Mavcap budget to be slashed, looks to private sector

• In talks with three companies on private investments into startups
• Reduced allocation may mean missing out on key opportunities

 
THE Malaysian Government’s venture capital arm Malaysia Venture Capital Management Bhd (Mavcap) may see its allocation for investments reduced by as much as half, said its top executive.
 
“Compared with the allocation under the 10th Malaysia Plan (10MP), under the 11th Malaysia Plan (11MP), we could be seeing a decline of 40% to 50%,” Mavcap chief executive officer Jamaludin Bujang (pic above) told Digital News Asia (DNA) after participating in a DNA Disrupt panel discussion in Cyberjaya on Jan 5.
 
“I can’t reveal the actual figure yet as it has not been finalised and we are still working on it, but what I can tell you is that it will definitely be a lot less than previously,” he said.
 
The Malaysia Plans are five-year national development plans. The 11MP runs from 2016 to 2020, with Prime Minister Najib Razak describing it as the last lap towards Malaysia achieving developed nation status.
 
According to Jamaludin, under the 10MP, Mavcap received an allocation of over RM200 million. [RM1 = US$0.223 under current rates].
 
With the allocation likely to be reduced significantly, Jamaludin said he would now be banking on the private sector to fill the gap.
 
“If you want to do the same [investment] activities as under the 10MP with less money, you need to make your money work twice as hard or get the private sector to come in,” he said.
 
The Malaysian economy took a battering last year, caused by plunging oil prices and the ringgit being severely devalued against the greenback. Despite the extra revenue from the implementation of the Goods and Services Tax (GST) last April, the Government has been tightening its belt in some key areas.
 
For example, for the national budget this year, Budget 2016, Najib announced a reduction in funds towards universities.
 
Jamaludin however argued that reducing budget allocations during such trying economic times may not be an entirely good idea either.
 
“The impact is that I get less money and invest less – but you don’t want to do that either, because there are so many opportunities out there.
 
“There's a lot of money coming into South-East Asia. If we slow down, then we will be left out if we don’t participate or tap into these opportunities,” he said.
 
Private sector mindset improving
 
Mavcap is in talks with three companies as part of its efforts to raise money from the private sector to invest in local startups, according to Jamaludin.
 
“I am talking to at least three companies now – whether I can raise money from them, that remains to be seen. There’s a lot of work to do still,” he said.
 
Although it may take some time for these negotiations and discussions to be completed, Jamaludin is feeling optimistic about private sector funding in the long term.
 
“The fact that they allow us to present to them is quite good already. This is because before this, they wouldn’t even want to have this conversation ... they wouldn’t even consider putting funds in it,” he said.
 
Jamaludin also said that an increasing number of companies in the private sector are beginning to understand the benefits of investing in startups.
 
“On one hand, they don’t have much choice. The economy is slowing down and they have to find a way to improve their productivity and diversify their revenue base.
 
“They can see that GrabTaxi started small but became really big. They’re starting to see that this is a real business,” he added, referring to the Malaysian-founded but now Singaporean-based taxi-hailing startup.
 
In late 2014, regional telecommunications group Axiata Group Bhd and Mavcap tied up to launch the Axiata Digital Innovation Fund (ADIF), with an initial fund size of RM70 million (US$16 million at current rates).
 
To date, ADIF has invested in seven startups.
 
“This year, we [ADIF] are looking at another seven to 10 investments, depending on the deal flow,” Jamaludin said.
 
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