Launches its first venture fund with US$15mil of its own capital
Sees fund as helping to push its ‘Advancing Asia’ mission
TAKING a different path from the digital strategies of regional telcos such as SingTel and Telenor Group, Axiata Group Bhd announced today it is setting up a US$30-million (RM100-million) venture fund with Malaysia Venture Capital Management Bhd (Mavcap).
Axiata is starting by investing into a fund that will look at Malaysian entrepreneurs, with a particular focus on bumiputeras, with about 70% of the fund targeted at them. The term 'bumiputera' includes the Malay-Muslims who make up about 60% of the country’s population, indigenous peoples, and certain native races of East Malaysia.
The Axiata Digital Innovation Fund (ADIF) was launched this morning (Nov 4) at a ceremony attended by Prime Minister Najib Razak and Minister of Communications and Multimedia Ahmad Shabery Cheek.
Axiata’s move differs from those of other telcos which are looking into the startup space. SingTel created its own venture fund SingTel Innov8, while Telenor has been birthing startups from within its corporate structure through a separate entity, Telenor Digital, besides making investments in Internet companies. Both have been looking globally for deals.
[Additional statement from Axiata: “ADIF is an Axiata initiative at the group level that is independent of the broader and much bigger Axiata Digital Services (ADS) initiative. The fund does support our ADS programme by spurring the ecosystem in Malaysia, which is one of our largest markets, and part of ADS’s core strategy”]
In Malaysia, a company is classified ‘bumiputera’ when 51% of the shareholding is owned by such individuals. However, an executive familiar with the fund told Digital News Asia (DNA) that depending on the deal flow, the 70% bumiputera ratio will be relooked at the end of the first year.
[Mavcap Note: “We wish to clarify that the fund targets 70% bumiputera participation. At this point, we will work towards achieving the given target and the question of reviewing it after a year is not in the plan.”]
The fund is targeting investments at the Series A level, which in Malaysia tend to be deals starting at US$1 million (RM3 million), with a cap of no more than US$3 million (RM10 million) in any single company.
The ADIF represents the largest digital corporate venture capital fund in Malaysia. It will focus on companies with both enterprise and consumer services that can enhance and add value to Axiata’s 250 million customers across Asia.
Axiata will invest US$15 million (RM50 million) into the fund, with Mavcap investing US$6 million (RM20 million). Mavcap will jointly manage the fund with Teak Capital and QuestMark Capital Management.
While it will not have any role in the running of the fund, an Axiata executive will sit on the investment committee.
The parties are targeting to raise the remaining US$9 million (RM30 million) by the end of the second close of the fund.
Mavcap chief executive officer Jamaludin Bujang told DNA that they are open to regional investors coming in. At the moment talks are ongoing with a Malaysian corporate entity, he added.
Axiata Group president and chief executive officer Jamaludin Ibrahim (pic) said he is excited about the impact of the fund, which he sees as being in line with its ‘Advancing Asia’ mission, via connectivity, technology and talent.
“We aim to make a real difference to people’s lives and help to transform the economies of the countries in which we operate,” he said in a statement.
Jamaludin Ibrahim said he expects the fund to invest in and support fast growing and innovative digital services startups which are crucial to the telco industry and national development.
“Axiata has been growing significantly over the last few years and now feels a responsibility to spur other Malaysian companies, especially bumiputera companies, to become successful too. Via this programme, we intend to nurture talent, enabling them to grow bigger and faster,” he said.
As with similar programmes and funds by other telco investors, the startups will potentially have access to Axiata’s market over 13 million customers in Malaysia and over 250 million across Asia, together with its knowledge of the region.
This will offer the Malaysian entrepreneurs not just funding but regional partnership opportunities, Axiata said in a statement.
To Mavcap’s Jamaludin (pic), a DNA Digerati50, a standout feature of the agreement is the coming together of public and private entities.
“This is a unique partnership as it is among the first few between a Government-backed venture capital firm and a corporate investor.
“The new fund is in line with our aspirations to increase availability of funding for deserving companies, while at the same time reducing dependence on government funding,” he said.
Mavcap hopes the Axiata investment will be the catalyst for more Malaysian corporations to realise the value in actively investing and participating in venture capital funds.
“This is all the more crucial for Malaysian multinational companies (MNCs), as they must take steps to remain competitive in an increasingly globalised economic environment, particularly in the face of fiercer competition expected from foreign-owned MNCs as the economy becomes more liberalised in the future,” said Mavcap’s Jamaludin.
According to an executive familiar with its plans, Axiata plans to launch a number of other funds next year, but it is unclear if it will take a direct management role in those funds or stick to its ADIF model and rely on venture capitalists.
By 2020, the regional telco hopes to nurture and fund a substantial number of bumiputera and Malaysian digital services businesses and build five to 10 regional champions, the executive told DNA.
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