Looking at overseas venture capital investment to thrust tech startups

Malaysia is eyeing overseas venture capital investment to speed up its technology startup industry, revealed Economy Minister Rafizi Ramli.

The focus is on spurring the development of Malaysian nascent tech companies.

“It is very important to bring in mid-tier, sophisticated VC and [private equity] firms from around the world [to back tech startups],” Rafizi said.

Despite having established itself as a key regional manufacturing hub, Malaysia still lags behind in terms of funding ecosystem for tech companies, compared to its.

A DealStreetAsia report revealed Malaysian based businesses only secured $110 million as opposed to Singapore and Indonesian companies that 90 percent of the $7.7 billion they have raised.

Hence, the Malaysia Venture Capital Roadmap was launched last month to position Malaysia as “a preferred regional venture capital hub by 2030” through measures such as regulatory reform. Goals include boosting Malaysia’s venture penetration rate — venture capital investments relative to GDP — to 0.25%-0.35% in 2030 from 0.19% in 2022.

“As far as policy is concerned … regulations are being streamlined, but all these [changes] will not happen unless you start seeing waves of VCs coming in,” the minister said, Nikkei Asia reported.

Malaysia has also rolled out its Golden Pass scheme to lure private equity firms via incentives and tax exemptions.

Prime Minister Datuk Seri ANwar Ibrahim also announced that Khazanah Nasional would set up RM1 billion in funds to invest in local tech companies.

Two other sovereign wealth funds – EPF and Retirement Fund and local venture capital company Blue Chop Venture Capital would be investing RM 3 billion to establish ASEAN Growth Initiative Fund to nurture the startup ecosystem.

Malaysian sovereign wealth funds tend to invest in larger companies and only a small number of local VC firms support startups in the country, with foreign VC firms potentially plugging the gap, Rafizi said.

He added that recent weakness in the ringgit, which in February fell near its lowest level against the dollar in 25 years, could help entice foreign funds.

“[Foreign direct investment] and portfolio investments into Malaysia are more attractive now, given the strength of the dollar,” he said.

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