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Cradle Fund is moving away from grants; ‘Direct Equity 800’ will invest around US$70,000 to US$180,000 in early-stage startups

Cradle Fund Sdn Bhd, an agency under Malaysia’s Ministry of Finance, announced this week the launch of an investment product called Direct Equity 800 (DEQ800) that is built to help startups receive cash injections of between RM800,000 (US$180,000) and RM300,000 (US$67,000).

The strategy behind DEQ800 is to slowly wean early-stage Malaysian startups off of government grants. According to Cradle Group CEO Nazrin Hassan, about half of  Cradle’s budget for 2017 will be equity-funding while the other half will be in grants. Longterm, Cradle hopes to gradually shift away from grants and towards the equity model.

The decision comes on the heels of a February initiative from Cradle to expand its portfolio. Cradle will target a wide-range of industries — like fintech or oil, gas and energy. But, the company must be a tech-based startup.

Hassan said he hopes DEQ800 will become an alternative option early-stage startups consider when they are going on the fundraising path. The agency plans to invest in 10 companies and close three co-investment deals in 2017.

Also Read: Cradle launches VC arm; targets to raise fund value to US$27M

“We believe DEQ800 will serve as a crisp avenue for start-ups with clear growth and good exit potentials at pre-seed and seed stages to raise capital for their businesses and help achieve these objectives,” said Hassan in a statement.

The co-investment strategy

Cradle’s co-investment strategy strategy is also being tweaked.

Previously, Cradle would match the amount being invested from their partners. Now, Cradle will double the money being invested by their partners.

The 2-to-1 model will be introduced along with a bump in the ticket size. Previously, Cradle would invest RM500,000 (US$112,000); now the amount will be RM800,000 (US$180,000).

‘‘One major advantage of getting seed funded by Cradle is that our start-ups can look forward to leverage our ecosystem of diversified investor groups which can add value to their knowledge and experience as they strive to scale beyond their home market,” said Hassan.

Also Read: The long game: A crash course in customer lifetime value

Cradle Fund also has a subsidiary called Cradle Seed Ventures that was launched in June, 2015.

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