Private Equity & Venture Capital
The Malaysian venture capital (VC) and private equity (PE) industry has been developing in tandem with the expansion of the Securities Commission Malaysia (SC)’s registration framework to include PE firms since 2015. To cultivate a healthy entrepreneurship culture, efforts are being expended to cultivate a conducive business and regulatory environment, thereby ensuring early access to financing and the review of existing policies on the commercialisation of innovation. Against this backdrop, the Malaysian PE industry has been charting encouraging growth, with RM10.71 billion of committed funds as at end-December 2022, along with another RM5.37 billion for VC (2021: RM9.65 billion and RM5.18 billion).
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 of VC and PE firms. As at end-December 2022, the market counted 109 registered VC firms and management corporations, together with 20 registered PE companies. As per the SC’s 2022 annual report, the top three registered corporations by amount of investor commitments as of end-2022 were Creador, Xeraya Capital and Malaysia Venture Capital Management Berhad (MAVCAP).
As at end-December 2022, some 33.4% of PE financing was derived from corporates, followed by individuals and family offices (17.0%), and financial institutions (12.8%). Concurrently, about 36.0% of VC funds stemmed from government agencies and investment companies while sovereign wealth funds contributed 27.3% and corporate investors injected 22.7%.
In 2022, the leading sectoral recipients of VC investments were medical and biotechnology (34.8%), information and communications (16.5%) and financial and insurance/takaful activities (12.7%). On the other hand, PE financing was mainly directed towards wholesale and retail trade (53.7%), healthcare (13.5%) and manufacturing (13.4%).
The Leading Entrepreneur Accelerator Platform (LEAP) Market was launched on Bursa Malaysia in 2017 – to address the funding gap faced by SMEs and also as an alternative exit avenue for PE firms. This represents part of the authorities’ ongoing efforts to develop the domestic VC and PE industry. Bursa Malaysia is the sole approving authority for LEAP Market listings.
Since its debut in 2017, a total of 48 companies had been listed on the LEAP Market by end December 2022. Notably, listings on the LEAP Market matched those on the Main and ACE Markets combined in 2018 and 2019. The LEAP Market accounted for 5 of the 35 listed entities on Bursa Malaysia in 2022. Given the growth potential of this market segment, the relevant stakeholders are striving to enhance the attractiveness of its ecosystem to both investors and issuers, particularly given the latter’s preference for more trading liquidity.