Izwan Zakaria founded Izwan & Partners in 2019, where he made a bold decision to focus exclusively on providing legal advice to technology companies, startups, and investors. In this Q&A with Asia Law Portal, Izwan describes what makes dealing with technology companies and startups different from other brick and mortar companies, what motivated him to become a technology, venture capital, and startup lawyer. He also shares his thoughts and aspirations on how he hopes to contribute to the startup and technology ecosystem in Malaysia and the South East Asian region.
Tell us more about yourself
Hi, I’m Izwan Zakaria! I have over a decade of legal experience in corporate and commercial transactions. As a corporate lawyer, I’ve worked in multiple roles in my legal career. I’ve worked as a legal associate in a medium size boutique corporate law firm where I was involved in complex projects and infrastructure transactions like setting up a mini hydro power plant to advising a car assembler in its local assembly for a foreign carmaker.
Later, I’ve transitioned into several in-house roles and gained more knowledge about private equity and venture capital work. I’ve worked for a short stint for a family office before joining a private equity firm in setting up their new outfit which includes advising them on their licensing application and preparing the fundraising documents.
As much as I enjoyed working on these large deals, I realise that I enjoyed working with technology companies and early stage startups a lot more. So I made a firm decision to leave my comfortable salary job to start Izwan & Partners.
As a corporate and technology law firm based in Kuala Lumpur, Izwan & Partners focuses on advising technology companies, startups, and investors in Malaysia and the South East Asian region.
What made you decide to start Izwan & Partners, especially focusing on technology companies, startups, and investors? Tell us more about this.
At the outset, legal practice is a competitive industry. According to the latest statistics by the Malaysian Bar (a self regulating body for lawyers in the peninsula Malaysia), there are currently over 19,817 practising lawyers in the country. Out of over 6,244 registered law firms, over 99% of the registered law firms have less than 30 lawyers.
The statistics does look intimidating isn’t it? It does make you wonder why anyone would go and set up a new law firm when there are so many lawyers out there already. Many existing corporate law firms would either create another ‘practice area’ or dedicate a team focusing on these clientele. For us, we do not do anything else apart from giving exclusive attention to emerging companies like technology companies and early stage startups. This also means that we can spend more time investing time and learning the latest regulatory updates affecting these disruptive technology companies.
In our case, we like to think that this decision would help people to remember our law firm much better. And we do hope that someday we could be the ‘go to’ law firm when it comes to technology and startup related matters.
On a side note, in light of the Covid-19 crisis, so many Malaysian law firms are adversely affected by the crisis as affected clients have decided to postpone legal fee payments and so on. And we may see partners in established law firms leaving their current law firms to form their own niche practices. It is both an interesting and challenging time indeed.
How has your experience been dealing with early stage technology entrepreneurs and startup founders so far?
It has been an interesting journey so far!
Every week, I get to speak to over ten people. They range from first time founders to seasoned entrepreneurs to impact investors. All of them are trying to change the world or seeking to disrupt a certain industry. When I pick up a call, it could be a 21 year old management trainee or a college student who is leaving his or her current role in a large company or a university to set up a new fintech startup. Or you could also get a 45 year old frustrated finance professional who is trying to disrupt the banking industry with a new payment solution.
Again, running a dedicated entrepreneur and founder focused law firm has been so rewarding. You get to hear for the first time an entrepreneur or a founder sharing his or her vision on what a world could be. Imagine listening to a young Reed Hastings for the first time pitching his idea about Netflix!
Like an early stage company, we also use lean startup principles when doing our legal work. This makes our law firm agile and nimble when it comes to providing effective legal advice to startups and technology companies. We are also lucky that our clientele are generally young and tech savvy people that are comfortable dealing with a lawyer online without the hassle of a physical meeting.
What inspired you to focus Izwan & Partners on technology matters?
My passion and love toward technologies began when I got my first computer. I remember vividly the first time my mother got me a desktop. Many people now would know the Windows 10 operating system by Microsoft and how easy it is now to find a document and install a new device. My first desktop ran on an MSDOS! It was just black and white with some basic menus to choose from. Those were the GUI (graphical user interface) back then. We then upgraded to Windows 3.1, Windows 95 and you know the rest.
In retrospect, I am so grateful for my mother for that first desktop. I came from a lower middle class family so I could only imagine how much these desktop purchases over the years must have cost my mother back then especially on a meagre public school teacher’s salary.
Also, I remember taking out all the hardware parts like the processor, fans, hard disk, RAM and so on inside the desktop casing just to see how they all looked like. And just imagine the horror face that my mother had when she saw the computer parts everywhere on the table!
So even when I got into the law school, I became that ‘computer nerd’ that would be around to help out colleagues or even lecturers that needed help troubleshooting computer stuff. I also did a website for my debate society which really increased our membership during our recruitment drive.
For all these reasons, it was only natural for me to continuously find my way back into technology work. So after leaving the law school, I constantly sought to find a role that would allow me to harness the technology space. I know there are so many “startup lawyers” out there, but I feel that it may be a great attempt to have a dedicated law firm focusing on advising startups and technology companies.
Hence why I made such a conscious decision to brand Izwan & Partners as a ‘dedicated’ corporate law firm focusing on advising early stage technology companies with complex, cross-border legal issues in highly regulated industries. Hopefully in the future more and more law firms will consider focusing on specific niche practices rather than trying to do everything.
You have direct experience in acting for online and digital businesses like equity crowdfunding, peer to peer lending, ecommerce, and robo advisory platforms and other disruptive technologies. What makes these practice areas unique?
Disruptive technology refers to an innovation that significantly alters the way that consumers, industries, or businesses operate. So when someone comes up with something new, there may be certain regulations that may be involved. So certain laws may be outdated or may not even cater to such disruptive technology.
We have also seen a change in terms of how technology companies approach regulations. The old Facebook founder Mark Zuckerberg’s now-famous motto: “Move fast and break things.” which seems to be the mantra in Silicon Valley does not really work anymore. We can see how Uber is getting into so many legal tussles in jurisdictions like France and the United Kingdom so they may not work so well now. Working closely with the regulators has still proven to be the best way especially when it comes to new disruptive technology whether you are selling a product or service.
The Malaysian regulators, the Securities Commission and the Central Bank of Malaysia have been taking proactive measures in issuing regular consultation papers including hosting roundtable discussions to get feedback and inputs from other ecosystem players. As a regulator it can be challenging when they have to manage the interests of the public andi investors but at the same facilitating or demonstrating that Malaysia is a fintech hub or an ecosystem that is open for technology companies and startups.
The regulators have been generally open to feedback and they have been understanding of the needs for early stage fintech companies to be agile and nimble while at the same time complying with the existing regulatory framework. If you are looking to set up a fintech company in Malaysia, you can engage any of these regulators to have an initial consultation on your proposed business or product.
You also advise fintech companies on compliance matters relating to regulatory developments in the industry as set out by Malaysia’s Central Bank and Securities Commission. Tell us more about this.
Malaysia has a vibrant fintech ecosystem, which is not only important for entrepreneurship in Malaysia but also in promoting venture capitals and foreign investments.
The regulators like the Securities Commission of Malaysia and the Central Bank of Malaysia have been encouraging and forward thinking when it comes to coming up with policies and frameworks to cater to the fintech agenda. For instance, in 2015, Malaysia was the first country in ASEAN to come up with guidelines for equity crowdfunding and then later P2P financing in 2016.
In 2017, the Central Bank of Malaysia came up with the sandbox framework under the Financial Technology Enabler Group (FTEG) which seeks to allow fintech applicants to work closely with the regulator when it comes to getting a safe space for them to work out their fintech solutions.
The Securities Commission of Malaysia also has a dedicated and experienced fintech team under the Digital and Innovation Strategy. Like the Central Bank, the Securities Commission also came out with a similar initiative known as the aFINity@SC (Alliance of FinTech Community). As a community member, you get to interact with other ecosystem stakeholders including getting inputs from the regulator directly for your fintech products and services.
In a recent legal work where I acted for a robo advisory firm, the officers from the Securities Commission were supportive and helpful in navigating the requirements and conditions imposed under the licensing regime so as to facilitate our client’s application.
Interestingly, both of these regulators have emphasised the phrase ‘financial inclusion’ as part of the agenda when it comes to selecting new fintech applicants. The new digital banking framework issued by the Central Bank of Malaysia makes it clear to any digital bank applicant that their application must focus on the underserved or unserved segments. We’re talking about micro entrepreneurs and people that may not have access to even a simple savings account.
Also, the Fintech Association of Malaysia (FAOM), a self regulating body (for which Izwan & Partners is also a member) aims to be the key enabler to support Malaysia as a leading hub for fintech innovation. They usually conduct regular roundtable discussions including officers from the respective regulators involved to get feedback and inputs on consultation papers and new guidelines.
In addition, Labuan, an offshore financial centre regulated by The Financial Services Authority (LFSA) has also been encouraging getting more fintech applicants to consider Labuan as a base to launch fintech products like insurtech, cryptocurrency, robo advisors, including digital banking services.
If you are planning to set up a new fintech company here, their doors are always open for consultation and discussion.
You’re active in the Malaysian startup and technology ecosystem. You’re also a mentor and adviser for several companies and nonprofits. What is your assessment of the current state of Malaysia’s startup ecosystem?
Malaysia remains one of the top contenders when it comes to choosing a place of domicile especially for foreign startups and investors. Government agencies like MDEC and MaGIC have been aggressive in showcasing and demonstrating various initiatives that are on offer to get more foreign entrepreneurs to set up a base in Malaysia.
Notwithstanding the current political crisis, the Malaysian startup ecosystem remains vibrant and well supported by both private and public sectors. Online interactions on community groups like Open Coffee Club and StartupMamak on Facebook have been more active nowadays due to more people working from home.
For example, you will be surprised to see how resourceful and digitally connected Malaysian can be. During the Covid-19 lockdown, a group of volunteers came up with a #Kitajagakita initiative which seeks to aggregate verified campaigns which seeks to crowdsource donations from the public to help those affected by the Covid-19 crisis. Malaysians are a generous lot and you can find so many people joining various crowdfunding campaigns to help purchase food and daily supplies especially for daily wage earners. These various crowdfunding campaigns demonstrate that Malaysian are tech savvy and connected.
There was also a huge surge globally in ecommerce purchases which included Malaysia as well. So if you are planning to set up an online or digital platform here, you will be able to offer your products or services to a sizable addressable market that are not only tech savvy but also with some disposable income especially the millennials.
Recently, Cradle Fund which is a government funding agency backed by the Ministry of Finance has announced that they are launching two new grants amounting to RM26.5 mil (around USD6.2 mil) namely Cradle Investment Programme Ignite (CIP Ignite) and Cradle Investment Programme Accelerate (CIP Accelerate). CIP Ignite is designed as a conditional grant of up to RM500,000 to help support early-stage technology-based startups, tech-based small and medium enterprises (SMEs) or spin-off companies from universities or research institutes, whereas CIP Accelerate provides funding of up to RM2 million focused on accelerating the growth of deep tech companies and spin-offs from universities and research institutes
These are just some of the funding opportunities and initiatives being undertaken by the Malaysian government. In addition, foreign venture capitals and local investors regularly invest in technology companies. The inherent challenge faced by many investors is the sourcing and screening process as many early stage entrepreneurs may not have a strong business case. This is also where tech accelerators and incubators are aplenty in Malaysia to fill this gap so that investors will have more visibility on potential startups for investments.
What should investors and entrepreneurs be thinking about most when considering getting involved in the Malaysian startup and technology ecosystem?
Similar to other jurisdictions in Southeast Asia, getting local inputs like legal counsel, accountant, and even engaging with local ecosystem enablers like Malaysian Global Innovation & Creativity Centre (MaGIC) and Malaysia Digital Economy Corporation (MDEC) will allow investors and entrepreneurs understand the local Malaysian startup ecosystem.
For example, since 2016, MaGIC has been running ACE (Asean Centre of Entrepreneurship) programme which seeks to help startups expand into ASEAN countries. MaGIC does not just help local companies but also regional startups that are finding to set up a shop in Malaysia.
MDEC also maintains a comprehensive database of resources and service providers on its one stop centre known as Malaysia Digital Hub. On the platform, you’ll be able to find more information on getting a work visa, forming a company, legal advice, finding a coworking space, and other related areas.
On a side note, we are proud to say that Izwan & Partners is one of the legal partners and listed for both of the ACE and Malaysia Digital Hub programmes respectively.
What advice would you give to Malaysian investors and startup entrepreneurs who are thinking about expanding outside of Malaysia?
For a Malaysian company to succeed, it needs to start looking at building its business with a regional or even a global perspective.
According to the Internet Economy Report by Temasek, Bain & Co, and Google published last year, over 10 million Southeast Asian are joining the workforce annually. They are young, educated, tech-savvy and always connected. Young millennials are used to paying for subscriptions like paying for streaming and other cloud based services. They are also more likely to become an early adopter for new solutions as they are constantly looking for new and innovative ways to do things.
For instance, young millennials with some disposable income are finding smarter ways to allocate their hard earned capital on new investment products. They are open to investing in crowdfunding platforms and robo advisors. Although they may be riskier investments, these investments may also potentially reap good returns which means better social mobility.
We must applaud Malaysian government agencies like MDEC and MaGIC for their constant support and initiatives. To illustrate, MaGIC’s annual Global Accelerator Programme (GAP) seeks to offer any startup in the world a platform to equip them with the necessary skills to expand their companies into Southeast Asia. For MDEC, a combination of both young and seasoned business leaders under its Global Growth Acceleration (GGA) team can be found in its GAIN programme which have seen more Malaysian companies expanding overseas.
If you are planning to venture outside Malaysia, it may be a good idea to engage these local ecosystem enablers to get their feedback and ideas on how to navigate the local culture in the new jurisdiction. They can also open doors and connect you with other ecosystem enablers through their existing partners including linking you up with other successful startups and entrepreneurs that may already be operating in a particular jurisdiction that you’re planning to set up your company.
Before entering into any new jurisdiction, it is always a good idea to seek local legal advice as early as possible. It is so crucial especially for early stage entrepreneurs and founders so that they can avoid making costly mistakes, and even expensive litigation!
What else do you do apart from being a technology and startup lawyer?
When I started the law firm, I made a pledge that I will allocate thirty percent of my time for pro bono or mentoring initiatives. Since I run such a small and lean team, I must admit it has not been easy!
Currently, I am grateful to be selected as a mentor for several companies including nonprofits. For instance, I am a mentor and legal counsel for the Founder’s Institute in Kuala Lumpur (a pre-seed start-up accelerator with a presence in over 180 cities worldwide), Mentor For Good (a mentorship platform for Malaysian startups) and Closing The Gap (a nonprofit helping underserved students address education inequity). Recently, I’ve also joined as a mentor at Mentor For Hope, where they connected a group of mentors in Southeast Asia ranging from venture capitals, accelerators, and investors with startups affected by the Covid-19 crisis.
For a growing startup community like Malaysia, I hope that more seasoned entrepreneurs and successful business leaders could allocate some of their monthly time for mentoring. As a corporate lawyer who deals with early stage companies, you can see visibly the difference when a founder has been mentored by someone more experienced in terms of their roles and understanding on what it takes to run a successful company.
Mentoring is so important to help founders avoid silly mistakes including filling the gaps where government agencies may not be able to do. This is in line with the Malaysian government’s vision to create and nurture more people to become entrepreneurs.
In addition to mentoring, I also enjoy writing on my personal blog (www.izwanzakaria.com) where I usually write on technology, consumer and innovation trends.
What are your future plans for Izwan & Partners?
We are constantly looking for new partners and people to work with in growing the technology and startup ecosystem in Malaysia and across South East Asia. We are looking for like minded law firms, service providers, and ecosystem enablers that we can work together. For instance, a strong partnership means we can easily tap into our regional partners to help our clients access other markets (when they are ready to expand overseas).
Like the Uber model, we like to leverage on others rather than trying to start something on our own like having a corporate secretarial practice. Recently, we’ve partnered up with a leading digital company secretary here in Malaysia which is also backed by one of the ecosystem enablers. When it comes to fundraising, the company secretary plays a crucial role in the success of such fundraising exercises. So we are strict when it comes to choosing a reliable partner that can offer a certain standard including an acceptable turnaround time. We believe that only by working together can we achieve prosperity.
I am also hoping to get more young lawyers to get exposed in the technology and digital space. For instance, we are planning to run an internship programme where law students can intern in any of our selected clients! So you could be doing an internship with a technology accelerator, venture capital, or even a venture backed startup.
Also, we are following closely the development of the legaltech products in other mature common law jurisdictions. The whole post-Covid-19 crisis will change the global business landscape and the legal industry will perhaps be the one that may be most disrupted. As a technologist at heart, we are confident that more and more legal departments and even law firms are now looking at how they can adopt legaltech products and solutions in their operations. We hope to bring some of these legaltech products to be deployed here in Malaysia and the region.
Finally, we hope to get more people applying to work with us. So if you’re entrepreneurial, self-motivated and like challenging the status quo, we’d like to hear from you!