<article>The Malaysian government has initiated a process to restructure two government-linked venture capital (VC) funds, Malaysia Venture Capital Management Bhd (MAVCAP), and Cradle Seed Ventures.</article>

The Malaysian government has initiated a process to restructure two government-linked venture capital (VC) funds, Malaysia Venture Capital Management Bhd (MAVCAP), and Cradle Seed Ventures.
The Ministry of Energy, Science, Technology, Environment and Climate Change (MESTECC) is in charge of the process and any subsequent restructuring.
DEALSTREETASIA has learnt that the restructuring exercise may result in the closure of Cradle Seed Ventures (CSV), the venture capital arm of Cradle Fund, as well as Malaysian Technology Development Corporation (MTDC) and Kumpulan Modal Perdana (KMP).
MTDC is a wholly-owned subsidiary of sovereign wealth Khazanah Nasional Bhd. It was set up to promote the adoption of technologies by local companies via commercialisation of local research and development or acquisition of foreign technologies. On the other hand, KMP was established under the Ministry of Finance to invest in local tech firms.
Meanwhile, MAVCAP, which has previously backed startups including Grab, Fashion Valet, Hermo, TheLorry, Katsana, Easy Parcel, Aerodyne and Carsome, is expected to be reorganised as a fund of funds and will cease to make direct investments. The VC firm in the past has also invested in local VC funds such as Teak Capital, Axiata Digital Innovation Fund and the Meranti Asean Growth Fund.
A source familiar with the matter said that the closure of CSV is to reinstate Cradle Fund&#8217;s initial purpose, which is to provide grants to early-stage startups. The restructuring efforts will also see the shuttering of Cradle Fund&#8217;s DEQ800, an equity investment programme that invests up to RM 800,000 ($193,052) in local tech startups.
By shutting down CSV and DEQ800, Cradle Fund will be left with Cradle Investment Programme 300 (CIP300), a pre-commercialisation programme that provides financial and value-add assistance of up to RM 300,000 to local entrepreneurs. It is a conditional grant and does not involve a transfer of an equity stake.
Launched in June 2015, CSV typically invests in pre-Series A rounds and above, cutting check sizes between $300,000 and $1 million. With an initial corpus of RM 40 million ($9.6 million), it has backed startups including InvolveAsia, a referral platform that connects businesses with customers; ServisHero, a regional mobile marketplace for local services; and TheLorry, a lorry on-demand startup; among others. The firm recently led an investment in local fintech startup <a href="https://www.dealstreetasia.com/stories/moneymatch-pre-seriesa-129873/">MoneyMatch</a>.
CSV recently saw its CEO <a href="https://www.dealstreetasia.com/stories/cradle-seed-ventures-magic-130837/">Dzuleira Abu Bakar move</a> to Malaysian Global Innovation &amp; Creativity Centre (MaGIC). Cradle Fund&#8217;s chief investment officer is now the acting CEO at CSV. Similarly, at MAVCAP, its CEO of seven years, Jamaludin Bujang, exited <a href="https://www.dealstreetasia.com/stories/mavcap-ceo-gobi-partners-128245/">the VC firm last October</a>, and is now a managing director at Beijing and Kuala Lumpur-based VC firm Gobi Partners.
It is understood that Cradle Fund is currently administered by MESTECC, although it is still funded by the Ministry of Finance.
When contacted, both Cradle Fund and MAVCAP said the agencies are still awaiting further instructions from MESTECC and declined to comment. MESTECC Minister Yeo Bee Yin did not respond to queries, while the finance minister&#8217;s political secretary Tony Pua said &#8220;restructuring is being planned&#8221; but did not divulge details.
The restructuring is in line with the <a href="https://www.dealstreetasia.com/stories/malaysias-national-budget-2019-highlights-110393/">national budget announcement made by Finance Minister Lim Guan Eng</a> last November, who said all state-linked VC funds will be streamlined and made more efficient in delivering capital to companies in various stages of financing needs.
According to a <a href="https://www.thestar.com.my/news/nation/2019/05/04/ministry-to-take-on-80-initiatives/">recent report by The Star,</a> Yeo had said that MESTECC had appointed a task force to consolidate the VC funds and a cabinet paper is in the works, with further announcements to be made once the paper was approved.
The task force is chaired by V. Sivapalan, co-founder and chief evangelist at Proficeo Consultants, which runs the Coach &amp; Grow entrepreneur programme for Cradle Fund. He is also the president of Malaysian Business Angels Network (MBAN) and has recently been appointed as one of the <a href="https://www.dealstreetasia.com/stories/malaysia-pe-vc-council-131322/">seven new members to the Malaysian Venture Capital and Private Equity Development Council (MVCDC)</a> by the Securities Commission (SC) Malaysia.
In February, the SC had said <a href="https://www.dealstreetasia.com/stories/targeted-govt-intervention-needed-to-spur-vc-ecosystem-says-sc-malaysia-120819/">targeted government interventions were needed</a> to spur further growth in the local VC ecosystem, outlining eight recommendations made by the Institute for Capital Market Research (ICMR).
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<a style="color: #ff0000;" href="https://www.dealstreetasia.com/stories/cradle-seed-ventures-magic-130837/">Malaysia: Cradle Seed Ventures’ Dzuleira joins MaGIC as CEO</a>
<a style="color: #ff0000;" href="https://www.dealstreetasia.com/stories/malaysian-funds-deny-reorganisation-104643/">Malaysian funds including MAVCAP likely to be reorganised by Ministry of Finance</a>
<a style="color: #ff0000;" href="https://www.dealstreetasia.com/stories/targeted-govt-intervention-needed-to-spur-vc-ecosystem-says-sc-malaysia-120819/">Targeted govt intervention needed to spur VC ecosystem, says SC Malaysia</a>
<a style="color: #ff0000;" href="https://www.dealstreetasia.com/stories/malaysia-startup-vc-130959/">Why are early-stage investments abysmally low in Malaysia?</a>

The restructuring could result in Cradle Seed Ventures shutting down, and Malaysia Venture Capital (MAVCAP) becoming a fund of funds.

Malaysia's government-linked VC funds likely to be restructured

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