Growing the Malaysian Venture Capital and Private Equity Industry

Abstract

The venture capital (VC) and private equity (PE) industry in Malaysia is at a crossroads. Despite having received RM3 billion in government aid, according to practitioners the industry will be devoid of any privately-backed organisations within five years if further action is not taken. This situation is problematic for many reasons - not least being that the government believes a robust venture capital and private equity sector would contribute to Malaysia’s development goals. Through a review of existing academic literature and in-depth interviews with 25 senior executives of Malaysian financial firms, this article investigates the state of the Malaysian VC/PE industry, and whether the government should intervene to improve its condition. Many financial executives argue that government intervention to aid the VC/PE sector is necessary at the present juncture. Although government efforts to grow VC/PE sectors have yielded less than desirable results in many nations, scholars have noted that a well-structured intervention can minimise such risks. In order to overcome those problems, this article recommends the creation of a RM1 billion ‘fund-of-funds’.