KUALA LUMPUR: Malaysia Venture Capital Management Bhd (Mavcap) has tied up with China-based Gobi Partners in a US$50mil (RM212mil) deal to launch a new fund to assist start-up companies in South-East Asia and China.
As Malaysia’s largest venture capital (VC) company, Mavcap makes direct investments with a fund size ranging from RM1mil to RM20mil and participates actively in the management and operations of start-ups.
Mavcap also invests through its outsourced partners programmes, whereby it allocates capital to other VC fund-management companies to invest in high-growth businesses.
Targeting information and communications technology (ICT) companies, Mavcap chief executive officer Jamaludin Bujang told StarBiz that it was a good opportunity for start-ups, as “the partnership with Gobi provides the exposure for businesses to capture local and China markets”.
According to a report, this came as many Malaysian start-ups still hold a locally-focused mindset and lack a compelling regional vision to sell to investors or potential partners. This is likely because they’ve never been exposed to markets outside of Malaysia.
Nonetheless, this year to-date, Mavcap has invested RM66.22mil in up and coming ICT start-up companies, higher than its total investments of RM60.62mil in 2014.
The group, under the purview of the Finance Ministry, has allocated RM642.75mil to 170 start-up companies.
On average, Mavcap will invest in five to 10 companies annually, with up to a 40% equity stake for about three to eight years to provide advice and guidance to the companies. Once the company begins to thrive, it will plan an exit strategy.
“However, it is challenging to identify worthy companies, as they must have scalable products and economical business plans to be eligible for the fund.
“For example, you must search for 20 companies to find one. They must have all the boxes ticked and attractive valuations,” explained Jamaludin.
Mavcap has partnered numerous local and international VCs to set up funds such as Elixir Capital Management, DTA Capital Partners Sdn Bhd and Intres Capital Partners.
Last year, Mavcap set up a US$30mil fund with Axiata Group Bhd intended at promoting innovation and growth in Malaysia’s digital ecosystem.
Jamaludin said Mavcap was also looking to work with other corporations.
“We hope to partner with other corporates. We’re working with one as we speak. We will also continue find companies to fund and work with,” he added.
However, it has been reported that despite an increase in demand for capital, there are only a handful of VCs in the market.
Currently, about 60% of VC funds comes from government sources, with only nine private VC firms in the country.
It is said that VC firms should look at pushing out more Series-A funding.
Series-A is the first significant round of funding for start-ups that have progressed beyond the seed-funding stage and have started generating revenue of between RM200,000 and RM1mil.
Meanwhile, Gobi managing partner and co-founder Thomas Tsao said the group recently established its Kuala Lumpur office and was focusing on expanding its business across South-East Asia.
Tsao is hoping to capture about 25 to 35 companies in Malaysia.
The venture capital firm, which is headquartered in Shanghai, recently announced a US$94mil fund dedicated to providing start-ups in China with early-stage funding.
Established in 2002, Gobi is a leading investor in digital media, IT and Technology, Media and Telecommunications companies in China and Asean.
Gobi’s current portfolio includes photo app Camera360, online travel agency Tuniu, and Madhouse, one of China’s leading digital advertising agencies.
It has funded over 100 companies and invested in six funds with offices in China, Hong Kong and Singapore.