Being the first duly-accredited Shariah compliant venture capital firm (VC) may have helped open doors for Ficus Capital since its establishment in 2018, but this advantage also comes with extra challenges, its founders shared with IFN Investor.
Managing Partner for Investment & Operation Abdullah Hidayat said that in following Shariah venture capital guidelines, as issued by IsDB in 2016, Ficus has been making an extra effort to avoid errors or failures while it is carving out a path for all subsequent Islamic VCs to follow.
Embracing this tenet, Abdullah said Malaysia-based Ficus looks for innovation with multiplier benefits – rather than optimizing on returns by investing in startups that mimic or simply duplicate successes from other jurisdictions.
“We’re not making it easy on ourselves, but it is definitely more rewarding from both the Shariah impact and the benefits possible for a wider set of people.”
Ficus has so far invested in four entities – with three in Malaysia to comply with its mandate of at least 50% of its funds going into the fostering of local startups – and an Indonesia outfit to stay within its Southeast Asian focus.
Co-Managing Partner for Business Development Rina Neoh explained the first investment made with Malaysian electric vehicle firm Eclimo truly illustrated the Ficus approach. “While many wonder why we chose an e-scooter product similar to others, our interest was in the unique battery’s potential.”
Due to this battery’s internal plug-n-play structure and in-house servicing provided by Eclimo, secondary markets were created with the recycled batteries to expand the firm’s revenue stream.
Rina said other such underlying insights drove investments by Ficus into the Simplify platform for trading excess Internet bandwidth and the Klean recycling ecosystem that gets people to exchange empty plastic containers for rewards.
As for Indonesia’s augmented reality firm Assemblr, Ficus saw beyond the education focus – into the potential of the internally-developed technologies and proprietary advances.
Another key challenge for Ficus is that it is viewed as a very small player in the venture capital arena without an established track record yet, despite its leadership having over 70 years of combined experience in capital raising and deployment for startups and SMEs.
“Even when a startup has already completed due diligence with us, there are no guarantees because those founders can still opt to go with more established names. As this puts Ficus on the same runway that any startup is on before reaching a stable stage, we understand their needs better,” said Rina.
Abdullah said the Shariah mindset also guides the crafting of contractual terms for Ficus, which does away with many of the mitigating clauses that conventional VCs impose on startups. “We take on the risk in partnership with the startups and do away with the usual predatory approach.”
This stance includes providing immersive mentorship by Ficus staff to the invested startups, far beyond the practice by incubation lab initiatives. “We want our investments to succeed beyond their initial targets,” Abdullah added.
Complementing this approach is a longer investment timeframe set by Ficus of up to seven years before expecting a turnaround at the startups.
Operating two funds so far, Rina said: “We expect to make more investments by the end of this year or in early 2025, amounting to a total of RM20 million in total since inception.” The Ficus SEA fund is backed by Malaysia Venture Capital Management as the anchor investor, with a 1:1 investment commitment matching ratio with other investors. The newer Greentech Fund is run in collaboration with Malaysian Green Technology and Climate Change Corporation.
