Photo credit: Carsome

Dan Lain-Lain (Malay for “and others”) is a weekly column by TIA journalist Emmanuel Samarathisa that dissects the goings-on in the Malaysia tech scene but with a heavy mix of current affairs, policy and politics. Click here to read past articles.

Last Friday, we ran a scoop that used-car platform Carsome petitioned Malaysian Deputy Finance Minister Steven Sim to be recommended as an investment for government-linked investment companies (GLICs) and government-linked companies (GLCs).

After hitting publish, it was fire. I received requests for the headline to be changed, among others. After mulling over them, we stuck with the headline because we felt it captured the letter well.

A mini storm also brewed on social media, especially Twitter, where I usually hang out.

So I wagered it’s time for a follow-up to unpack some of the points in the article and to talk about an interesting development that has happened since.

In a response to our story, Carsome denied soliciting or petitioning the Finance Ministry for funding.

It said the March 27 letter was in “response to an engagement session” with the ministry “to encourage and welcome the participation of Malaysian institutional investors in the company’s growth journey.”

But the fact is that Carsome did write a letter to the minister and it did implore him to recommend the company as an investment to the country’s state-owned institutions and firms.

I wanted Minister Sim’s take on this so I reached out to his team for comment. Sim acknowledged receiving the letter, which was sent to his office in April, and said he passed it to the relevant departments within the Finance Ministry for “review and any further action deemed necessary.”

Deputy Finance Minister Steven Sim (white shirt) visiting Carsome’s regional headquarters in Petaling Jaya in February. / Photo credit: Carsome

He added that it’s not within the purview of the deputy minister’s office to recommend or make any decisions on investments by the ministry or its agencies. Sim went on to cite existing structures in place within the ministry and relevant agencies to review proposals “and make decisions based on merits, in a fair and independent manner.”

Here’s another thing: you don’t need to write to the minister to ask GLICs and GLCs to consider your company as an investment. These entities have their respective investment committees and their own frameworks for pouring funds into startups.

In other words, Carsome didn’t need to take the matter to the minister as it could’ve reached out directly to the GLICs and GLCs. Sure, it’s the company’s right to write to the minister – but this isn’t the only way to get investor support.

It’s also worth pointing out that while Carsome said in its letter that Malaysian institutions make up less than 10% of its cap table, Khazanah is one of its shareholders. That the sovereign wealth fund, which has insider knowledge on the used-car platform, has yet to cough out more cash for the bridging round is one thing, but Carsome asking the deputy finance minister to recommend it as an investment to an existing shareholder is another.

Along the way, Carsome chief of staff Aaron Kee tweeted that there were misconceptions about the letter being a bailout. He didn’t tag us or refer to our story but, for what it’s worth, we never mentioned a bailout.

We’ll return to Mr. Kee in a bit, but pointing back to our article, the petition was in the context of raising an extra US$10 million from Malaysian institutions for the purpose of an IPO.

Why are we all getting excited or jumpy (in Carsome’s case) over a support letter? No matter the intention, these things are usually frowned upon. It sends a negative signal that one needs a backdoor to get something.

To be sure, situations like this are common and not solely unique to Carsome. But we’re talking about Carsome because the letter was leaked. The fact that the company had to write to a minister certainly warrants attention.

The usual criticism of asking for state support is that taxpayer money will be used. But that depends on which entities will step in to take up Carsome’s request.

If we are talking about the entities named in the letter, then they do not depend on public allocations. In fact, it’s the reverse: GLICs and GLCs are expected to contribute to “national interests” by way of investments and dividends.

Khazanah and Petronas, for example, pony up dividends to the government annually. In fact, in this year’s budget, these entities are expected to cough up a cumulative sum of 1.6 billion ringgit (US$346.3 million) from their own books for startup funding.

Another thing to bear in mind is that these institutions cater to a specific audience. The Employees Provident Fund, for instance, is reserved for private sector workers while the Retirement Fund (also known by its Malay acronym, KWAP) is solely for civil servants. Not everyone is invested in these entities.

A “public” case, however, can be made this way: Since Khazanah has to give dividends to the government, a bad investment could mean lower dividends.

Direct public funds are channeled through various ministries and their respective agencies. For tech, you have the Science, Technology and Innovation Ministry and all its agencies such as the Malaysian Research Accelerator for Technology & Innovation.

There are also Finance Ministry-controlled companies such as Penjana Kapital and Mavcap, which invest in tech startups, that receive a direct injection of funds from the government. Now, Penjana and Mavcap are among Carsome’s shareholders, and here is where the taxpayer angle is most relevant.

Now, back to Mr Kee. In a Twitter thread dated June 11, he wrote, among others, that “a certain rival group is trying to shut us down via coordinated attacks.”

Image credit: Aaron Kee’s Twitter

As far as Tech in Asia is concerned, we’ve not heard of any such attack as we were working on the article.

Kee then replied to a Twitter user saying he doesn’t want to allege anything defamatory. But he subsequently went to highlight local auto website Paultan.org, which were “plastered with myTukar’s ads.”

After being called out by entrepreneur Colin Charles for jumping the gun over what seemed to be retargeted ads, Kee went on to say he used a “poor example” but claimed that Paultan.org was purportedly hiding its affiliation with myTukar. He also wrote a follow up thread on the same subject, even saying that he met up with the journalist to explain matters, which have been liked and retweeted by some of Carsome’s staff.

I reached out to Paul Tan, the owner of the auto website, and he denied the possibility of being part of the alleged “coordinated attacks.” Aaron Tan, CEO of myTukar parent firm Carro, also denied being part of such a purported agenda, telling me that such allegations are “totally baseless and rejected entirely.”

I then reached out to Carsome for clarification, asking if the firm or Kee could prove the claims since the threads were retweeted by staff. I also asked whether Kee was tweeting in his personal capacity or if he was representing the company, as well as if Carsome could provide the identity of the journalist Kee was referring to or the publication the journalist is affiliated with.

A company spokesperson told me that Carsome will not be commenting on the matter.

Anyway, there are some things we need to consider.

For one, a bridging round is normal in the tech world. But that Carsome needed to tap the might of Malaysian government-linked entities at this stage is something we need to watch, more so as the firm has come out in defense that it still has more than US$150 million in its war chest and that it is on path to break even this year.

One proxy for Carsome’s possible listing trajectory is US-based Carvana, which isn’t doing too well on the New York Stock Exchange.

Sure, there are nuances in both companies’ business models. But there’s a similar concern: Will Carsome reach a point where it’ll struggle to sell cars acquired at elevated prices?

There’s another question to consider: Where does Carsome plan to list? Bursa Malaysia may be a destination but the Main Market is a profit-testing exercise – companies need to post profits at least for three years prior to listing.

Both Bursa and the Securities Commission Malaysia have been working on reforms, but will these be implemented in time to match Carsome’s listing needs?

For what it’s worth, Nasdaq and other stock exchanges have more sophisticated investors and liquidity. So even if Bursa delivers on its reforms, that’s just one part of a complex puzzle.

Finally, there’s always the fear that Malaysia will keep losing unicorns to (gasp) Singapore like the case of Grab, simply because our institutions weren’t quick enough to move in.

That’s true. And I know of some other Malaysian startups that have domiciled in Singapore already.

But this is a tricky case. Malaysia has much to do for it to catch up, from regulations to funding. The country’s institutions, for example, do not even seed young fund managers, unlike what’s happening with Singapore’s Temasek.

At the same time, there’s still the fear that Malaysian institutions will invest in the wrong companies. Beneath this fear is also a lack of accountability.

Recently, Temasek cut compensation for its senior management and for the team that recommended the firm’s investment in FTX, the now-bankrupt crypto exchange.

You’ll never find that level of accountability here. In fact, we love to fail upward.

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.62 ringgit.