Private Equity & Venture Capital
Malaysia has a vibrant entrepreneurship ecosystem, populated by innovative start-up companies that are ready for commercialisation. Their funding requirements have led to the growth in the number of Venture Capital (VC) and Private Equity (PE) firms locally. As at end-December 2023, the market registered a total of 113 VC firms and management corporations, together with 24 registered PE companies.
The private market, specifically Malaysia’s VC and PE industry, has been developing in tandem with the expansion of the SC’s registration framework to include VC and PE firms since 2015. Amongst the efforts rolled out to cultivate a healthy entrepreneurship culture and to develop a conducive business and regulatory environment include the creation of better early access to financing and review of existing policies on the commercialisation of innovation. Concurrently, Malaysia’s private market has been charting encouraging growth, with RM11 billion in total committed funds (2022: RM10.71 billion) in the PE industry as at end-December 2023, whilst the VC industry recorded a total of RM6.58 billion (2022: RM5.37 billion) in 2023, bringing the combined total funds committed in 2023 to RM17.58 billion.
As at end-December 2023, some 32.36% of PE financing was derived from corporates, followed by individuals and family offices, as well as financial institutions. Concurrently, about 38.62% of VC funds originated from government agencies and investment companies while sovereign wealth funds contributed 22.55% and corporate investors injected 19.73%.
In 2023, the leading sectoral recipients of VC investments were financial services (18.12%), followed by wholesale and retail (13.55%) and life sciences (12.97%). On the other hand, PE financing was mainly directed towards business services (45.06%), wholesale and retail trade (35.15%) as well as transportation and storage (4.28%).
Efforts are underway to drive vibrancy in the private markets. Extensive engagements with both private and public markets underpin the SC’s approach to develop relevant and impactful frameworks. This is especially so in building platforms and improving access to alternative financing in private markets to complement capital raising in the public markets. In December 2023, the SRI Guide for Private Markets was issued to provide voluntary guidance to Venture Capital Management Corporations (VCMCs) and private equity management corporations (PEMCs) on incorporating sustainability considerations in the investment process and due diligence. The objectives of the guidance issued remain – to facilitate the growth of private markets through financial inclusion and increasing the breadth and depth of the domestic capital market.
On the public front, Bursa Malaysia’s Leading Entrepreneur Accelerator Platform (LEAP) Market was launched in 2017 to address the funding gap faced by SMEs and to serve as an alternative exit avenue for PE firms. This platform represents part of the ongoing efforts by the authorities to develop the domestic VC and PE industry, and also as a pathway for SMEs to grow and mature, in tandem with their funding requirements. Since the LEAP Market’s debut in 2017, a total of 48 companies have been listed as at end December 2023. Notably, the number of listings on the LEAP Market matched the number listings on the Main and ACE Markets combined for the years 2018 and 2019. However, in 2023, the LEAP Market accounted for only 1 of the 32 listings on Bursa Malaysia. Efforts are underway to revitalise the LEAP market given the growth potential of this market segment and the number of SMEs in Malaysia.
In 2024, the Malaysian Venture Capital Roadmap (MVCR) for 2024-2030 was launched by the Ministry of Science, Technology and Innovation (MOSTI) to position Malaysia as an emerging venture capital hub in Southeast Asia. The roadmap aims to enhance the VC ecosystem through three (3) strategic pillars (key strategies, interventions and targets). The MVCR is a framework to streamline business processes, increase funding avenues and nurture VC talent.
