healthy finance ecosystem needs a combination of  factors and elements working together. They include:  

- Good regulator to provide framework for ecosystem to thrive. 

- Investor base required for funding. 

- Innovative firms who are pursuing these funds

- Alternative financing platforms and fintech companies for technologies that democratise  finance. 

• On the issue of the current financial ecosystem for financing startups and fintech companies  and its capability to fund innovative ventures, Karen Puah of Fintech Association of Malaysia said that the pandemic has helped accelerate fintech adoption in consumer acceptance and  cultivating new behaviour. However, the industry is now seeing a drop in digital usage and  she queried if the usage pattern will continue. 

Fintech firms have underestimated the cost of distribution, affecting how companies grow  cheaply or affordably. Growth is tough from channel saturation. To keep growing, Malaysia  is looking at different pockets of society e.g. the underserved. She cited wikiimpact.com,  started by social entrepreneurs, that provides information on who needs services, how  Malaysia is doing and what fintech companies can offer to the underserved. 

• To the question of whether the ecosystem, especially the financial ecosystem, is conducive  for a fintech company to grow and startup in an efficient way, Karen Puah said that the  current ecosystem can support the fintech companies’ startups. She highlighted the  potential in Islamic finance, which is supported by a big pool of Islamic scholars and a 10- million Muslim consumer base. Malaysia is located just four hours away from any part of  Southeast Asia and is conducive as a hub for fintech companies looking to expand. 
• The Securities Commission launched the comprehensive Capital Market Masterplan (CMP3)  last year, which will run till 2025 and it has a sizeable section on startup financing. The Lead  Discussant posed the question of how the CMP3 will spur innovative ventures in Malaysia. 

To this, Dr. Wong Huei Ching of the Securities Commission Malaysia (SC) replied that  attention is on how to shape companies especially unicorns, to create new value for  Malaysia. Some of the steps include : allowing more access to investors to be angel funds  that allow new investors to participate, increasing the allocation of Alternative Financing, and SME finance. CMP3 also touched on Corporate Bankers, who are encouraged to take on  a bigger role in financing. 

• Lead discussant Kristina Fong said that the investor base is a driver of finance. She asked the  question of whether the current composition of VCs are right to fund innovative ventures? 

Sam Shafie of pitchIN said that the right mix for financing should look into areas like allowing  democratising of fundraising, and when the public should be allowed in for fundraising of  very early stage startups which are risky. For crowdfunding platforms like Kickstarter and 

Indiegogo, their initial fundraising for innovative projects attracted a lot of people and funds  - the projects took off and grew and subsequently were sold at much higher values.  

• To the question of whether there is the opportunity or need for traditional alternative  finance e.g .VCs to work with newer alternative finance like pitchIN (crowdfunding):

Ng Sai Kit of Captii Ventures: 

The market is more mature now. He is interested to see how VCs can work with  Crowdfunding. Funding size has grown to RM20million and that may need some level of  governance to be introduced. VCs working with Crowdfunding will inject liquidity, which  early stage investor or angel investor will welcome. 

CHAT AND CHILL: A CANDID SESSION WITH THE PUBLIC AGENCIES 

Panelists: 

Aznan Abdul Aziz (Assistant Governor, BNM) 

Chin Wei Min (Executive Director, SC) 

Lead discussant:  

Vincent Fong (Editor, FintechNews Malaysia) 

• On the issue of key lessons learnt from their years of experience as regulators, the panellists shared as follows:

Aznan Abdul Aziz of BNM: 

(a) If one is clear about one’s objective and outcome, it is easier to formulate your strategy.  For example, if one is focused narrowly on, say, efficiency, then it is often the case that  those involved will have natural incentives to pursue the same end, If, however, one’s  objective is wider, e.g. financial inclusivity, then the regulator will find himself having to  do a lot more to nudge players on.

(b) Trade-offs are complex and difficult but not insurmountable. For example, one may  reduce costs and barriers for startups but then also want to ensure that funds are safe,  and customers are protected. The systems that are needed to put these wants into  place incur costs. To work out how to best balance these costs with what is needed to  protect consumers, two of the best principles to use are those of parity and neutrality. 

(c) One must adapt and evolve. In the “Old School” tradition, if a proposition were to be  considered too risky, it would simply have seen no action. In the thinking of the new  age, the very same proposition would have garnered the response: “Let’s look at the risk  and then find a safe and secure way to do it.” 

Chin Wei Min of Securities Commission Malaysia: 

(a) Balance innovation versus market integrity. 

(b) Build industry collectively and collaboratively. 

• On the issue of the priorities of BNM, particularly within the fintech and financial services lenses:

Aznan Abdul Aziz of BNM: 

(a) Main areas of focus include financial inclusion, addressing social gaps, competition and  efficiency. 

(b) Take a very agnostic stance on technology. 

(c) The payment space will attract more attention as e-payments are very much a part of  life now and the focus there will be on inter-operability. 

Chin Wei Min of Securities Commission: 

(a) Access to finance and the use of Alternative Finance to help the underlying economy. (b) Islamic fintech will continue to be pursued, especially how to innovate indigenous  Islamic principles and create success. 

(c) Looking at investment in the future – digital investment management, the spare change  programme, etc, and how technology makes the process easier and more engaging. 

• On the issue of how Malaysian fintech could attract more capital, Aznan Abdul Aziz said the  need was for more risk capital and this would require a holistic approach that considered  both demand and supply side factors; while Chin Wei Min called for a whole-of-industry  approach as the problem was not a problem solely for regulators but one for all parties to  participate in to ensure the solution thus created would be relevant, have value and even  help technopreneurs to expand regionally.
• On the issue of Malaysia apparently lagging behind while many other countries are already  trialling CBDC, Aznan Abdul Aziz replied that Malaysia is also experimenting with CDBC but,  as one cannot regulate something that one doesn’t understand, there is still a need to learn  from others and monitor how things develop. 
• On the remark that Singapore has already issued four digital banking licenses, Aznan Abdul  Aziz replied that Malaysia is clear that its objective is financial inclusion, especially for  students and rural customers. Singapore, however, has different needs and objectives  including serving regional customers.

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