Malaysia's venture capital industry poised to bounce back

Malaysia's venture capital industry is expected to reverse its declining trend this year, as it is looking at about 25% growth by the year-end from the current RM5.4bil of total assets under management.

Malaysian Venture Capital and Private Equity Association (MVCA) chairman Darawati Hussain gave the positive outlook based on the increasing level of confidence among investors, particularly from the Middle East, the United States and Europe on the economic environment from 2013 onwards.

“Our private investors who have been stagnant in terms of outsourcing funds due to the global economic crisis are now re-looking at this part of the world again,” she told reporters yesterday after the opening of the 4th Islamic Venture Capital and Private Equity Conference 2012 by Minister in the Prime Minister Department Tan Sri Nor Mohamed Yakcop.

The RM5.4bil of assets under management are from the 28 members of the MVCA. About RM1bil of the total amount is Islamic venture capital. Currently, about two-thirds of the RM5.4bil has been invested.

On the declining trend, Darawati said that it was due to the sliding trend of funds outsourcing by the private sector due to the global economic crisis.

Total assets under management had slid to RM5.4bil currently from RM5.9bil.

But, she said fortunately the funds from the Government were increasing during these difficult times.

The largest fund in the venture capital industry still comes from the Government which commands 54% of the total fund.

Meanwhile, Malaysia Venture Capital Management Bhd (Mavcap) chief executive officer Jamaludin Bujang said that it was working on a programme to mutually raise some money from its counterparts in the United States, Europe and Asia.

“This programme is looking at matching contributions from us and our counterparts, and if all goes well in the next few months, we should be able to bring in about US$100mil (RM303.7mil) this year,” he said.

Meanwhile, Nor Mohamed said there was a need to grow venture capital funds in Malaysia, which currently stood at eight funds.

“Undoubtedly, we need to grow not only in the number of funds but also companies that have the potential to be multinationals, too.

“It is time we created companies with innovative technology that the Muslim world can be proud of.

“We also need to have more private sector involvement and capital from pension funds and sovereign wealth fund to ensure that our venture capital industry matures,” he said.

Darawati said venture capital tenures were usually long term in nature at three, five and even up to seven years (for investment in companies that are still in infancy stage).

“This is important for our customers to grow, get their customer base and get more institutionalised.

“Nevertheless, venture capital investment will look at companies that have the potential to double or triple their top-line growth or margin expansion apparent in most innovative technology companies, especially those that made breakthough innovations,” she said.

The conference was jointly hosted by MVCA and the Islamic Banking and Finance Institute Malaysia. - StarBiz