Three young Malaysians pool together their professional expertise and personal resources to bring in, not only fresh, but also smart capital into Southeast Asia. The trio aims to add value to the region’s startup ecosystem with their unique investment philosophy and network spanning several continents.
Rachel Lau, Raja Hamzah Abidin and Lionel Leong, whose initials make up the company’s name, RHL, are the co-founders of the newly established private investment fund based in Malaysia.
“We have known each other for a very long time,” revealed Raja Hamzah during the interview. Alongside him were Rachel and Lionel.
“Over the past few years, we have worked across numerous geographies, including New York, Hong Kong and Australia. We have done a lot of investing in our private and professional lives, so we thought… why don’t we start looking at opportunities in Southeast Asia?” shared Raja Hamzah, who is currently the Head of Business Development in Rasma Corporation, a boutique Mechanical and Electrical engineering services firm based in Malaysia.
Prior to that Raja Hamzah was a Principal Investment Analyst with Guoco Management Company in Hong Kong and a Senior Analyst in the institutional coverage team of Goldman Sachs Asset Management in Singapore.
Upon the realisation to look for opportunities in Southeast Asia (SEA) , the trio first looked at the public space, but soon found out that it is dominated by institutional funds and there are really nothing much going on in the public market. Then they looked into the private space, delving deeper into what is growing the fastest and what generates the most interest.
“That is why we ended up looking more into early stage investment, because there is where we can bring the most value and the most expertise into the business,” Raja Hamzah expressed.
Applying the PE Approach on VC Investment
“We feel that we can bring a lot of strategic value to an investment,” Raja Hamzah explained, “…We have been investors for a long, long time. (In terms of finances), we know what makes a business — what makes a business tick and what moves a business. From a financial perspective, we try to bring in a more private equity style approach to VC style investment.”
“We prioritise numbers.”
As opposed to the VC approach of focusing primarily on people and ideas, Hamzah explained that they prioritise numbers, “For Rachel, Lionel and myself, we look at different profit and capital structure — whether it is debt, whether it is equity, whether it is convertible —we know what moves a business. We know how to plan a cash flow. Basically, we know how to future proof a business for the next five to seven years.
Rachel, who is currently the Vice President of Heitman Investment Management, US$35 billion investment manager headquartered in Chicago, added that their PE-style approach differs from the VC model, which usually invests, let’s say, in 20 companies and bets on four to five businesses to make solid returns.
“This is not what we are trained to do. We are trained to find businesses and invest in businesses which have sustainable growth, sustainable margin; and we are there for the long run,” Rachel explained.
“When we talk about PE, we are also talking about a larger stake. When we buy into a company, it is usually with a board seat. We take a board position with a view of influencing direction of the company. We don’t handhold, we don’t mentor; we are partner, we are not above you, we are not below you, we are next to you,” Rachel further elaborated on RHL’s PE approach, in which they serve as a sounding board, take a board sit, look to influence, and look to give more than just capital.
Helping Business on Revenue & Cost
“We are trying to help a business from two perspectives. One is from a revenue perspective,” Raja Hamzah elaborated on how RHL aims to add value to its portfolio companies, taking Perx, an AI-based customer relation management platform, as an example.
RHL is currently strategically complementing Perx’s expansion plan to Malaysia but leveraging their network to connect Perx to their potential clients.
On the cost side, Raja Hamzah told that RHL hopes to help businesses reduce cost by helping to source potential solutions.
“We don’t want to be just an investor, but a strategic investor. We partner with them, we don’t want to babysit them or handholding them. We just help them grow, help them take, and partner with them throughout the cycle of the business.”
Facilitating Rapid Expansion into Malaysia
Another area in which RHL’s strategic investment targets to do is to help companies to expand as quickly as possible, especially into the Malaysian market.
Lionel, among the three, has the most experience in operations. His is currently the Director of Operations of Mah Sing Group, the largest non-GLC property developer in Malaysia. Lionel is responsible for the entire development cycle from acquisition, project planning and design, tendering, construction to sales and marketing. In discussing about companies wanting to enter Malaysia, he said that RHL can help provide valuable local insights that foreign investors may not be able to fully grasp.
“If we look at Grab and Uber. Uber came into Asia. They have a tough time penetrating the market culture here, if they don’t find the partner that understands the needs. But Grab made it because they sort of found the localised way, and the founders are all local. So we are here to bridge that gap with international companies that come to Malaysia. We can provide that sort of local context,” Lionel explained.
help provide valuable local insights that foreign investors may not be able to fully grasp.”We can help provide valuable local insights that foreign investors may not be able to fully grasp.”
The three co-founders — Rachel, Raja Hamzah and Lionel — are extremely well connected in the Malaysian business scene. In addition to their professional links is their families’ network.
They are the scions of three prominent businessmen in Malaysia.
Rachel Lau is the daughter of the late Lau Boon Ann, who was a non-executive director of Top Glove Corp Bhd, Raja Hamzah is the son of former federal territories and urban well-being minister Datuk Seri Utama Raja Nong Chik Zainal Abidin, and Lionel is the son of Mah Sing Group Bhd group managing director and chief executive Tan Sri Leong Hoy Kum.
Besides that, RHL also has a strong line of advisors that include Francesco Barrai, Senior Vice-President and convertible bond investor at hedge fund manager DE Shaw, and Marlon Sanchez, Managing Director and Head of Prime Finance Distribution for Asia-Pacific at Deutsche Bank.
The RHL team emphasised that they stay away from seeding ideas, as it is not an area of their expertise. Plus, they believe that it is better to leave it to existing seed players who can offer better value.
“We want to give the business growth capital — the money to expand,” Raja Hamzah explained that they generally like businesses that have passed the ideation stage with a proven model wishing to grow as quickly as possible through different revenue channels.
Prefer Companies that are “Switched On”
Despite the firm’s non-interest in seed-stage startup, the team do receive seed-stage proposal, on that, Rachel commented, “If you really read our interviews and our profiles, you know we are not into seeding. Then it makes us wonder how much you know about us or you are just trying every body.”
“As an investor, you want to choose a portfolio company, and startup must be smart in choosing their investors as well. If you don’t know which investor can help you in which stage of the profile, then you are not very switched-on,” Rachel added.
“We are not everything to every one but there is something that we can do very well.”
In general, all three of the co-founders do deal sourcing. They go through an extensive process in determining an investment. They talk to the founders, go through the numbers, cross-check with other players, etc. Decisions are made unanimously. All three of them must agree before any decision is made.
More Investments to Come
RHL is actively looking for deals and continues to source for the best businesses to invest in. They are working with a lot of VCs in this region, as well as oversea VCs in Europe and the US. They hope to reveal more of their plans in the months to come.
As Rachel put it, “We are not everything to every one but there is something that we can do very well. We have got very strong network in a lot of places, and we capitalise on our network (to help our portfolio companies).”
You may read more about the co-founders’ profiles and RHL’s investment criteria in depth on their website: www.rhlventure.com.