Reza Fahmi Razali has been living the start-up life since he was 17, making his first successful web venture in 1999 in the form of a teen portal and car community that had 50,000 members (which closed last year). After graduating from Oklahoma University, he worked at Dell and was then appointed as an adviser to various organisations for the development of technopreneurs in Malaysia.
In September 2008, he formed Terato Tech, after successfully applying for the Pre-Seed fund the Multimedia Development Corporation (MDeC), and has since grown his company into a small, but profitable business that develops phone apps for the iPhone and Android platforms. Within a year, the company earned local accolades like Maxis Most Promising Application Developer in 2009 and was among the finalists for the Asia Pacific ICT Awards (APICTA) 2010 for Best of Startup category.
The company started as just a two-man startup, and now has 12 developers and four designers on the team.
We caught up with Reza after his panel discussion at the Kre8tif Digital Content Conference held in Putrajaya, Malaysia on Dec 17, to get his views on the challenges of Malaysian start-ups, what’s needed to succeed in the App marketspace, and the success of the MDeC pre-seed grants.
Photo from XMedia Lab
Soon after getting the pre-seed money to get things moving, and shortly after we managed to secure some servicing work for premium clients including banks and government-linked companies (GLCs), but we also develop our own games to keep things interesting for our own developers.
Last August, we released our first title, Qalvinius, which is a 2D side-scroller RPG that got about 400,000 downloads (it costs $1.99 per download), and the success of it has become the catalyst for us to launch another three game titles next year. But no doubt, the majority of our revenue comes from servicing and developing apps for premium clients like CIMB Bank, Halal Development Corp, and a few other local banks.
Where do you think Malaysian companies are at when it comes to innovation? Are we still in a copycat stage, or are we starting to move beyond that?
We’ll get it right eventually. For many Malaysian companies, the way they approach IT is to go to conferences in the US, become resellers for good products they see over there, or take an interesting idea and develop it for the local market. That’s the stage we’re in right now. I mean, look at the number of Groupon clones here – there’s GroupsMore, Baloi, and many more – but that’s not the right way to move forward. Rather, we have to start taking inspiration from different ideas and make our own products – in a similar way Qalvinius was created, by taking on elements of Korean gaming and other popular RPG games.
What’s driving the app market – is it market-driven or client-driven?
For us, it’s a client-driven business. It’s not worth the investment to build apps just for the Malaysian market – I just don’t see where the revenue is going to come from. Our most popular Malaysian app, 1Malaysia Hotline, was little more than a hobby that was coded within a week and achieved 60,000 to 70,000 downloads, but it was free. As for Qalvinius, it’s become popular in Chinese-speaking markets and in France.
But the app market place has become very competitive – gone are the days when you could publish an app and make millions overnight. These days, you need to have strategy and proper branding campaigns to get noticed – sites like Touch Arcade, for example, won’t even review your app if you don’t have a proper press release or video trailer.
So for our next games, we’re planning to splash out a big marketing budget – about RM30,000 per title – compared to Qalvinius, which didn’t have any. We’ve now bought spaces in game magazines and popular iOS sites in the US to get the word out.
What are the challenges faced by Malaysian startups in growing their businesses?
In Malaysia, it’s easy to create a RM1million to RM2 million company, but growing it to the next level is a hard step. It’s an awesome ride for the past two years, but the question I’m faced with now is how am I going to hit the RM5 million mark next year. A lot of companies here are stagnant at the RM2 million to RM3 million stage, where the founder drives a Ferrari, but he’s stuck at that level without ever hitting the RM10 million or RM15 million level.
The reason? Maybe they’re just comfortable servicing the local market and clients – that’s why for us next year, we’re looking to venture out into other regions, in Thailand, Singapore, and the MENA region. We have to look beyond Malaysia to expand.
Terato Tech was formed with the help of the MDeC Pre-Seed Fund, which has been said to be abused by many opportunists and ‘grantrepreneurs’. What’s your take on the Pre-Seed Fund’s method of kickstarting innovation?
It was definitely abused, but then again, you have to ask: has there ever been such a thing done before in Malaysia? Our model has been copied by Singapore, Brunei and Middle East countries, but the reality is that not enough of the talented guys know about the fund, while the business-minded guys did and went for it.
But it’s not all bad. Look at me, I’m nobody’s son, and it took me three times to get that grant – and it got the ball rolling for my company. A lot of pre-seeders got it wrong because they think they can be serial grantrepreneurs and they think the money’s always going to be there. For them, there’s no next level of growth.
And you can’t blame the government for these funded companies’ lack of growth – the government has given out the money, and you know what, you’ve got to be sustainable after that. Start-ups shouldn’t be expecting and getting handouts.
What are some of the lessons you’ve learned during your time as a startup founder?
Cash flow and revenue is king – and that’s where my focus has been from the very start. VCs would tell you to build an awesome product first, don’t focus on consulting or servicing clients, but the fact is, you gotta pay the bills – we’re not the Silicon Valley here.
I was determined to get it right, and we were already cash flow positive in the first year. Within the first few months of starting, we landed some clients that built up our RM500,000 revenue for the first year, and for this year our revenue has grown to RM1.5 million. As for next year? Well, that’s something I’m thinking very hard about.
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A*STAR Exploit Technologies is organising the 3rd Distinguished Technopreneur Speaker (DTS) Forum to seed innovation and entrepreneurship in Singapore. DTS aims to engage entrepreneurs, industry professionals, researches, scholars and students and inspire them to explore the potential of entrepreneurship, innovation and emerging technologies as envisioned by the new economy. 
