Mavcap looks to regional venture capitalists for funds

KUALA LUMPUR: Malaysia Venture Capital Management Bhd (Mavcap) is partnering regional venture capital companies (VCCs) to raise funds and invest under its third Outsource Partners Programme (OSP 3), said its CEO Jamaludin Bujang (pix).
He said MAVCAP will be raising a total fund of RM450 million, of which the first OSP 3 fund sized RM150 million will be launched soon. The remaining two OSP 3 funds sized RM150 million each, will be launched once the company has concluded its negotiation with its partners.
"For the past two years, we (have been ) identifying the right partners (for OSP 3) to raise funds. We have been talking and developing the business plan together. We initiated the OSP 3 early 2012 and 2014 is where we will be executing it," Jamaludin told SunBiz in an interview recently.
"We have done two OSP programmes previously. We found out that the first two programmes had a limited fund size. So, we could not do many investments and diversify. So, we have to increase the fund size to economically feasible," he added.
He said at the same time, Mavcap also realised that it was difficult to raise the funds locally. "So, we try to partner with foreign VCCs (regionally) to raise the fund and invest," he said, adding that the two OSP programmes had a fund size of RM30 million.
Jamaludin said, depending on the fund size, Mavcap hopes to invest in between 10 and 15 companies.
As for its traditional investment, Jamaludin said the company has done six investments valued RM50 million last year. For this year, he said Mavcap plans to make similar investments, but it depends on the capital that available with the company.
"We invest in companies based on referral and we also study the risk involved. At the end of the day, the deal must be good enough for us to invest. We also take some share or equity in the company," he said.
At the moment, he said the company is working with a potential party to fund start-up information and communications technology (ICT) companies. In February, Jamaludin had said the fund is expected to be launched in two months.
He said Mavcap is also exploring the possibility of setting up funds with the collaboration of major corporations in the country to invest in technology companies.
"We are talking with big Malaysian corporates on that. We are still in the preliminary stages. That is still on-going. We are still discussing on how to structure the whole programme," he said.
Mavcap, established in 2001, is the country's largest venture capital company with investments in the ICT and other high-growth industries. It is also a wholly-owned subsidiary of the Minister of Finance Incorporated.
Jamaludin said the company was formed to realise the government's mission to support Malaysian based ICT companies as well as the VC industry. It invests for a period of three to eight years in seed, start-ups and early-stage companies.
Sharing the industry outlook, he said given the current global economic situation, investors are still taking a cautious stance on investment. Jamaludin said they will closely monitor the global economic environment before deciding on making any investments.
He said there are now more quality start-up companies in the country that is run by young entreprenuers with good vision and have global standard.
According to the Securities Commission's (SC) annual report in 2013, the number of registered VCCs and venture capital management corporations (VCMCs) stood at 61 and 58 respectively as at the end of Dec 31, 2013.
Out of the 119 registered VCCs and VCMCs, he said 99 are locally-owned, 15 are joint ventures while five others are foreign-owned.
Jamaludin said the number of venture capital professionals employed in the industry with at least four years of experience stood at 103 as at end-2013.
He said the total committed funds stood at RM5.79 billion which represented an increase of about 1.7% year-on-year while total venture capital investments increased by 24.5% to RM3.43 billion from RM2.76 billion.
Investments stood at RM264 million as compared to RM230 million representing an increase of 14.8% year-on-year. A total of 56 investee companies received venture capital funding as compared to 47 investee companies.
As for divestments, Jamaludin said there was an increase of 22.1% from RM235 million in 2012 to RM287 million 2013. A total of 33 investee companies were divested in 2013 compared to 52 companies in 2012. Divestments were mainly through share redemptions and trade sale.
He said the government remains as the main funder of the venture capital industry by contributing 61.36% of the total committed funds, or about RM3.56 billion.