Venture capital market size to grow to RM10b
Published on: Thursday, July 24, 2003
PUTRAJAYA: The Malaysian Venture Capital Association (MVCA) expects the venture capital (VC) industry to grow to a size of RM10 billion by 2008, its chairman Chok Kwee Bee said.Last year, VC funds stood at RM2.536 billion with a total investment worth RM1.112 billion.In line with that, she said MVCA was finalising a 5-year plan with the government to chart the VC industry’s growth.ADVERTISEMENT “We are at the final draft stage and are waiting for the approval. The government has shown keen interest,” she said after a media briefing on the venture capital industry organised by the National Economic Action Council (NEAC) and MVCA.She said the plan would give the VC industry a direction to pursue.She said the VC fund size was expected to be driven mainly by the private sector compared with the conventional way of some 60 per cent funding by the government.“We aim to bring that figure (funded by government) down to at least 45 per cent,” she added.ADVERTISEMENT Earlier, in his opening address, executive director of NEAC, Datuk Mustapa Mohamed said the role of VC as an alternative source of financing, particularly for the SMEs, had increased significantly.He said the government had been very supportive of this industry by addressing various issues and making capital funds available to VC industry.
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He said the VC industry, a rapidly growing sector, could contribute significantly towards creating employment and generating income for the country. Meanwhile, Chok said the VC industry was still new in Malaysia and many entrepreneurs were unaware of its existence and functions.VCs are calculated risk takers in the business of building sustainable high growth businesses.It provides equity funding for entrepreneurs who want to start up a business, right from an idea up to the listing of the company and it does not require collateral.However, she said the VC companies looked at certain criteria when evaluating deals.Chok said VCs on the average would hold 20 to 25 per cent of a business’ equity, going as low as five to 10 per cent and as high as 70 per cent.Normally, a VC has a life span of about 10 years before it exits from the business. It will then either sell its shares to the founders of the company or put the shares up for initial public offering (IPO).VC companies are keen to invest in wireless broadband, bio-technology, fuel and energy.VC firms are exempted from tax for the first 10 years provided that 70 per cent of the funds are invested in start-up, seed capital and early stage financing.VC firms could also be granted tax deduction on the amount invested in the investee company at start-up, seed capital or early stage and that the VC firm has not disposed of its shares in the company before IPO.Stay up-to-date by following Daily Express’s Telegram channel.
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There is no distinction between fully-owned and local-owned VC firms.Foreign investments in all sectors are limited to 30 per cent ownership unless approvals are given by authorities.-Bernama