Malaysia's nothing ventured, nothing gained

Nothing ventured, nothing gained

ON YOUR OWN By TAN THIAM HOCK

I had a weird start to 2012. For the first time, I joined the unemployment line. Voluntarily of course. I started working two weeks after my final examination in University Malaya back in Feb 1983 and I have never stopped working since.

Had a good month's break from writing this column and I have to admit that writing is much much more difficult than selling lipsticks! Mighty pleased that I am not making a living out of this writing profession ... or my family will be starving at this moment. No holidays. No iPhones and no I want this and I want that.

To some concerned readers, no, I was not banned from writing nor was I terminated by Star Publications (M) Bhd CEO. I did receive some formal complaints from some sensitive officials from government agencies and sovereign funds but no RM100mil defamation suits ... yet. As such, I do not have to apologise in public to anybody. So far, so good. No shame.

Writing this column forces me to recall snippets of historical events that had pass me by. Looking back, an event that happened 31 years ago could have changed Malaysian history. And your current cost of living.

In 1981, I was in AIESEC, University Malaya involved in organising the Heavy Industries seminar, at a time when our Dr M decided to launch the national car project. Our economics professor, Dr Chee Peng Lim was adamantly against the car project, arguing that Malaysia should concentrate her resources on modernising agriculture, invest in infrastructure and resource-based manufacturing.



He further argued that unlike Japan and South Korea, Malaysia has a small domestic market and we will not achieve the economy of scale that will help make us cost competitive for the export market. It would be an extremely inefficient allocation of economic resources if we were to proceed with the car project.

It was rumoured then that Dr Chee had to leave the country and he subsequently joined the World Bank. No opportunity to confirm this rumour but what a great story!

Commodity prices are at its highest in years. Felda pioneer settlers are all millionaires. Malaysian rubber gloves dominate the world market. And Proton is still in a poor state of affairs. Proton still needs the protection of the Government to compete in the local market. It has never been able to compete in the world market. With or without Lotus. It never will. Dr Chee was right.

To be fair, Proton did generate some economic benefits. It spawned many entrepreneurs with investments in car parts, logistics, etc and it created jobs. Billionaire entrepreneurs were also created ... from papers. That's right. From AP papers that costs a few cents to print. So, why bother to sell cars when it is more lucrative to sell a piece of paper? In the meantime, the poor rakyat has to pay some of the highest car prices in the world.

There is no better place in the world for entrepreneurship to flourish than Malaysia. The best projects are privatisation projects. Buy an airline from the Government with maximum loans from our GLC banks. If you manage it well, then you are a successful entrepreneur. If not, no worries. The Government will buy it back from you at the same price. So, you wasted your precious time but hey ... nothing ventured, nothing gained, right? You will never ever suffer personal losses. Only occasional lawsuits.

Back in the good old days before LRT, we had a haphazard public transport system of mini-buses and many bus companies. But it worked. In true entrepreneurship spirit, supply meets demand. And the mass could travel everywhere by bus. Many choices and on time arrivals.

Then the Government decided to upgrade the public transport system by centralising and privatising. All the old Omnibus companies folded. Tong Fong Omnibus, Klang Omnibus and Ah Hock Omnibus. Conservative entrepreneurs who toil over long hours and small margins. Good riddance though to those crazy and dangerous mini-bus drivers.

Brilliant entrepreneurs were roped in to invest in modern air-conditioned buses. Easy loans were arranged. Modern management techniques were employed. Monopolistic routes were divided and spread among these entrepreneurs. But still they lose money? Now they claim that they are providing a social service to the rakyat. “Compensate us for the losses or we will stop running the buses.” The rakyat was held to ransom.

With election looming, neither the opposition state government nor the federal government could afford the backlash from the rakyat. The rakyat's money was used again to pay inefficient and hopeless entrepreneurs. No shame. No shame.

Entrepreneurs invest in business knowing that the risk of failure is ever present. So you work hard and you work smart. You try your best. If it works, great. If you fail, just swallow your pride and walk away. Don't go begging for help especially if it is the rakyat's money. And don't you dare hold the rakyat to ransom again.

In the ETP seminar, Datuk Seri Idris Jala said inefficient entrepreneurs should be eliminated in a free enterprise economy. I agree. The politicians and the bureaucrats should manage the rakyat's money as if it's their own or the rakyat will hold them accountable in the polls.

Dr Chee, wherever you are, thank you for the invaluable lecture.

On Your Own The writer is an entrepreneur who hopes to shares his experience and insights with readers who want to take that giant leap into business but are not sure if they should. Email him at thtan@alliancecosmetics.com

Too Young to Fail

17-year-old Laura Deming doesn't drive and can't vote. Is now her chance to change the world? 

Thinking ahead: Academic prodigy Laura Deming left school and moved to Silicon Valley after winning a $100,000 grant to start a business.
Jessica Leber

Laura Deming was studying for finals in a crowded MIT reading room last April when her phone rang. That's when she learned she may never again take another exam.

Deming, only 17, had just been chosen by Silicon Valley billionaire Peter Thiel for a high-profile experiment: Put $100,000 apiece in the hands of 24 entrepreneurial teenagers and give them free rein to pursue innovative ideas.

The condition? Deming had to leave her studies and classmates, and vow to stay out of college during the two-year fellowship.

Thiel, who is PayPal's co-founder and holder of two Stanford University degrees, says higher education today is in a "crazy bubble" that, like a bad mortgage, saddles students with tuition debt often for little in return. A vocal libertarian, Thiel, 44, takes the view that a college degree can be harmful to innovators because of the conservative, career-driven mindset it imparts.



"Youth have just as much intelligence and talent as older people," says James O'Neill, head of the Thiel Foundation and managing director at Thiel's investment fund, Clarium Capital. "They also haven't been beaten down into submission by operating within an institution for a long time."

Thiel has attracted critics for his anti-higher-education message. After all, not every young person is like Deming, a home-schooled prodigy who learned calculus at 11 and sought experience in a cutting-edge genetics lab at 12. That's where she first had a chance to explore the science of extending the human lifespan, an idea she's now hoping to turn into a business.

For Deming and her cohort, chosen from more than 400 applicants, the publicity around Thiel's endorsement has been followed by some quick successes. Eden Full, 19, won a $260,000 social entrepreneurship award for her efforts to improve solar energy in developing countries. Dale Stephens, 20, landed a Penguin deal for his book Hacking Your Education.

Still, the foundation embraces the startup ethic that failure is inevitable, even desirable. So does John Deming, Laura's father, an investor who moved the family to Boston when his daughter enrolled at MIT at age 14: "What I say to Laura is 'The biggest problem you have so far, kid, is you haven't failed yet.'"

After packing up her things at Sigma Kappa sorority, Deming moved across the country to a tiny room in a shared house in Palo Alto. Most days, she gets up before sunrise and heads out on foot to catch a commuter train to San Francisco, where she is talking to investors about a venture capital firm she wants to create to back research on new therapies for age-related diseases.

Because of SEC rules, Deming says she can't go into details about the firm. But she jokes that one question now is whether to wait until her 18th birthday so that she can legally sign up investors or ask her father to do it. "The cool thing about Silicon Valley is that, though people might be skeptical of youth, they don't actually know that you're not smart enough or capable enough to make it work," she says.

With startup success stories tempting undergraduates to quit, universities have raced to add entrepreneurship to their curricula. Stanford has StartX, an accelerator for student-run startups. Similarly, last year UC Berkeley created FounderSchool, which prepares students to raise venture money. James G. Boyle, managing director of the Entrepreneurial Institute at Yale University (which lost four undergraduate students to Thiel fellowships) agrees that more colleges should help kids start companies, but he says that most students benefit from an environment where they can test ideas without betting their future.

Deming doesn't know yet whether she'll ever go back to finish her college degree. "The funny part is I think I'll miss studying for exams," says Deming. "It's the sort of thing that was very fun—like a sudoku puzzle or a crossword puzzle can be fun. But I thought that I could learn a lot more about the biotech industry and business by diving right into it."

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Make money from Facebook IPO!

Tan: How I made money from Facebook

By JAGDEV SINGH SIDHU jagdev@thestar.com.my

PETALING JAYA: For a man who does not have a Facebook account, Tan Sri Vincent Tan surely knows the value of the Internet giant.

“I may have one later,” quips Tan on opening an account but he will be counting the windfall from the 3.5 million shares his company, MOL Global Bhd, owns in Facebook once the company is listed on either the New York Stock Exchange or Nasdaq.

Based on an assumption that Facebook shares start trading at US$40 post-initial public offering, Tan’s MOL Global stands to pocket RM420mil for its shares.

Speaking to StarBizWeek, Tan recollects how he came about getting his hands on a tiny but valuable stake in Facebook.

Tan: ‘We don’t want to hold them for too long.’

 

Friendster was among the first social networking websites. It preceded MySpace and Facebook. Starting operations in 2003, Friendster found the going tough and lost money for years.

The company continued to raise but spent money aggressively. In running up losses, Friendster had, nonetheless, built up a base of 140 million registered users, of which 40 million were active.

Tan said the losses then stemmed from Friendster not monetising its user base. Finding it hard to make money from its users, it was losing an average of US$10mil a year.

Eventually, the patience of the owners and investors in Friendster wore thin and they wanted to exit the business. Friendster then called for a process to sell the business and now Friendster CEO, Ganesh Kumar Bangah, who was then working with Tan, informed him that Friendster was for sale.

“I asked for the numbers and found that 140 million registered users and 40 million active users was interesting. If we could make them spend some money, maybe Friendster would be a good investment. Of course, the downside was the business will continue to lose US$10mil a year,” he said.

Tan said the owners of Friendster initially wanted US$100mil for the business but with losses mounting, he knew no one would pay that much for the company. “At that time, Facebook wanted to buy Friendster’s patents but Facebook was willing to pay US$10mil cash and later increased it to US$20mil cash.”

Tan was made to understand then that the owners felt that taking US$20mil only to lose US$10mil a year will soon see that cash vanish and then decided to accept US$40mil for Friendster but wanted a quick sale. “They gave the potential buyers about a week to decide. Many people were looking, including large firms from China and Japan, at Friendster.



“They were much larger than MOL but with the owners of Friendster needing a fast sale, I told Ganesh to do a quick due diligence on Friendster.

“We took two days for the due diligence and made a bid. We said since Friendster owed people US$2mil, we offered US$38mil.

“With other potential buyers doing their due diligence, I told them that if they accepted US$38mil, we will do the deal right away. They accepted our proposal,” said Tan.

After buying Friendster in 2008, Tan then turned his attention to Facebook, which remained interested in Friendster’s patents and whose offer of US$20mil cash for the technology rights was still on the table. “We had a conference call with the people at Facebook. I accepted their price but I wanted shares.”

Facebook officials told him that Mark Zuckerberg, the boss of Facebook, did not want to dilute the shares in the company but Tan stood firm and said “if there was no shares, forget it”.

Tan insisted on getting shares in Facebook because he felt the company will be big in the future. Finally, Zuckerberg agreed to a share exchange for the patents and Tan got his 700,000 shares. His shares have grown to 3.5 million following a 5-for-1 split in Facebook’s shares before the IPO process.

Tan did not leave Friendster to languish but devised a plan to get the social networking website to breakeven point. He closed the US, Singapore and Australia offices to cut cost and began rebuilding the company.

This year, Friendster has stopped the bleeding and Tan felt the company has become “quite valuable”.

“The number of active users on Friendster has fallen from 40 million to four million but these four million spend money with us. We put games and all kind of things on the website and they spend money. If they didn’t, we cannot monetise the business,” he said.

Potentially, Tan values his Internet business at around RM1bil. It does business in Malaysia, Singapore, Thailand, the Philippines, Indonesia and India and is trying to get into Vietnam and many other countries.

MOL makes money from points people buy to play online games. It is also a payments gateway and is a payment partner for Facebook and Zynga, which is the creator of the hugely popular Farmville.

Tan said business models employed by companies such as Zynga, instead of relying on advertising revenue, was how large sums of money can be made from the Internet.

“People play and buy cows and tractors for their game. It’s amazing why people pay so much for that and I cannot imagine it.

“I tell my kids ‘you don’t play Farmville. If you want to farm, you can go to Bukit Tinggi. I will give you a real farm’,” he laughs.

Will he hold or sell his Facebook shares?

“We will see where it goes,” said Tan. “We will probably sell them for our business. We don’t want to hold them for too long but will see where the shares go after the IPO.”

At any price, the Facebook shares Tan owns has been hugely rewarding and the profit from the shares means the Friendster acquisition was paid for plus a lot extra profit on the side. “We were lucky,” he said.

So where does this investment rank among the many that Tan has executed in his corporate life?

“It’s one of the good ones but none can beat DiGi,” he said. “DiGi was my best investment and I should have stayed with it. I sold when DiGi had a market capitalisation of RM5bil to RM6bil. Today, the company is worth some RM31bil.

“That’s the big one that got away,” he lamented.

Vincent Tan awaits Facebook IPO windfall

By CHOONG EN HAN han@thestar.com.my

 His stake in the social networking service company may be worth RM420m

PETALING JAYA: Tan Sri Vincent Tan is definitely going to “like” the much anticipated Facebook Inc initial public offering (IPO) as his stake in the world's largest social networking service company could be worth as much as RM420mil.

MOL Global Bhd, which is controlled by Tan, is said to have 3.5 million shares in Facebook and assuming the IPO price is set at US$40 a piece, this would translate to US$140mil (RM420mil), and even more after the listing. sources said.

However, the amount is still an estimated value as Facebook has yet to reveal its share price information and its valuation is still speculative.

Facebook has been discussing raising as much as US$10bil, making the IPO the biggest Internet or technology IPO the market has ever seen.

“With the outstanding shares of Facebook of about 1.88 billion, the stake of MOL does not even come close to 1%,” said the source.

Given the share base of Facebook, MOL Global's stake represents about 0.19% of the social networking service.

MOL Global is currently the payment partner for Facebook, as well as with game developer Zynga, which made its name through popular social games such as Farmville.

MOL Global first got its hands on the stake in Facebook in 2010 when it sold off the patents of Friendster, the world's first social networking site, to Facebook.

As part of the deal, it received 700,000 shares in Facebook which subsequently increased to 3.5 million shares last year after Facebook initiated a 5-for-1 split of the company's shares.

MOL Global made global headlines when it acquired Friendster for US$39mil in 2008, after winning the bid in an open tender against Chinese game and instant messaging company Tencent and other bidders.

According to regulatory filings for the US IPO, Facebook founder Mark Zuckerberg currently has a 28.4% stake in his company, with about 533.8 million shares.

The company said it conducted its own valuation of its stock at the end of each quarter, and as of Dec 31, it had determined its shares to be worth US$29.73 a piece.

In 2011, Facebook pocketed about US$1bil on a revenue of US$3.7bil with over 845 million monthly active users. In 2010, it made US$606mil.

The company's main revenue are derived from advertising, while another US$557mil came from payments, with most of the non-advertising funds coming from social-gaming partner Zynga.

M'sians to benefit from facebook IPO windfall

A FEW weeks ago, the fortunes of 70 households in an isolated farming village in Spain changed forever.
Initially the residents of Sodeto wanted to give Spain's huge Christmas lottery, known as El Gordo, a miss, because they were facing tough times due to the economic downturn and a severe drought.

But they bought tickets anyway out of loyalty to the homemakers' association and they hit the jackpot. Some of the farmers and unemployed people became instant millionaires.

Everyone in town had a share except for one man, who was apparently overlooked. Sadly, he will never find out what it takes to make a bet.

That brings me to the topic of Facebook.

Facebook is a social networking company that has changed the lives of many, and perhaps, destroyed some too. But who would have thought that Mark Zuckerberg and his college roommates could have created such a company way back in 2004 that could be raking revenues of more than US$3.7bil today.

Facebook started as a site that allowed students to interact via the Web, but later made accessible to everyone, thereby intensifying competition with sites such as MySpace and Friendster, founded two years before.

Going public: A ‘like’ sign is seen at the main entrance of Facebook’s headquarters in Menlo Park, California. Zuckerberg (inset) says the scale of the technology and infrastructure that must be built is unprecedented — AFP

Eight years later, it is going for a listing on the New York Stock Exchange or Nasdaq. The company is considering a valuation of US$75bil to US$100bil. Going forward, its biggest challenge is about keeping the advertising momentum because advertising is its key source of revenue.

Today, Facebook has over 800 million users and the numbers are growing every day because Facebook has created enough buzz that even a seven-year-old or a 60-year-old wants to get connected on Facebook.

Out of all this buzz, who would have thought that a Malaysian company MOL Global Ltd would have something to cheer about as Facebook goes for listing.

This smallish company is making headlines like never before.

MOL Global is majority owned by billionaire Tan Sri Vincent Tan and MOL group CEO Ganesh Kumar Bangah holds just over 10% in the company.

Tan is a well-known billionaire who has made a lot of bets, some have made him richer, others just fizzled out. Today, his empire spans across several sectors and several countries and he continues to make more bets to expand it further.

The story of MOL Global began in 2000, during the dot.com era.

He bought over his brother Tan Sri Danny Tan's company, Dijaya Corp, and renamed it MOL.Com Bhd. Like a venture capitalist, he invested in over 30 Internet companies, including Bangah's MOL Access. Of the 30, perhaps two or three grew.

MOL Access is involved in online games and was subsequently listed on the Mesdaq board in 2003, but privatised in 2008.

In late 2009, MOL.Com bought over Friendster for US$39mil and, in the same year, MOL Global was set up in Singapore. Today MOL Global owns Friendster and the MOL Access Portal.

In July 2010, Facebook forged a partnership with MOL Global for the patents of Friendster. For that, MOL Global received 700,000 shares in Facebook stock and that explains why it has a stake in Facebook.

Today, MOL Global's stake could be potentially worth US$140mil on assumption that Facebook may be valued at US$40 a share but any gain can only be realised if the shares are sold and there is a capital repayment or dividend payout.

Analysts are comparing Google's valuation with that of Facebook. The world's favourite search engine went public in 2004 and Google's shares were priced at US$85 at issue but are now at US$583. Can Facebook reach that level?

That aside, a question to ponder is, had Tan pushed the growth of Friendster, would Friendster's position be like Facebook today?

Whatever, only Tan knows if this was his best bet ever. Who will ever know?
Deputy news editor B.K. Sidhu hopes Zuckerberg will know how to reward the 845 million Facebook users who have helped him get his biggest break in his life and if he needs lessons on goodwill, then he should read up how Maxis Bhd rewarded some of its users when the company was listed and re-listed.

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