Malaysia’s listed diversified conglomerate Malayan United Industries Berhad (MUI) – whose business interests span
from confectionery to property – is betting big on startup investments to capitalise on the digitalisation boom.
MUI created an early-stage venture capital vehicle Pan Malaysia Ventures Sdn Bhd (PMV) in August last year to invest in tech or tech-enabled businesses at the seed or Series A stage primarily in Malaysia, and also across Southeast Asia, MUI executive chairman and chief executive officer Andrew Khoo told DealStreetAsia.
MUI has invested in at least 5-6 startups since its foray into the VC space in 2020. In 2021, MUI is looking at a similar investment momentum. It is targeting to invest an average of $100,000-200,000 for a pre-Series A round, Khoo said.
PMV (formerly Gelombang Sinar) is a wholly-owned subsidiary of Pan Malaysia Corporation, a unit under MUI. MUI’s move into venture capital comes at a time when the company’s core businesses in the hospitality and retail sectors have suffered a severe impact on account of the virus-induced lockdowns and movement restrictions.
MUI, which has been in the red since 2014, saw its net loss widen to 194.42 million ringgit ($48.42 million) in the financial year ended June 2020, from a net loss of 106.21 million ringgit a year ago.
MUI has no immediate plans of raising funds from external investors as it will invest from its balance sheet. “As we are not raising external funds, we do not have a fund life or external pressures when it comes to making investment and exit decisions,” Khoo said.
Describing MUI as a “patient investor with a long-term horizon,” Khoo said, “we are investing in next-generation businesses that will create an impact on society. Nevertheless, we expect a double-digit internal rate of returns for our portfolio of investments.”
MUI, which is already a limited partner in Singapore-based Genesis Alternative Ventures’ $50-million fund, is bullish on the venture debt space as also other LP opportunities apart from direct venture investments.
“Venture debt is an important part of the financing needs for every growth stage venture-backed company and hence our investment into Genesis enabled us to seek out attractive companies seeking debt financing and help these entrepreneurs with much-needed funding,” Khoo said.
PMV and Genesis will be collaborating to seek out startups for both equity or venture debt investments, he said.
“Selectively, MUI might look into investing in other venture funds that can complement this strategy and to also widen out network and deal flow capabilities,” he added.
MUI will focus on investments that bear synergy with the group’s core businesses of financial services, retail, hotel, property, and food. In that direction, it has invested in the Asian marketplace welovesupermom.com.
“This is a highly strategic investment because, with our experience in traditional retail and welovesupermom’s experience in the online space, we hope to leverage each other’s expertise to create an outsized growth trajectory,” he said.
Other startups MUI has invested in include Singapore-based credit management firm Flow; Hong Kong-based on-demand expert network platform Lynk Global; US-based 3D imaging platform Matterport and Singapore-based co-living company Hmlet.
On MUI’s investment approach, Khoo said, “as an operating business, we have the knowledge and experience that we can bring to the startups. We believe that a portfolio diversification strategy – a proven VC model – will help us identify some big winners.”
Also, an emphasis on venture debt [in collaboration with Genesis] will allow MUI to derisk its portfolio. “With venture debt, we are getting recurring cashflow, both interest and principal, throughout the three-year tenure of the loan,” he reasoned.
Corporate VC activity picks steam
MUI’s latest move is in line with several mainstream corporates in Malaysia hopping on the venture investing bandwagon.
Sunway Berhad, a listed conglomerate with business interests spanning property to construction and healthcare, established Sun SEA Capital in July 2018 with a planned size of $50 million to invest in Southeast Asian and Hong Kong startups.
Later in June 2019, Sunway partnered venture capital firm Gobi Partners and state-linked Malaysia Venture CapitalManagement Berhad to launch a $10-million micro fund targeting early-stage startups in Malaysia.
Other corporations in the country that have set up VC arms include Malaysia’s state oil and gas firm Petronas and budget airline AirAsia Berhad.
Petronas announced the setting up of a $350-million VC arm, Petronas Corporate Venture Capital, to tap investments in startups in advanced materials and specialty chemicals in 2019.
AirAsia launched its digital venture arm in 2018 to create an ecosystem of businesses that will help transform the airline to become a full-scale digital company.
Source: Deal Street Asia