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Malaysia ready for prominence on SEA private equity and venture capital radar
THE completion of the big-ticket deals in Grab and Go-Jek has reinforced the tech sector's role in pulling in private equity and venture capital money into South-east Asia.
But while investment activity is moving rapidly within ride-hailing services, fintech (particularly e-wallets) and e-commerce platforms, we at RHL Ventures are looking at other areas where disruption is imminent but may not be as visible as the aforementioned sectors.
Yet, despite the rapid growth seen in South-east Asia's startup ecosystem, Malaysia still lags behind its regional competitors. But the space is ripe for growth; not in the least due to Malaysia holding a strategic position both geographically as well as in terms of market reach to Asean and the Asia-Pacific.
To catalyse these opportunities, the role of the private sector will need to overtake government-led efforts. On this front, corporates will need to take a more proactive position.
LEANING ON COMPARATIVE ADVANTAGES
Malaysia's corporates should be more active in investing in startups. This is because we have regional market leaders within areas such as glove production as well as agricultural businesses such as rice and palm oil. With greater involvement, corporates can reinforce their market leader status by investing in innovative entrepreneurs within and in support of these industries.
Combining that with Malaysia's growing talent base and the increased government support to nurture a startup ecosystem, the scaling prospects for innovative tech such as artificial intelligence (AI) and robotics are massive. But while those technologies have conventionally been applied in automation and manufacturing, RHL is helping to grow businesses which are implementing them in less conventional areas such as sports chat platforms and even dating apps.
On top of that, our nature of being sector-agnostic helps us discover innovation in industries that aren't at the top of investors' minds but have the capacity to foster industrial disruption - just as Grab and Go-Jek did so for Southeast Asia's transport sector.
In addition, there is the changing socio-political landscape in Malaysia. There's now more willingness for our high-calibre diaspora to come back and add to the country's talent and innovation pool.
THE CHANGING LANDSCAPE OF EXITS
The exit environment in Malaysia and South-east Asia is still a far cry from what is being seen in more mature markets. While exits on public platforms are still the norm across the region, the overall ecosystem is shifting towards trade sales - where a business (or part of it) is traded to another business - which is becoming more commonplace in South-east Asia.
Hence, more avenues for successful exits are needed to secure the confidence of investors and grow the region's private equity and venture capital ecosystem - so it can fully support the region's entrepreneurial talent.
To raise investor confidence levels, corporate partnerships will be key. We're already seeing this trend ramping up in countries such as Indonesia and Singapore. In Malaysia, the uptake has lagged slightly but there are definitely signs that it will improve in the near future.
LEVERAGING EXTENSIVE NETWORKS TO EMPOWER INNOVATION
With competition heating up between investors across South-east Asia, we're distinguishing ourselves by utilising our collective experience in regional investments and networks to effectively grow innovative startups.
For startups to thrive in a heterogenous market such as South-east Asia, it's important for them to work with backers who have a deep understanding of the region's markets. It's not just about who has the money now; investors have to go further in cooperating more actively with their startups in a sort of mentorship role, which is what we've been striving to achieve at RHL from day one.
We also aim to stand out from other investors by concentrating on empowering forward-thinking businesses which have achieved initial commercial success but have faced roadblocks when expanding regionally. This helps us circumvent the constraints faced by most traditional private equity and institutional investors - especially as we're playing a long-term game and aren't bogged down by short-term market performance benchmarks.
And when we select our portfolio companies, we conduct a bottom-up approach by determining if they can grow sustainably to help generate better margins for investors. The founders also need to be trusted and have the capacity to reach the next level, which we determine via our multi-tiered due diligence assessments.
With competition heating up between investors across South-east Asia, we're distinguishing ourselves by utilising our collective experience in regional investments and networks to grow innovative startups effectively.
- The writer is managing partner of RHL Ventures.