Malaysia’s Mavcap partners China’s Gobi for $50m fund, focuses on SEA, China

In a DSA file photograph, Mavcap chairman Rahim Hamid, Axiata chairman Azman Mokhtar, Mavcap CEO Jamaludin Bujang, Prime Minister Mohd Najib Abdul Razak, Axiata president and group CEO Jamaludin Ibrahim

Malaysia Venture Capital Management Berhad (Mavcap) has partnered China’s Gobi Partners to launch a fund of $50 million to invest in startups across Southeast Asia and China.

Gobi Partners marks the third international partner Mavcap has on board its outsourced partners programme.

Local business daily StarBiz reported that Mavcap chief executive officer Jamaludin Bujang believed that the partnership signalled a good opportunity for startups, for exposure to capture local and China markets.

Mavcap, which is Malaysia’s largest venture capital (VC) firm, makes direct investments ranging from MYR1 million to MYR20 million and participates actively in the management and operations of information and communications technology (ICT) startups locally.

Gobi managing partner and co-founder Thomas Tsao said the group recently established its Kuala Lumpur office and was focusing on expanding its business across Southeast Asia.

Tsao is hoping to capture about 25 to 35 companies in Malaysia.

The VC firm, which is headquartered in Shanghai, recently announced a $94 million fund dedicated to providing start-ups in China with early-stage funding.

Gobi is a leading investor in digital media, IT and technology, media and telecommunications companies in China and Asean, with a current portfolio consisting of photo app Camera360, online travel agency Tuniu, and Madhouse, one of China’s leading digital advertising agencies.

Established in 2002, it has funded over 100 companies and invested in six funds through its offices in China, Hong Kong and Singapore.

Mavcap invests in five to 10 companies annually, taking up to a 40 per cent equity stake in each investee for about three to eight years to provide advice and guidance to the companies. Once the company begins to thrive, it will plan an exit.

“However, it is challenging to identify worthy companies, as they must have scalable products and economical business plans to be eligible for the fund.

“For example, you must search for 20 companies to find one. They must have all the boxes ticked and attractive valuations,” Jamaludin was quoted.

Year to-date, Mavcap has invested MYR66.22 million in up and coming ICT start-up companies, surpassing its total investments of MYR60.62 million in 2014.

The group, under the purview of the Malaysian Finance Ministry, has allocated MYR642.75mil to 170 startup companies thus far.

Locally, Mavcap has partnered several VC firms in its investments, such as Teak Capital, Intres Capital Partners, QuestMark Asset ManagementAstra Partners, Expedient Equity Two and Musharaka Venture Management.

Through its outsourced partners programme, Mavcap also allocates capital to other VC fund-management companies to invest in high-growth businesses.

Mavcap has partnered numerous local and international VCs to set up funds such as Elixir Capital Management and DTA Capital Partners Sdn Bhd. It has also worked with 500 Startups.

Last year, Mavcap set up a $30 million fund with Axiata Group Bhd intended at promoting innovation and growth in Malaysia’s digital ecosystem.

Jamaludin said Mavcap was also looking to work with other corporations, noting that the firm is in collaboration with one undisclosed corporate.

Currently, about 60 per cent of VC funds comes from government sources, with only nine active private VC firms in the country. Many industry observers have noted that VC firms need to push Series A stage funding further, as startups which are surpassing the seed stage growth mature into revenue-generating business models. In the context of Malaysia, Series A stage ready startups usually have recurring revenue of between MYR200,000 and MYR1 million.

Also read: Axiata, Mavcap launch $30m VC for digital cos

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