The renewable energy from the sun seems to be inspiring a lot of innovations especially green technology. Best of all, solar energy is readily and abundantly available and will never run out, being a clean renewable solution to the global warming issue intensified by our growing hunger for energy consumption.
Asia GreenTech Fund (AGTF) to tackle climate change
Fabulous Sunview Sdn. Bhd. (Sunview), a homegrown solar power provider, is opening up a new chapter in sustainable energy industry, following a RM16 million funding from a private equity company under the Hong Kong based Asia GreenTech Fund (AGTF) through Malaysia Venture Capital Management Berhad (MAVCAP), a wholly owned subsidiary of the Ministry of Finance, Malaysia.
The AGFT fund, created to champion green energy and green technology in Asia in response to climate change, serves as a catalyst for Sunview to take on Large-Scale Solar 4 (LSS4) projects, riding on the fund’s extensive experience in executing large projects in the region while working closely with the Malaysian government and relevant agencies.
“We are proud to be the first company that receives such funding from a private equity company to promote green technology in the country,” says director of Sunview, Ong Hang Ping, highlighting that the AGTF fund is focused on the development of sustainable energy, which is in line with the objectives of the Malaysia National Green Technology Policy.
“This strategic collaboration enables us as an industry player to pool all the essential resources together to strengthen the local green technology industry which will ultimately uplift the growth of our company,” he adds.
The AGFT fund will also be utilised for enhancing human competency and capacity in green technology applications, formulating support policies, promoting and creating awareness of green technology, and financing initiatives to promote green technology growth, according to Ong.
Creating a solar-powered future
The IS0 9001:2015 accredited and SEDA & Energy Commission certified Sunview, which has concluded more than 200MW of solar projects since its establishment in 2013, is on a mission to create a solar-powered future by harnessing solar energy to save Mother Earth, focusing on reducing carbon emissions through Zero-Energy Building (the development of super energy efficient buildings that are integrated with renewable energy applications), using green technology.
“We want to create more awareness about the importance of renewable energy among Malaysians and we would like enable everyone to benefit from the renewable energy generated from the sun without polluting the environment,” assures Charlie Chow, one of the two founding directors of Sunview, asserting that the company is committed to providing a quality and worry-free service to its industrial customers – the key focus, with residential customers coming into the picture in the next expansion phase.
Huge solar potential and government incentive schemes
Going from strength to strength with over 7 years of experience in the industry, Sunview foresees a huge potential in the Malaysian solar market, given a very low adoption rate of between 3 – 5% against the 20% target of the country’s electricity to be generated by renewable sources by 2030, as set forth by the Ministry of Energy, Science, Technology, Environment & Climate Change (MESTECC).
According to the Malaysian Investment Development Authority (MIDA), solar energy is one of the thriving renewable energy technologies with solar photovoltaic (PV) systems seeing a phenomenal growth in Malaysia, where applications involving solar energy have also been gaining popularity due to our favourable climate conditions.
Driven by the solar energy potential, the Malaysian government has introduced Net Energy Metering (NEM), Feed-in Tariff (FIT), Large Scale Solar (LSS), Self-Consumption (SELCO) and other renewable energy incentives, in an effort to reduce your bills and carbon footprint at the same time.
“Under the NEM programme, users pay a lower tariff for energy generated by solar, hence allowing for savings in electricity. Additionally, the Zero Capex scheme allows our users to enjoy savings without an upfront payment. And tax exemption will further reduce the cost of installation which will encourage business owners to adopt solar energy into their operations for cost savings,” says Chow.
“Our strategic geographical location, where we are nearer the equator makes it easier to harness the sunlight and turn it into energy. And thanks to the incentive schemes introduced by our government, we are able to offer solar energy and related services at affordable prices,” Chow continues, indicating that Sunview offers free consultation for the public to learn more about solar energy and is open for collaboration with any interested university on green education.
“We are like the designer of our clients’ premises, from design to construction, technical support and even financing support through certain incentive schemes. We want to ensure that our clients can enjoy the benefits of maximising electric savings while empowering them to focus on growing their business,” he adds.
A new trend beyond sustainable development
Echoing Chow’s views, Ong emphasizes that green industry goes beyond sustainable development as it pushes job creation and economic growth.
“Green industry will be the future as we believe we couldn’t just relay on non-renewable resources to generate energy. We believe that in the future, energy should be self-generating on a self-consumption model. The integration of solar panel and energy storage system, and even the recycling of solar panels will be next trend of the solar industry in Malaysia,” he says, pointing out the capability of solar energy that can be used to power both the factories and residences for efficient energy use to save on electric bill eventually.
Sunview specializes in providing Building Integrated Photovoltaic (BIPV) systems (replacing the existing roof by using Solar PV Module with Sunview Waterproofing System); Energy Management System (EMS) – an automation system that collects energy data to improve energy efficiency with online monitoring; and Total Energy Solution to reduce high peak, mid peak, off peak energy usage to take advantage of the different TNB tariff categories.
Regionally, the Philippines has become one of the most significant ASEAN markets for Sunview, following the incorporation of Fabulous Sunview Philippines Inc. in in 2015. Taking its game to the next level, Sunview aims to get listed on Bursa Malaysia in the near future.
Passion and dedication
“We must have passion in what we are doing and doing our best to be the best. Most importantly, everyone onboard our team must work toward the same goal in the fight against global warming,” reminds Ong.
The dedication of Sunview has earned the company a long list of awards such as Sin Chew Young & Emerging Company Award 2016, SME 100 Awards 2016 Fast Moving Companies 2016, Golden Bull Award Year 2017, Sin Chew Business Service Excellence Award 2017, Golden Globe Tigers Award 2017, Malaysia Independence Award 2017, Top 30 Nominees for JCI Creative Young Entrepreneur Award 2020 and the Nomination of Excellence Leadership Award – Innovation Leader of The Year 2020.
Find out more about Sunview’s green aspirations at https://www.sunview.com.my/
On 3rd November 2020, Mr. Fung was invited to be a guest speaker in “The Asia Opportunity: the World’s New Growth Powerhouse?” of the Cyberport Venture Capital Forum 2020.
‘In Hong Kong, we have seen a lot of interesting opportunities in the last 12 months. Now we need to look beyond to the Guangdong-Hong Kong-Macao Greater Bay Area,’ he shared ‘a mere 5 percent of China’s population in the Bay Area contributes 11 percent of the country’s GDP. Home to 43 unicorns, the Bay Area has a wealth of investment opportunities on green tech.’ He pointed out that there are great opportunities out there we can explore.
In addition, “China has announced a huge investment plan to more than double the renewable energy percentage of total energy capacity by 2035 from the current 15 percent while Malaysia also has an aggressive plan to increase the renewable energy percentage of total energy from 3 percent last year to 20 percent by 2025. Therefore, there will be plenty of demand for capital investment on renewable energy,” Fung said.
“Asia GreenTech Fund (“The Fund”) was established against this backdrop. The Fund recently invested in a leading solar PV systems and service provider in Malaysia. The investment also enables the Fund to have an integrated platform for solar projects to capture the fast growing Malaysian green energy market. The move also facilitates us to enter other APAC markets on a later stage as the portfolio company is also Malaysia’s first company to penetrate in Philippines market,” Fung added.
Fung also emphasized that as Southeast Asia develops rapidly, the demand for renewable energy also surges. It is crucial to ensure the region is growing in a sustainable manner since many places in the region are suffering from serious flooding more than ever.
For Malaysia Venture Capital Management Bhd (MAVCAP), the missed opportunity to participate in home-grown ride-hailing major Grab’s later-stage fundraising prompted a rethink in its funding strategy.
Malaysia-born Grab, which moved its headquarters to Singapore in 2014, has since evolved from a ride-hailing major to a super app offering a slew of other services including food delivery and payments. Reuters reported early October that Grab is now valued at over $15 billion.
“We learned our lesson with Grab and now we have Meranti Asean Growth Fund with a fund size of $200 million, focused on the growth stage. The companies that we have nurtured at the seed or pre-seed to Series A can now be funded for Series B,” MAVCAP’s newly-appointed CEO Shahril Anas Hasan Aziz told DealStreetAsia in an interview.
Shanghai and Kuala Lumpur-headquartered Gobi Partners closed its 2017-vintage Meranti ASEAN Growth Fund in December 2019 at $200 million.
Elaborating on why backing Grab was not a feasible option back then, Shahril said, “we did not have enough funds when Grab wanted to raise $10 million. If we had, we would have needed to syndicate with other parties. That amount during 2010 was about 20-30% of our [overall fund] size.”
MAVCAP has since worked closely with VCs to improve the ecosystem by allowing local startups to secure funding in the later-stage funding rounds, he added.
Set up in 2001, MAVCAP’s mandate is to create a bigger pool of funds for competitive local companies.
MAVCAP, which has 12 funds with an asset under management of RM2 billion ($481 million), is targeting an AUM of RM5 billion ($1.2 billion) in two years.
MAVCAP operates from pre-seed to growth stages in partnership with Gobi Partners, sovereign fund Khazanah Nasional, government-linked Johor Corp and local conglomerate Sunway Group.
“For pre-seed, we have SuperSeed with Khazanah, and now SuperSeed II from seed to pre-seed with Sunway. For SuperSeed II, we invest RM500,000 to RM2 million in non-revenue tech companies with a unique selling proposition,” he said.
MAVCAP will continue its ‘strategic funds model’ to invest alongside other private venture capitalists to fund more startups.
“We also hope to work with more government-linked companies and corporations,” he said.
“Because of our strategic funds model, we are more or less an institution, with the likes of Alibaba, GS Shop, Axiata and Sunway Group as our partners. Today, we are a global institution as our partners are global – including 500 Startups in San Francisco and Gobi in Shanghai. This allows us to benchmark ourselves globally as well,” he said.
Strategic funds model
For the first decade, when the venture asset class was relatively new in Malaysia, MAVCAP made direct investments in startups. Subsequently, with the ecosystem maturing, MAVCAP allocated funds to 11 local venture capital firms.
Furthermore, MAVCAP began exploring partnerships with government-linked corporations such as Axiata, Johor Corp and other corporates to start VC funds.
“We will continue with that approach,” Shahril said on MAVCAP’s shift to the fund-of-funds strategy in 2011.
For MAVCAP, the strategic fund model has paved way for greater collaborations with foreign VC firms and corporate partners. This model has enabled MAVCAP to rope in local and foreign players to invest in the funds created by MAVCAP and its partners.
Having joined MAVCAP in 2015, Shahril has played an instrumental role in collaborating with foreign and corporate partners to implement the ‘Strategic Funds’ model.
Shahril shared that MAVCAP aspires to follow the model of Silicon Valley fund managers.
“Our aim is to emulate Silicon Valley GPs. The best fund manager is one who does not need to put in any money. For MAVCAP, we are heading towards that direction, and aim to reach it within the next five to 10 years, as we need the track record and the right people,” he said.
MAVCAP eyes interest from China
Based in Malaysia, Shahril said MAVCAP is at a strategic location to benefit from the best of both worlds – Silicon Valley and Shanghai.
It also hopes to leverage its “state-linked” identity to attract funds from China.
“We are currently in talks with some parties in China on fundraising for the Asia Greentech Fund,” he said. The first close of Asia Greentech Fund was in February, the final close is expected in February 2022.
However, the current travel bans due to the global pandemic might be stalling the progress.
“If we cannot travel and meet our partners face-to-face, it is tough to build the relationship and even tougher to gain trust,” he noted.
Managing impact of COVID-19 on portfolio firms
Shahril’s immediate focus after his appointment as CEO is to enable portfolio companies to survive the COVID-19 crisis.
“We are looking at both the health of our fund managers as well as our portfolio companies,” he noted.
While none of MAVCAP’s portfolio companies have been classified as a casualty yet, Shahril observed that for several companies the [capital] runway was getting shorter. “Some did manage to raise funds. For others, we did bridging [round] where we put in some money as a loan for them to remain afloat,” he shared.
The global pandemic also lifted the fortunes of some portfolio companies in the e-commerce and logistics spaces while several others needed to pivot to offset the impact.
“For example, before the COVID-19 pandemic struck the country, our investee company theLorry (logistics startup) was involved in B2B services such as house and office moving. However, when the movement control order was implemented, theLorry pivoted to B2C providing grocery delivery services,” he said.
Michael Ngai, The Chairman of Asia GreenTech Fund, was invited to be a guest speaker of Macquarie Momentum China 2020 which was held on 22nd September 2020. Focusing on the development of a green China, Mr Ngai covered China’s goal and progress towards developing a sustainable green economy and key green industries (renewable energy, technology, financial and commodities) that will see accelerated investment and growth. Furthermore, He also examined the roles of the private sector in developing China’s green industries based on his rich experiences in the field.
Deal-related activity in the venture capital industry may have slowed as a result of the tough economic conditions for many businesses due to the ongoing pandemic. But Malaysia Venture Capital Management Bhd (Mavcap), the country’s largest venture capital firm, is showing no signs of pulling back and intends to keep investing in promising companies amid this landscape.
“Mavcap aims to take this opportunity to continue investing in start-ups. As many institutions will be holding back on new investments, this presents greater opportunities for us and our partner funds,” says acting CEO Shahril Anas.
The venture capital firm is a wholly-owned subsidiary of Minister of Finance Inc.
Private equity (PE) and venture capital activity across Southeast Asia was slow in 1Q2020 amid the Covid-19 pandemic, according to EY’s Private equity briefing: Southeast Asia report published on July 8. A total of 141 deals worth US$1.4 billion were announced during the quarter — a decline of 9% and 65% in aggregated volume and value respectively — compared with the previous corresponding period.
The impact of the pandemic has been different for each company and industry, says Mavcap chairman Datuk Noharuddin Nordin. Some companies will find that the situation is benefiting their businesses while others will find their market dwindling or totally disappear. While this is a challenging time, it is also an opportunity for companies to showcase their capabilities.
“Most companies can perform in good times. But when the times are tough, [only] resilient companies are able to survive and subsequently thrive. There are many Malaysian start-ups and entrepreneurs that possess the potential and capabilities to weather the storm, with the necessary support. That is what venture capital firms such as Mavcap should be here for,” says Noharuddin.
Mavcap has been monitoring and guiding its portfolio companies to adapt and navigate through the pandemic. This can be seen through the collaborative partnerships between start-ups, corporations, government agencies and investors. One example is the collaboration between drone-as-a-service company Aerodyne Group and the Royal Malaysian Police to operate drones for surveillance and enforcement during the second phase of the Movement Control Order period.
The firm is currently helping its investee companies to pivot their businesses. For example, the expansion of parcel delivery service EasyParcel into Pgeon and TheLorry’s new service to deliver other products such as groceries.
“The environment has changed and all businesses must adapt, including the venture capital industry. There are tremendous opportunities for venture capitalists (VCs) who are smart and nimble enough to identify them. This is not a time for VCs to retreat, but a time to refocus,” says Noharuddin.
“Exit strategies will have to be different. Previously, getting listed was the dominant exit strategy. However, we have seen financial markets across the globe being hammered by the impact of the Covid-19 pandemic and other economic factors. It is time for investors and start-ups to look for creative exit strategies.”
Mavcap believes there will continue to be significant opportunities in the market among sound entrepreneurs with viable business models, even amid the challenging environment. Consequently, the firm intends to continue investing in such companies through its funds.
Noharuddin points out that historically volatile periods such as wars, economic downturns and natural disasters normally precipitate a surge in innovation. Hence, businesses will be looking at new ways of doing business post-pandemic.
“As Mavcap participates in this sandbox of technology companies and is nurturing companies in this field, we believe there will be many opportunities ahead for SMEs (small and medium enterprises) to leverage innovation and cater for the changing lifestyles that the pandemic has brought, and will bring, about. This includes working from home, online shopping, last-mile delivery in Malaysia and the whole ecosystem that goes with it. Other areas will also open up,” says Noharuddin.
Mavcap has remained active since the beginning of the year. It has invested in two funds, the first being the Asia Greentech Fund I. The newly launched fund is set to invest in companies operating in the green energy sector such as those involved in solar energy, hydro energy, waste-to-energy and other green energy projects in Asia. The fund was established in partnership with Asia Greentech Capital Ltd (a Malaysia and Hong Kong-based venture capital firm) and Cardina International as the initial investor.
In early May, it was announced that Mavcap had invested in LuneX Ventures, a seed-stage blockchain fund by LuneX and Golden Gate Ventures. Launched in 2018, the fund is dedicated to accelerating the adoption of blockchain across Southeast Asia through funding and supporting homegrown global entrepreneurs. The portfolio companies include smart contract-powered derivatives trading platform Sparrow Exchange, cryptocurrency wallet provider BlueWallet and digital asset custody solution provider Propine Capital.
Evolution of the funding model
Mavcap has come a long way since it was established in 2001 with the mandate of developing the nation’s venture capital sector, stimulating the domestic economy and driving greater economic wealth for Malaysia through its support for start-ups, particularly in the tech sector.
The government entity was created following the rise of Silicon Valley as a hub for technology innovation and development. At the time, funding for tech start-ups was scarce with just banks and PE firms providing the financing. Silicon Valley was providing these start-ups with funding and a platform on which to grow. That was how the venture capital model came about and began to thrive.
Recognising the immense potential of cultivating start-ups and entrepreneurs, the Malaysian government established Mavcap to develop the local venture capital scene. The firm has since evolved. Now, it not only focuses on information and communications technology-related companies but also bricks-and-mortar businesses that have progressed to digital platforms such as Fashion Valet, TheLorry and EasyParcel.
The list of ICT-related companies that Mavcap invested in in its early days includes JCBNext Bhd (which runs the JobStreet.com platform), Diversified Gateway Bhd (which runs ISS Consulting Sdn Bhd), Fibon Bhd, Censof Holdings Bhd (which runs Century Software Sdn Bhd) and Aemulus Holdings Bhd. These companies have since gone public and are currently listed on Bursa Malaysia. Meanwhile, its portfolio companies that have been acquired include YouthAsia Sdn Bhd, WebBytes Sdn Bhd, Aexio Sdn Bhd, Tranglo Sdn Bhd and ADA Cellworks Sdn Bhd.
Mavcap also recognised the importance of strengthening Malaysia’s venture capital network to provide greater opportunities for local companies. Thus, its strategy was changed to focus on collaborations with foreign parties and corporate partners to create venture capital funds. This new approach, dubbed the “strategic funds model”, was adopted by the firm in 2013.
This model has enabled it to attract both local and foreign players to invest in the funds created by the firm and its partners. Mavcap’s last direct investment was made in 2016.
In total, the firm has attracted about RM715 million from local and foreign private investors. Most of these funds are still in the investment phase, says Shahril.
Through its partnership with California-based seed accelerator 500 Startups, Mavcap invests in three early-stage funds, namely 500 Durians, 500 Durians II and 500 Startups III. The first two focus on ICT and internet technology companies in Southeast Asia while the latter invests in companies in the consumer space and small internet-related businesses. 500 Startups is the world’s most active global venture capital firm, having backed more than 2,400 companies in more than 75 countries.
Axiata Digital Innovation Fund is another fund Mavcap has invested in. The local fund, which was formed in collaboration with Axiata Bhd and Johor Corp, focuses on business-to-consumer (B2C) and business-to-business (B2B) internet companies as well as industry disruptors. The fund is managed by Intres Capital Partners, a venture capital firm formed through a partnership between Mavcap, QuestMark Capital Management Sdn Bhd and Teak Capital Sdn Bhd.
The firm has partnered Asian venture capital firm Gobi Partners for the Gobi Mavcap Asean Superseed Fund, the Meranti Asean Growth Fund, the Gobi Fund III as well as the Malaysia Superseed Fund II. These funds focus on early-stage, series B and series C funding. Founded in 2002 in Shanghai, Gobi Partners now has 11 offices across the globe. It has invested in more than 260 companies and recorded 13 exits in 2018 and 2019.
Through these partnerships, Mavcap invests in high-growth companies, some of which have become unicorns (valued at more than US$1 billion). The unicorns include Singapore-based Grab, Australia-based Airwallex, US-based Knotel and Indonesia-based Bukalapak. The other investee companies of the funds include Carsome, EasyParcel, Aerodyne, Fave, TheLorry, Carousell, Signature Markets and Travelio.
The nature of the venture capital industry has always been different from PE investments or funding from banks, Shahril notes. The venture capital industry is focused on equity and the development of start-ups, with a view to exit at the best possible yield for the fund. The equity risk is much higher than a loan risk, he points out.
“Mavcap takes the risk of investing in early-stage companies with a minimal track record, products, market and technology, with the aim of growing the value of these companies. Financial institutions and other investors are not willing to take these risks,” says Shahril.
“This is a key challenge. However, Mavcap continues to fund and support these companies, especially in recent years when we have journeyed with them on top of providing them with funding. We have assisted and provided guidance in all aspects of their business, including finance, marketing, operational efficiency and value chain management, with a view to making them more successful in order to land at the appropriate seeding to exit the business.”
Even when Mavcap does exit, it still follows up on the investee companies for the next two years as it does not want them to fail or collapse after it leaves, he says. “We still provide guidance and counsel to strengthen their business model, especially as competition heightens and disruptions are a given in business these days.”
Spurring the growth of the local market
In 2001, there were not many venture capital players in Malaysia. Thus, the funds available for start-ups were limited. The private sector was not interested in the venture capital industry owing to its high-risk nature and the fact that these investments were not classified as an asset class, says Shahril.
Programmes undertaken by Mavcap have created more than 50 fund management personnel and a number of local venture capital firms, spurring the domestic ecosystem. Over the years, this has resulted in greater participation by the private sector. “To date, we have seen more participation from the private sector locally and internationally in our fund portfolios. This has increased the pool of funds available to viable local start-ups,” says Shahril.
“Continuous engagement with the private sector has resulted in more corporate venture capital firms being established, which is a positive sign of spurring the local ecosystem with more funds and personnel available. It is part of Mavcap’s mandate to develop the ecosystem in support of start-ups, entrepreneurs and personnel.”
Some market observers have pointed out that there are still major obstacles to a vibrant venture capital industry in Malaysia, including a lack of diversity as well as scarce investment opportunities. Noharuddin disagrees, saying that there are numerous opportunities in the domestic industry.
He points out that Mavcap has invested in and propelled several homegrown companies in diverse sectors such as financial technology (fintech), e-commerce, logistics, drone-as-a-service, software-as-a-service, artificial intelligence and health technology. This is reflective of the fact that there are many opportunities in the Malaysian market, he adds.
“We have to be prudent and objective to unlock these gems of opportunities. One of the objectives of our approach to partnering private investors is exactly that. We believe that there is a lot of diversity and plenty of investment opportunities in Malaysia. With the help of our partners in the private sector, we plan to identify and tap into these opportunities,” says Noharuddin.
In a report published by DealStreetAsia in March, it was found that Singapore-based VCs accounted for 58% of the total funds raised in the region last year, followed by Indonesia (16%) and Malaysia (13%). In a more recent report (dated May 19), the company noted that Singapore and Indonesia had dominated the venture capital market with total fund closings of US$865 million and US$161 million respectively in the first three months of the year. No closings were recorded in Malaysia during the period. Can the country’s venture capital industry overtake those of Singapore and Indonesia?
Noharuddin says that at this juncture, Indonesia may retain its No 2 position. This could be due to investors favouring its market size, observed in the number of start-ups offering fintech services. He explains that the majority of Indonesians are unbanked and fintech companies deliver the most value to this segment, making that country a larger market to service.
“However, this may not be the strongest factor for investors as Singapore is smaller than both Malaysia and Indonesia with a population of only 5.6 million, compared with Malaysia’s 31 million and Indonesia’s 267 million. The key differentiator with Singapore is its favourable investment ecosystem and ease of doing business for start-ups,” says Noharuddin.
He says factors that would allow Malaysia to overtake Singapore and Indonesia in terms of funds raised would be through greater participation from the private sector, by enhancing the integration of local start-ups with the Asean market and by increasing the ease of doing business through a legal framework in Malaysia.
“Malaysia can certainly be the premium place to raise venture capital funds. As mentioned, Indonesia is perhaps placed second because of the sheer size of its domestic market and this is deemed to translate into business opportunities,” says Noharuddin.
“Singapore does not have the same size of domestic market, but there is a perception that the city state is the best place to do business, especially for financial-related companies. Malaysia definitely has a larger domestic market than Singapore, but its financial sector does not enjoy the same reputation. It is very much an issue of perception.”
Often, the decision to operate in a particular country is not influenced by business factors alone. Noharuddin says a good example of this is the fact that a major international venture capital company decided to set up an office in Malaysia purely because one of the founders liked the living environment in this country. Of course, the good investment opportunities also helped, he adds.
“This is where Mavcap can help. We aim to support the government in debunking negative or misconstrued perceptions of Malaysia. Being close to both the demand and supply sides of the market, we can provide useful inputs to policymakers in relation to the soft infrastructure for venture capital, including policies and the legal aspects of the ecosystem,” says Noharuddin.
Adapting and being responsive to changes in the market is vital to remain relevant and effective. In line with this, Mavcap is now focused on accessing funds available in the market and relying less on funds from the government and taxpayers.
“Rather than investing taxpayers’ money in risky start-ups, Mavcap is now predominantly creating funds and inviting private funds, both local and international, to invest in these funds and using the funds created to invest in start-ups,” says Noharuddin.
This approach has two clear advantages. First, as Mavcap does not make direct investments, there is less reliance on the government and taxpayers’ money. Second, the start-ups are naturally subject to the disciplines of the market as the funds are raised by investors, who expect good returns. In other words, they have to be operating a successful business.
“We consistently leverage the expertise and experience we have in our arsenal to achieve desired returns. Through our local and international partnerships, many parties contribute insightful ideas to achieve this and we believe that if this is carried out in other venture capital entities, the outlook ahead is promising for Malaysia’s venture capital sector,” says Noharuddin.
Providing the right support
Mavcap is the largest government-owned entity, with a total portfolio value of about RM5 billion in the funds that the firm and its private sector partners manage. Going forward, it will focus on developing the venture capital sector by bringing together the expertise and talents of its partners to nurture and strengthen the companies it invests in.
“We cannot just invest financially. We need to make the companies stronger, put them on a firmer footing, to launch them further in the context of heightened competition and now, the Covid-19 pandemic, which will have a disastrous impact on a number of sectors,” says Shahril.
As for his advice to venture capital investors in the country, Noharuddin says the market will continue to be challenging. SMEs, especially in the tech realm, will see a tough period ahead. Nevertheless, there are many Malaysian start-ups and entrepreneurs that have the potential and capabilities to ride out the storm with the necessary support.
He adds that investors should be mindful that it is not all about e-commerce. While the mode and method may change, the products have to be manufactured as well as delivered. These are opportunities for start-ups to discover and address.
“In Malaysia, there are many high-net-worth individuals who have made their millions or billions in traditional industries such as mining, timber, construction and property development. It is time for the VCs to assist start-ups in the newer sectors,” says Noharuddin.
Ultimately, the right support must be extended to start-ups because these companies will define the future of a country, he adds. “It requires a lot of knowledge and effort to identify and support the right start-ups. At Mavcap, our goal is to ensure that the right support is extended to the right start-ups, so that our nation and the rakyat will benefit from their success.”
On the outlook for Malaysia’s venture capital industry, Noharuddin says three challenges remain. The first is ensuring that the government continues to provide for venture capital funds, considering the numerous demands on the government’s coffers. The second is to seek out good deals and the third is securing venture capital funds from the private sector.
“Mavcap is willing to take on these challenges. The market will judge us on our readiness. What is important is that all of our strategies are geared towards preparing ourselves to face any circumstances,” he says.