Corporate venturing has been a key factor influencing the growth of the tech ecosystem in Malaysia. According to Capital Markets Malaysia (CMM), it involves a large company investing funds into external startups in exchange for equity, assimilating new businesses to eliminate competition, or fast-tracking the development of novel products. As a result, it enables organisations to be competitive, get access to other markets, experience long-term growth, and diversify their offerings with new technologies and products.
As a subset of venture capital, corporate venturing in Malaysia comprises corporate venture capital (CVC), accelerators, incubators, and partnerships. The ecosystem has organisations like CMM, which has a developmental and promotional mandate, and the Securities Commission Malaysia (SC), which collaborates with stakeholders to develop the corporate venture landscape. Others are Bursa Malaysia, which advocates for market development, and the Malaysia Digital Economy Corporation (MDEC), which launches local tech companies into the global space.
Emerging startup trends reshaping Southeast Asia’s digital economy
The final partner in the CVC landscape is the Khazanah Nasional Berhad, a sovereign wealth fund established to benefit tech startups in Malaysia. For example, in 2023, it launched the Future Malaysia Programme, a five-year commitment initiative to support, fund, and share ideas with early-stage companies. Khazanah worked with VC firms Gobi Partners and 500 Global to encourage regional venture funds to invest in Malaysian companies and push startups to expand regionally and globally.
How can corporate venturing in Malaysia support the tech ecosystem?
One of Malaysia’s best tech hubs is Kuala Lumpur, which raised USD 47 billion in startup environment value between 2021 and 2023. Top sectors include fintech, artificial intelligence (AI), Big Data & Analytics, and Sustainability. Additionally, some of the country’s startups making waves include:
- Carsome, Southeast Asia’s largest integrated car eCommerce platform.
- Respond.io, an AI-powered software for customer conversation management.
- Naluri, a digital health service provider.
- MyMy Payments Malaysia, a fintech and eWallet provider.
How corporate venturing is impacting Malaysia
The CMM report ‘Advancing Malaysia’s Innovation Landscape: The Pivotal Role of CVC’ shows that corporate venture capitalists seek strategic returns on disrupting the tech environment, bringing innovation into their companies, and earning financial returns from their novel tech-powered product and service offerings.
Corporations recognise that failing to invest in innovation is the biggest threat to their survival. The CMM report shows that CVCs are using dedicated fund vehicles, which were over 1000 in 2021, to identify opportunities to access a wide range of technologies at different stages of development. This means they will have a competitive advantage if the products work out.
CMM’s survey showed that 64% of Malaysian corporations believe their innovation ambitions align with their strategies and goals. They are pushing the tech landscape to seek more capital for research and development projects.
The e-Conomy SEA Report 2024 says Malaysia wants to enhance regulatory frameworks to improve capital market efficiency. For example, its Securities Commission reduced initial public offering (IPO) time to three months. The government has also enabled the growth of the digital financial services (DFS) sector, with digital banks like GXBank making their mark on the fintech industry.
Malaysia is using its global tech hub, Cyberjaya, as an innovation sandbox that empowers startups and secures millions in investments. It has enabled initiatives like CLLA, one of the earliest accelerator programmes in the country. Furthermore, collaboration with CVCs has ensured startups have resources and networking opportunities to reach bigger markets.
Trends in corporate venturing and its impact on Malaysia’s tech ecosystem
As the CMM report notes, there are some barriers affecting corporate venturing in Malaysia. One is VC expertise gaps that prevent companies from identifying opportunities and managing investments effectively. Secondly, concerns over return on investment (ROI) may create uncertainty and risk aversion in making deals. Third, management’s focus on core business may prevent them from running the CVCs well.
The good news is that the tech ecosystem in Malaysia is ripe for further investment. Future trends will focus on sustainability and AI. For example, a prominent CVC player is Petronas, Malaysia’s national oil company, which is diversifying by targeting the sustainability sector through startups innovating in the clean energy space.
With the tech landscape in Malaysia needing funding, entrepreneurs and founders must establish their businesses in sectors that are receiving attention from investors. For example, the AI industry is getting more than a fifth of the capital coming into the country.
Ultimately, tech startups in Malaysia will thrive as the nation encourages collaboration among multiple stakeholders and boosts innovation through corporate venturing. Corporations should consider funding not only early-stage startups but also others at later stages to ensure the growth of the digital economy.