In my post last week, I wrote about the highlights of this year’s regulatory updates. This time around, this article will focus more on several notable news in the funding space, especially by local institutions that may be interesting for startups.
Khazanah is Malaysia’s sovereign wealth fund responsible for managing and preserving the nation’s wealth. It is also in charge of making “strategic investments” for the country. In 2021, Khazanah announced the Dana Impak fund (impact fund), an RM6 billion (US$1.2 billion) fund to be deployed over five years in six areas ranging from digital society, health, education, social mobility, food and energy security to climate-related startups.
In March, Khazanah announced its partnerships with two global VCs, 500 Global and Gobi Partners, to get more investments into Malaysian startups.
Note that Khazanah as a fund also invests in startups, usually in larger ticket sizes. This year saw several startups, notably insurtech startup PolicyStreet as its lead investor in the RM67 million (US$15.3 million) and agritech startup BoomGrow via Khazanah’s backed Gobi Dana Impak Ventures (GDIV) fund for an undisclosed sum.
More institutional funding in the startup ecosystem?
In September, Kumpulan Wang Persaraan (KWAP) (‘Retirement Fund (Incorporated)’, a public pension fund for civil servants, announced an RM500 million (US$107 million) Dana Perintis (‘pioneer fund’).
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The fund will be deployed by KWAP directly in direct investment into startups and via ‘fund on the fund’ to identified VCs and accelerators within the next “18 to 24 months”. In 2017, KWAP invested in Uber on its Series G round for the sum of RM170 million (US$30 million). KWAP is one of the several government-linked investment companies in the country.
Consolidation of the government’s funding agencies under Khazanah
The prime minister announced this year that two government funding agencies, Penjana Kapital and Mavcap, will now be placed under Khazanah’s purview. To summarise, both of these entities invest in local VC fund managers via the ‘fund of fund’ structure. Fund managers may be keen to hear updates in the coming months, perhaps on its new funding direction.
In a World Bank study on Malaysia’s funding ecosystem, which I co-authored in 2022, one of the policy recommendations that we’ve suggested to address the funding gap was for the government to act as the anchor investor to crowd in more private capital into startups.
More corporate ventures and “innovation centres” via the Future Malaysia Programme
I anticipate more companies embarking on new corporate venture capital (CVC) and “innovation centres” activities, especially involving publicly listed companies.
To date, CelcomDigi and Sime Darby Plantations, both Khazanah’s portfolio companies, have announced their own type of “innovation centres” to promote innovation and entrepreneurship together with Plug and Play APAC, a global innovation platform.
Also Read: A year in review: 2023 regulatory updates impacting startups in Malaysia
Another new entrant in the ecosystem is Antler, a global VC fund that may also lead to new startup creation and new deal flow. The news reported that Antler had completed its first cohort and is now inviting aspiring founders to apply for the second cohort.
These partnerships came from Khazanah’s “Future Malaysia Programme”, an RM180 million (US$38 million) initiative by Khazanah to partner with local and foreign ecosystem enablers to grow the startup ecosystem.
Securities Commission of Malaysia via Capital Markets Malaysia, its affiliate arm, is also actively promoting more publicly listed companies to get involved in corporate venture capital programmes. So, we may hear more news from the corporate sector in the coming months.
These initiatives may likely increase the number of new startups in the coming months in the ecosystem. The accelerator and incubator may also increase the chances for the startups to survive and get funding as the founders get access to experts and mentors in the programme.
In the recent article, I wrote about the regulatory updates, including the extension of the current tax incentives for angels and VC funds and additional funding in the equity crowdfunding and peer-to-peer (P2P) financing space. These efforts may help in ensuring continuity to get more private capital in the ecosystem.
As always, the devil is in the execution. Ease of doing business is a major issue that policymakers need to address as we strive to create a more vibrant funding landscape for Malaysia. As a startup lawyer who regularly deals with the ecosystem, I am hopeful to see more Malaysian startups get funded in 2024.
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