Malaysia’s 2024 Budget has handed to Khazanah the government’s venture capital agencies Penjana Kapital and Malaysia Venture Capital Management (MAVCAP) in a bid to nurture the country’s startup ecosystem, in a further evolution of the sovereign wealth fund’s mandate.

Alongside government-linked companies (GLCs) and government-linked investment companies (GLICs ), Khazanah is also backing a MYR1.5 billion in funding for “bumiputera” (indigenous) SMEs in high-growth, high-value (HGHV) industries, including electronics, the digital economy and the aerospace industry.

Set up by the Ministry of Science, Technology and Innovation, MAVCAP has a US$1.06 billion portfolio, while Penjana Kapital established by the Ministry of Finance has a US$270 million portfolio. By putting them under the control of Khazanah, the government says it hopes to advance Malaysia as a global VC hub.

Khazanah also announced that its Dana Impak program would invest MYR600 million (US$127 million) in economic development projects with a socio-economic impact in 2024. Dana Impak was allocated MYR6 billion (US$1.32 billion) over 2021-26 to invest in increasing Malaysia’s economic competitiveness and build national resilience.

Khazanah is already advancing VC investment, through its own deal origination as well as partnerships, such as the one announced in July with Antler, a global early-stage venture capital firm with a presence in Singapore, Indonesia and Vietnam. The partnership is seeking to back over 30 startups in the next three years. To date, Antler has invested in around 800 companies worldwide and has a combined portfolio value of more than US$3.7 billion.

Khazanah’s partnership with Antler is the latest addition to the SWF’s MYR180 million Future Malaysia Program under the Dana Impak strategy. Dana Impak also has partnerships with pan-Asia VC investor Gobi Partners and global VC investor 500 Global.

Khazanah has also invested directly in VC funding rounds. For instance, in June Dana Impak led a MYR67 million (US$15 million) series B round for insurtech startup PolicyStreet, in line with the Future Malaysia Program. The firm is using the funds to strengthen its technology and on-demand underwriting capabilities, with a view to serving under-insured segments of the Malaysian population.

This month, the Khazanah-backed Gobi Dana Impak Ventures (GDIV) backed a pre-Series A funding round for agritech startup BoomGrow, which aims to bring healthy, nutritious food to densely populated urban areas by repurposing shipping containers into ‘machine farms’.

While the moves into VC are welcomed by startups, Khazanah is still a long way from matching the activity of Temasek, in neighbouring Singapore.

A reduction in Khazanah’s payments to the government has freed up capital for investment, including VC. In 2022, investments (MYR6.6 billion, US$1.5 billion) outstripped divestments (MYR2.5 billion, US$560 million) for the second year in succession. In 2012-19, transfers to the government averaged around MYR970 million per annum, but in 2020 and 2021 it hiked the annual dividend to MYR2 billion – even as the state-owned investor was faced portfolio companies experiencing major difficulties. In 2022, however, dividends were reduced to MYR500 million (US$112 million) and altogether cumulative dividends since 2004 amounted to MYR17.1 billion (US$3.8 billion).

Khazanah attained a MYR1.6 billion (US$360 million) operational profit in 2022, but its net asset value fell 5% to MYR81 billion due to global economic headwinds.

Related funds Khazanah
Related tags Malaysia Inc. VC