Venture Capital in Malaysia

Flag of Malaysian

Malaysian flag

Venture capital firms, like Effi Enterprises, are always watching the global economy, looking for markets with potential for VC activity and growth.  They seek to find countries with government support for venture capital and general economic growth.  Despite a recent downturn in venture capital market progress due to the worldwide economic recession, investor confidence is returning in Malaysia.  With a government willing to revise policies to promote growth of the venture capital industry, there is great potential in the future for venture capital in Malaysia. 

History of the Venture Capital Market in Malaysia

Although there was activity in Malaysia from Silicon Valley firms since the early 1960s, the official beginning of the venture capital market in Malaysia was in 1984 with the establishment of Malaysian Ventures Berhad that invested in rubber products and furniture.  Venture capital companies continued developing and the government launched multiple plans giving money to venture capital financing targeting high technology industries.  The government’s commitment to developing the venture capital industry in Malaysia has contributed too much of its success.  In 1995, the government continued action to promote growth by creating the Malaysian Venture Capital Association, or the MVCA to develop the VC industry as a source of equity financing for business enterprises and startup companies.  There have also been efforts from the private sectors through Venture competitions that have sparked growth.

Current State of the Venture Capital Market in Malaysia

As of the end of 2010, there were 58 venture capital corporations and 55 venture capital management corporations.  In the most recent years, Malaysia’s venture capital market has been in decline.  Most VC companies are fully invested and in divestment phase where the proceeds are not recyclable.  The venture capital industry has yet to achieve sufficient critical mass to generate self-sustaining growth momentum and lack of good deal flow and poor post IPO performance have been cited as big issues facing the venture capital industry.  It is also generally constrained by the inadequate number of professionals, high staff turnover, and lack of technical and market knowledge to assist successful commercialization of technology based ventures.  Due to the recent worldwide economic downturn, investments into Malaysia had slowed, but now that things are picking up again, venture capital firms and potential investors are turning their attention back to this area.  In 2012, Malaysia’s GDP growth accelerated each quarter.  The manufacturing sector has experienced a small growth and the construction sector, due to on-going implementation of infrastructure projects, expanded an impressive 22 percent. The economic increases in 2012 combined with a rise in the level of confidence among investors, particularly from the Middle East, the United States, and Europe, which leads to a positive outlook for 2013 and beyond.

Future of the Venture Capital Industry in Malaysia

Growth is needed for the venture capital market in Malaysia.  Not only do the number of funds need to increase, but the companies with potential to be multinationals needs to grow and the private sector involvement needs to increase. Malaysia is historically a middle-income country, but under the new Prime Minister it is attempting to achieve high-income status by 2020 by attracting investments in Islamic finance, high technology industries, biotechnology, and services.  With domestic demand remaining resilient despite negative developments overseas, there is a 5% expected growth in the economy in 2013.  With the Prime Minister’s recognition of innovation and venture capital as the keys to economic growth for Malaysia, the government is fully support of the venture capital industry.  With a supportive government and the right policies in place, Malaysia’s venture capital industry is poised for this growth and success.

 

About Efraim Landa

My name is Efraim Landa I am an entrepreneur and an expert in venture capital. I am the co founder of Effi Enterprises, a venture capital firm as well as the co founder and CEO of Gluco Vista, a company that is in the process of developing a non invasive glucose meter for those with diabetes.

Posted on May 14, 2013, in Business Financing, Effi Enterprise, History of Venture Capital, Venture Capital, Venture Capital Markets and tagged , , , , . Bookmark the permalink. Leave a comment.

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