Malaysian Business Angel Network to function like a trade organization, driving regional and international linkages between angel investors
Will train, educate and accredit angels – the last is needed to qualify for the angel investment tax incentives announced in Budget 2013
IN an effort to plug the gap in early-stage funding for start-ups, Cradle Fund Sdn Bhd, an agency under the Ministry of Finance, has launched the Malaysian Business Angel Network (MBAN), which will educate, train and accredit angel investors.
Accreditation would be a must for angel investors to qualify for the tax incentive the Malaysian Government introduced in its national Budget for 2013.
The establishment of MBAN was announced at the Asian Business Angel Forum 2012 (ABAF 2012) in Kuala Lumpur in May, by Dato’ Seri Ahmad Husni Mohamad Hanadzlah, Minister of Finance II, who also officially launched the network yesterday (Dec 18).
ABAF 2012 also saw discussions around providing tax incentives to angel investors. Professor Richard Harrison, immediate past Dean of Queen’s University Management School, told Digital News Asia (DNA) then that the United Kingdom has been providing such incentives for 30 years now, which had contributed greatly to the growth of the angel investor community there.
Effective Jan 1 next year, an angel investor can qualify for a tax relief of up to RM500,000 per annum, in the third year of his shareholding, for equity investments made in a qualified technology company or a series of companies. To qualify for this incentive, the angel investor must be accredited with the newly-formed MBAN.
[RM1 = US$0.33]
MBAN is an umbrella body that would function like a trade organization, driving regional and international linkages between angel investors. It would formalize and coalesce angel investment in Malaysia - currently informal and somewhat unstandardized, Cradle said.
“MBAN would lead the voice of private sector angels for Malaysia and become their platform for engagement and action, both for the domestic and international community and to help develop the angel capital market within the country,” said Cradle chief executive officer Nazrin Hassan (pic).
“With the existence of MBAN, Malaysian angels can also build the relationships with other angels, to educate, exchange knowledge and benchmark on best practices,” he added.
With such a body as MBAN, angel investors would also be able to:
Begin efforts on cross-border investments;
Lobby for or market investment incentives by the Government;
Unite all local angel investment networks and be the umbrella networking and implementation arm;
Be the central database for angel-related activities; and
Be the voice of the angel investor community to the Government and to other policymakers.
“With MBAN, figuratively, angels will finally have wings to fly,” quipped Nazrin.
Nazrin said that by bringing together angel investment resources in Malaysia, Cradle hopes to recruit more investors and increase investment values to help bridge the early stage investment gap.
Three years ago, Cradle was mandated and tasked by the Ministry of Finance to help jumpstart angel investment in Malaysia and create an angel investment community, he added. At that time, there were no existing angel clubs, as those that had been set up in the past had gone defunct prior to 2004.
“In 2010, with Cradle’s support, an angel network called the Virtuous Investment Circle or ViC was formed. Today, ViC has a network of 20 angels and has invested up to RM10 million in the last two years,” he said.
Since then, two or three other such clubs have been formed, including the Angels Chapter at the National ICT Association or Pikom. These clubs have a total network size of 150 angels and an active investor base of 50 angels.
MBAN is targeting to get 50 members in 2013, and hopes to have a cumulative RM 100 million in angel investments coming via its ranks by 2020, or about 50% of early stage funds coming into the ecosystem.
In terms of membership, MBAN will be hoping to “get the low-hanging fruit which is the existing members of existing angel investment clubs,” said Johnathan Lee, vice president of commercialization and ventures at Cradle.
“We don’t intend to replace these clubs, but want to work with them. Our role is to accredit the various members within these clubs … so that they can qualify for the angel investment tax incentives too,” he added.
Lee said that to qualify for accreditation, angels have to be “high net worth or high income individuals” as defined by the Securities Commission of Malaysia -- total wealth or net personal assets of RM3 million and above; or an income of RM180,000 per annum (RM15,000 per month) or an individual who, jointly with his or her spouse, has a gross annual income of RM250,000 per annum.
“They must also have domain expertise or management experience; a minimum of five years in a relevant industry or role for example, that can add value to the investment beyond mere funds,” he said. Ideally, the angel should also be a member of an angel club.
Meanwhile, Nazrin noted that according to a 2011 report by the Asian Wall Street Journal, Malaysia has over 39,000 millionaires, while Cradle itself estimates that there is an eligible pool of 40,000 taxpayers who earn more than RM15,000 per month and could be considered potential angels.
“Out of these, Cradle estimates that there is an immediate addressable market of almost 3,000 taxpayers who would immediately qualify to be angel investors – a sufficiently large potential pool of angel investors for a country with Malaysia’s population size,” he added.
He also said that Cradle, through MBAN, is already building linkages with Singapore, India, Hong Kong, China, Australia and New Zealand and pursuing linkages to networks in the United Kingdom and the United States in the near future.
Cradle will serve as the interim secretariat for MBAN over the next two years, and will be managed by a pro-tem committee comprising various government agencies and angel groups including ViC, the Pikom Angels Chapter and the AIPO Business Angels Club.
“However, we hope that the local angel networks themselves will eventually organize amongst themselves and take over the running and leadership of MBAN,” said Nazrin, adding that this could perhaps be managed by the angel investor clubs on a rotational basis.
“The full of benefits of having MBAN will only be felt once the leadership is fully private-sector led and industry-driven,” he said. “We have prepared the car, but now we need someone to drive it.”
MBAN’s primary responsibilities are to:
Provide vision and direction, and drive the development of the angel investment industry;
Verify and certify angel investors and/ or clubs in Malaysia;
Track and report angel investments within the country;
Assist in the setting up of angel clubs in Malaysia; and
Run angel investment training for new angel investors
Its secondary responsibilities are to:
Continually conduct research and prepare white papers on the local angel ecosystem;
Advise on issues pertaining to angel investments;
Lobby for policies and incentives that encourage angel investments;
Disseminate and share deal flows amongst different angel members/ clubs around Malaysia; and\
Organize regular networking events if necessary
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