FirstFloor Capital manages both private and institutional funds and has invested in technology companies ranging from Nutraceuticals to Artificial Intelligence and in stages ranging from seed to pre-mezzanine. Unlike many other Malaysian VC firms, FirstFloor Capital is partner run and owned.
FirstFloor Capital’s team members are pioneers in their respective fields and have been involved in advising and developing technology businesses as well as raising funds for start-ups and mid-sized ventures since 1996.
FirstFloor Capital’s investment style is non-intrusive since we look for investee companies that are driven by entrepreneurs who know their business, are smart, passionately driven, and know that to succeed, they must understand and embrace the ever shifting technologies and markets.
Combined with FirstFloor Capital’s unique insight into new business paradigms and through its own capital, and that of its investor network, these ventures are allowed to bloom to their fullest potential.
To facilitate the funding of these High Growth tech-ventures, FirstFloor Capital is involved in managing several funds for various High-networth Investors and Institutions (Funds).
Technology Investing is not merely about understanding the technical workings of a technology, but being able to understand the broader context of how this technology can be monetised and turned into a value creation agent––it is about understanding the eco-system of the technology and its position vis-à-vis other competitive and complementary technologies.
In the ten years we have been involved in technology investing, we have found four important elements of a successful technology investment.
1. Commercial Relevance
3. Competitive Sustainability
4. Technology Life-cycle
Commercial Relevance: A technology should provide a revolutionary value creation.
Improvements should be in multiples and not incremental percentages. For example, a performance improvement of reducing a task-time from 3 days to 2 days would barely qualify for commercial relevance versus a technology that reduced task times from 3 days to 3 hours. Price reductions should be from $10 to $1 not $10 to $9.
In addition, the technology should address a real need with commercial value and not necessarily a whimsical nice-to-have.
Execution: The speed and ease of execution is perhaps an often underestimated aspect of a technology. How long is the turn-around time of the technology? Some biotech initiatives take several years to yield results, while a software project can produce results in months. What resources and raw materials are required for the technology, and what is their availability and cost? Are there any bottlenecks in the execution of delivery?
Competitive Sustainability: Some technologies are notoriously easy to duplicate and can generate copy cats in no time. An attractive technology should not only be proprietary but in practice should be competitive over long periods of time. Proprietary positions need not be based on patents or legal barriers. Other barriers can include proprietary control of necessary resources.
The key to mantaining sustainability is also continuous R&D, and being in a techonology that has a continuous growth trajectory. Moore’s law for example states that the number of transistors on an integrated circuit for minimum component cost doubles every 24 months. Having a technology that can simultaneously ride Moore’s law can also lead to sustainable growth.
Technology Life-Cycle: The Hype curve, first introduced by the Gartner Group, tracks technology life cycles. An embryonic technology carries higher risks but greater opportunities for value growth, while a more mature technology, while having a lower risk profile, may often yield lacklustre growth in value. Knowing when to invest and when to exit is both an art and a skill developed over time.
What type of companies does the FirstFloor Capital invest in?
We invest mainly in high-growth and technology companies with a significant market share in the industry.
FirstFloor Capital will consider all technologies including those from the following industries, Information Technology, Energy Industry, Services Industry, Communications Industry and Life Science Industry.
How long does the decision to invest take?
Provided that we receive sufficient information, the preliminary decision to invest in principle may take about 10 days and will be subject to parameters such as pricing, due diligence and other investment terms.
What is the maximum investment amount per company?
FirstFloor Capital’s funds generally invests between RM1 million and RM6 million, per investment and as little as RM10,000 for Angel type investments.
How much equity will FirstFloor Capital take per investment?
Depending on the company’s valuation, our funds may take up to a maximum of 49% equity. The typical investment size is RM5 million.
What does “high growth” and “technology” mean?
“Technology” has been interpreted in the broadest context and is not necessarily limited to Information Technology or Biotechnology but other forms of technology as well ranging from services to manufacturing. Technology is any mechanism or process that eventually improves the quality of life in a significant manner.
In true technological innovation, improvement in quality creates Value-add in Multiples and not in marginal increments. Companies in industries that promote new technology in high-growth markets will have significant advantage. “High Growth” companies are defined as companies whose values increase at least 20% to 30% per annum.