KUALA LUMPUR – Penjana Kapital Sdn Bhd’s success in attracting eight foreign venture capital (VC) firms will result in a trickle-down effect that will grow and enhance the capabilities of local ecosystem and start-ups through knowledge transfer, as well as spurring network opportunities.
“The foreign VC commitment will also encourage private capital to support promising local start-ups and businesses, alleviating their challenges as a result of the pandemic,” Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz said.
Penjana Kapital has attracted eight foreign VC managers, namely from the US, South Korea, China, Indonesia and Singapore, and local partners to invest up to RM1.57 billion in Malaysian start-ups.
The sum comprises RM600 million from the government matched up with 1:1 basis of a RM600 million commitment by the VC fund managers, and potential investment of a further RM370 million into companies that match their risk and investment profile.
Start-up financing requires professional investors that are interested in and truly understand the asset class, who must be matched with VC fund managers with the business acumen and commitment to the effort, and start-ups that are ready to receive VC investments, he said.
This process involves proper business planning with defined growth targets, appropriate business valuation and potential exit strategies for investors.
“Knowing and understanding this process makes Penjana Kapital’s success in attracting these investors that much more commendable, particularly during these difficult times. And what these VCs usually invest in are new sectors, or new ways of managing existing industries, which is good for the long-term development of a knowledge-based economy,” he said today.
Penjana Kapital, incorporated on July 1, is in charge of the Penjana Nasional Fund. The setup is part of the government’s initiative to accelerate Malaysia’s economic recovery.
It is aimed at catalysing and rebuilding Malaysia’s private capital investment space, and is expected to hone in on tech-based start-ups. Early indication shows that sectors they are interested in include fintech, edutech, agritech, mobility and artificial intelligence.
Apart from Malaysia’s business-friendly investment ecosystem, these new sectors will also be supported by the government’s RM21 billion national digital infrastructure plan, Jalinan Digital Negara (Jendela), designed to enhance Malaysia’s nationwide digital connectivity and optimise spectrum usage.
Tengku Zafrul said among the key success factors of Penjana Kapital is that, in selecting VC fund managers, it implements a rigorous evaluation process that was verified and validated by an external independent global consulting firm.
“It has developed a highly structured programme that includes setting key financial performance benchmarks, as well as determining non-financial/strategic goals, like knowledge transfer requirements.”
For instance, the eight VC fund managers and their local partners are selected through a rigorous evaluation and due diligence process by Penjana Kapital's investment panel.
Two VCs are selected per VC lifecycle stage.
The seed/co-creation stage will be a start-up launchpad that will co-create companies or provide seed capital to early-stage companies, he said.
“The Series A/B stage will invest in post-revenue companies that have passed the ideation stage. The following stage, the growth stage, will focus on companies undergoing expansionary stage. And finally, venture debt will provide short/mid-term debt financing for companies that are not traditionally covered by the banks,” Tengku Zafrul said.
Secondly, with the pandemic accelerating the adoption of digitalisation, the “ground has been softened” for further investments in tech-based sectors based on the real needs of the people, particularly in sectors like edutech, to develop remote teaching/learning, and agri-tech to develop food security.
“Thirdly, the relationship also allows Malaysian start-ups and companies to leverage on the connections and value-add that regional and global investors have. That, in itself, is a rich environment for fine-tuning ideas and concepts for eventual commercialisation.”
On how the government will ensure the capital stays in the Malaysian ecosystem, Tengku Zafrul said a key criteria of the fund is a minimum deployment into Malaysian start-ups. Potential Asian investee companies must bring tangible economic benefits to the Malaysian economy to qualify for the 1:1 fund-matching by the government.
“This will encourage private capital to continue supporting promising local start-ups and businesses.
“Apart from that, we have seen many investors continuing to invest, thanks to our highly attractive tax incentives and investments ecosystem, and the government’s strong promotion of Malaysia as an ideal base or springboard to access the 648-million Asean market,” he said.
Through the Penjana Nasional Fund measure, he said it is encouraging to see participation from venture capital fund managers in the request for proposal process that Penjana Kapital conducts.
“This indicates strong interest and confidence from the international investment community towards the growth prospects of the Malaysian economy and its start-up industry.”
As for the knowledge transfer programme (KTP), Tengku Zafrul said it is expected to benefit three main groups, namely, the venture capital fund management industry, start-up companies and the general public as a whole. This programme is to nurture and develop talent within the venture capital ecosystem.
He expects KTP to create meaningful, high-skilled jobs either in those identified investment areas, or within the VC ecosystem.
“It is anticipated that over the medium to longer term, more than 700 jobs will be directly created. Subsequently, the network effect will lead to the creation of more than 1,000 jobs, either through investee companies, events or trainings. In total, at least 1,800 high-skilled jobs will be created.” – Bernama, December 14, 2020
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