The landscape of the Malaysian venture capital industry is very encouraging. The industry has grown from a small investment pool in the 1980s and 1990s to a mainstream asset class that is a viable and significant part of the corporate and institutional investment portfolio.

To spur further growth in the industry, the Malaysian government has granted a tax exemption for venture capital management companies on income received from profit-sharing agreements, which would inspire venture capitalists to perform better and play a bigger role in creating and nurturing globally competitive companies.

Some of the most heavily venture capital invested industries are manufacturing, information technology, communications, healthcare, bio-technology, manufacturing and services.

How It Works

Every business has a "life cycle" which involves a number of stages of growth and development. The size of investment is usually closely related to the stage of investment.

Venture capitalists refer to the following stages when making investments:

• Seed Stage
  In this initial stage, the venture is still at the idea stage or may be in the process of being organised. Hence, it requires finance for research and development, which is funded by the entrepreneur's own resources.
  
  
• Early Stage
  The company is usually in the process of being set up or may have been in business for a short time. However, it has completed the product development stage. Although it requires less capital funding, the company needs greater assistance to initiate commercial manufacturing and sales of its products than a later stage company.
  
  
• Expansion/Development Stage
  The company is now established and requires capital for further growth and expansion. The company may or may not have made a profit at this stage. This is a period of rapid growth and the company will usually require several rounds of capital injection as it achieves the milestones set in the business plan.
  
  
• Management Buy-out (MBO)
  These are funds provided to enable a current operating management and investors to acquire an existing product or business from a public or private company.
  
  
• Management Buy-in (MBI)
  These are funds provided to enable a manager or group of managers from outside the company to buy in to the company.