MY looks to be preferred destination for venture capital by 2030 through new roadmap

The Ministry of Science, Technology & Innovation (MOSTI) and Malaysia Venture Capital Management (MAVCAP) have released the Malaysia Venture Capital Roadmap (MVCR) for 2024-2030 which aims to position Malaysia as the preferred destination for venture capital in the region.

Through the MVCR, the venture penetration rate is expected to increase from 0.19% in 2022 to between 0.25% to 0.35% by 2030, while also increasing the number of venture capital in Malaysia between 15% to 25% and increasing the number of local and foreign venture capital professionals.

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Despite Malaysia’s 44% compound annual growth rate in total funding from 2018 to 2022, its venture capital industry must catch up to the more mature venture capital ecosystems of its regional counterparts such as Singapore, South Korea and Indonesia.

In fact, in 2022, Singapore and South Korea had 1,111 and 2,134 annual deals respectively. In contrast, Malaysia had an annual deal count of 166.

Challenges faced by venture capital ecosystem

To achieve its targets, the MVCR has identified three main key challenges faced by Malaysia’s venture capital ecosystem and the necessary strategies to overcome them.

The challenges include the allocation of available funding within the ecosystem which can be optimised for greater efficiency, a need for regulatory reform to better develop and implement policies and capacity building to support an inclusive ecosystem that stimulates diverse perspectives.

“The ministry is aware of the critical role venture capital plays in the ecosystem of technological advancement and entrepreneurship. The dynamism and resilience of our startup environment depend heavily on the strategic allocation and efficient management of venture capital,” said MOSTI minister Chang Lih Kang. Adding:

This MVCR, therefore, serves not just as a guide but as a visionary blueprint for propelling Malaysia to the forefront of the global innovation landscape.

Furthermore, Malaysia’s venture capital ambitions will focus on diversity, equity and inclusion by spotlighting women entrepreneurs, creating impact to the Bumiputera and minority communities while also embracing diverse voices and talents, according to the MVCR.

The blueprint for venture capital growth

The first strategy is improving the ease of doing business which includes smoothening cross-border capital flow and having a centralised platform for venture capital to facilitate its management, monitoring and information provision.

Under this strategy, a conducive regulatory structure for venture capital that harmonises onshore and offshore legal structures will be employed along with the alignment of onshore and offshore tax incentives and increasing venture capital exit options.

The next strategy aims to address funding accessibility through more strategic and efficient allocation of government funds and enhance the attractiveness of the government’s matching of funds-of-funds scheme.

The MVCR will also increase the participation of Government-Linked Investment Companies (GLICs), Government-Linked Companies (GLCs) and other corporates in venture investments.

For the last key strategy, enhanced visa schemes will be employed to facilitate talent attraction to elevate Malaysia’s venture capital talent pool.

This strategy will also see the see the seeding of new fund managers, promotion of venture capital-focused educational programmes and industry immersion for new talents.

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