Welcome to Commerce Ventures

Find the answers to Investors' most frequently asked questions:

Need more clarification? E-mail us at enquiry@commerce-ventures.com.my

1. Why is it safer and often more profitable to invest in funds rather than
directly in deals?

Private equity investing, especially venture capital, is truly a full-time business,

seldom rewarding inexperienced or part-time participants. Direct investing requires

both highly specialised skills and access to a broad stream of investment prospects,

called "deal flow".

These requirements are generally best met by the managers of experienced venture

capital funds and who typically invest in only ten of the 1,000 plus business plan

they read. Such investors also create their own deal flow based on full-time

exposure to a given field, thus uncovering holes in a market. They are not as prone

to fund "me-too" or "shop-worn" companies that filter down to casual investors who

operate at a disadvantage.

2. How is Venture Capital different from Private Equity?

Private equity is a broader investment category that also includes leveraged

buy-outs, late stage mezzanine investments as well as some PIPES (private

investments in public equities). Venture capital fits in at the earlier stage in the

private equity spectrum, with emphasis on the word "equity".

3. Why invest in venture capital?

When properly executed, venture capital investing can provide substantially

enhanced long-term returns to a diversified investment portfolio. It operates in a

more imperfect market than most public investments, and consequently investors

see profit potential in these promising companies.

4. What makes a good venture capitalist?

Management backgrounds and networks in specific industries, financial skills,

"people skills", negotiating skills, statesmanship, and boundless energy are some of

the prerequisites of a good venture capitalist. But at its core, venture capital is truly

an apprenticeship business.

At Commerce-Ventures, we undertake years of mentoring to learn how to assess

investment opportunities, set pricing and strategy, build and motivate management

teams, deal with inevitable and unpredictable threats to the businesses, source

additional capital and strategic partners, and, finally, divest these illiquid

investments.

5. How are venture capital returns calculated?

Two ways - internal rate of return (IRR) and multiples of invested capital returned

(Realisation Ratio). Both approaches take into account cash inflows from and

outflows to limited partners after payment of fees and performance profits, called

"carried interest", to the general partners.

The IRR approach also considers the time value of money and assumes periodic

reinvestment of "earnings" calculated over the investment period. Both methods

have their shortcomings and are best viewed in comparison with one another.

6. How are venture funds structured?

Venture Funds are usually organised as limited partnerships where the investors are

limited partners, and the managers are the general partners (GP). The majority of

funds range in size from RM25 million to RM150 million. These partnerships

generally have a 10-year life, or lock-up period, which allows sufficient time for the

managers to make 15 to 25 investments, assist in their maturation process over

several years, and then arrange appropriate sales of the partnership's interests.

7. As an Investor, how do I choose a venture fund?

Hands-on due diligence is needed to determine whether the general partners are

capable of reproducing prior success. Experts have produced 10 basic rules that you

can follow:

How long have the General Partners (GP) been working together? Is the chemistry superior enough to last 10 years?
Turnover? Do they have a hard time retaining people because the anchor GP hordes the spoils?
Which GP made what investments, and is he still with the fund? Invest in people, not a fund name.
Did the GP lead that winning deal or just follow as a passive part of a big syndicate?
Does the entrepreneur in a deal confirm that the GP really added value? Will he work with him again?
What is the workload from the previous fund, and what time is available for your new money?
Competition? Are the GPs in on today's deal flow AND capable of creating their own superior investments?
Are the GPs experts in one or more areas, or just "jack of all trades, master of none".
Have the GP's run a portfolio of deals before, or were they just good serial investors?
Scale? How much money have they managed before and want to raise now, with how many GPs?

8. How can Commerce-Ventures assist me as an investor in companies at
start-ups and early stages of development?

Commerce-Ventures will actively seek out the most promising companies at start-

ups that meet your specific investment criteria. We will also conduct market

segment analysis as well as talk to consumers to help us thoroughly evaluate the

companies in order to get only highly potential companies.

9. How then do I invest in Commerce-Ventures?

To become a Commerce-Venture investor is easy. Contact our Business

Development department to know more about the criteria of investors that we work

with:

Commerce Asset Ventures Sdn. Bhd.

No. 6, Commerce House

22-24 Jalan Sri Semantan Satu

Damansara Heights

50490 Kuala Lumpur

Malaysia

Or you may send an email to us at enquiry@commerce-ventures.com.my with your

complete contact details and a brief company/personal summary. We will contact

you as soon as possible.

10. Does Commerce-Ventures guarantee Security Commission compliance for
its offerings?

No, every entrepreneur is responsible for complying with all Security Commission

compliance and regulatory issues. Thus, we encourage all client companies to have

qualified counsel to direct them through the fund raising process.