Concerns over fundraising and the need to conserve cash are weighing on the minds of entrepreneurs and dealmakers as the Malaysian government announced a nationwide lockdown from March 18 to 31 to avoid the spread of the novel coronavirus.
“[The prolonged COVID-19 outbreak] definitely has a negative impact on the market. The most difficult part, of course, will be the fundraising activities by companies and by the funds,” said Jamaluddin Bujang, managing director at venture capital firm Gobi Partners.
Bujang, a former chief executive officer of Malaysia Venture Capital Association, added that it is important for companies to conserve cash and manage it accordingly at this critical juncture when businesses are expected to witness a significant slowdown.
While a host of startups have seen a ripple effect of the coronavirus outbreak, Jamaluddin said none of them have so far closed down. This is even as dealmaking in many cases has hit a stumbling block since on-site due diligence has slowed down.
“So far, our portfolio companies are fine, they are managing the crisis. We are staying at the sideline at this moment,” he said, adding that companies and investors need to wait for another four to five months, or till the end of the year, to have better clarity on their investment plans.
Meanwhile, several Malaysian private firms that DealstreetAsia spoke to said they are feeling “the heat and are gearing up to prepare for the worst-case scenario.”
“We are still in talks for fundraising. But I suspect right after all this groundwork is done, the investor won’t pull the trigger until they see this Covid thing over,” said Timothy Tiah, founder of Malaysian premium co-working firm Colony.
In February, Tiah had indicated that the firm was in talks to raise $20 million in a Series B funding round this year to expand its operation to Thailand and the Philippines.
Meanwhile, Malaysia’s co-living platform Livein chief executive officer and co-founder Keek Wen Khai signaled how the Covid-19 has hit most businesses, including those in the co-living space.
“Everyone is worrying when they are meeting new people. This has definitely affected our member growth,” he said.
E-commerce businesses, on the other hand, evoked mixed responses.
“On the positive side, I believe e-commerce businesses will thrive with the current businesses,” said Ganesh Kumar Bangah, founder and executive chairman at e-commerce solution provider Commerce Asia. However, he added that the industry may stare at adversities as “growth (in e-commerce) in nascent markets like Southeast Asia is driven by capital.”
Echoing the same sentiment, former National Tech Association of Malaysia (PIKOM) chairman said the current negative investment environment would affect funding plans of companies across major sectors even as he cited opportunities in social commerce.
“We are seeing very strong growth in our omnichannel e-commerce, Sitegiant, which has grown 100 per cent in gross merchandise value (GMV) from 2018 to 2019, and social commerce platform, Bizapp, which has also grown 108 per cent in GMV from 2018 to 2019 respectively,” he pointed out.
However, what’s interesting is that despite growth being witnessed by digital services platforms, payment gateways are not performing as well. This, said experts, can be attributed to the slowing growth in the tourism sector that has been one of the worst-hit in COVID-19 outbreak with airlines, wellness chains, hotels and retailers reeling under tremendous pressure.
“Digital business is growing, but when the rest [of the economy] is negative, the adverse impact is tremendous,” said Chan Kok Leong, founder at Malaysia’s payment gateway provider ipay88. According to Chan, there has been a deceleration of growth for the company amid the COVID-19 outbreak.
According to Maybank Investment Bank Research, the impact of the pandemic may last for a year at least with crude oil price averaging $20 to $30 per barrel. That will result in countries starting at a virtually stagnant economy.