What next after the Budget?

Happy Merdeka Fellow Entrepreneurs.

So the budget was revealed by our dear PM on Friday. Malaysia Entrepreneurs was invited to a special edition of Perspektif Kita and we have a few comments on how is it going to effect entrepreneurship, investing and business in general in Malaysia.

To be honest, there was not anything new to shout about.

What was interesting was the allocation in Promoting Venture Capital Companies.

It states that Venture capital companies that invest at least 30% of their funds in start-up, early stage financing or seed capital be eligible for a 5-year tax exemption.

Sure thing, there is a lack of early stage venture investment in Malaysia and I would say in this region. As we know there are 2 main grants who look in pre seed ideas and a bunch of Mavcap linked VC that are investing in early stage startup. Would this encourage the other VC to come in to this market?

We believe No. For one, is it not clear what do they mean by start up. With the Mesdaq not performing as well it should be, there is generally no proper way for them to exit. Even for being a tax heaven, 30% investment is rather huge compare to a much lower risk pumping money into Pre-IPO companies.

I believe this is a commendable effort from the government to get more investment in the seed stage. I believe they should find ways to get more foreign investment in this area.

So what were the other complains?

The participant at the talked show complained there were nothing specific for the ICT industry and for those in Biotech.

Also there were not much in this budget, there are general consensus that the government need to upgrade the human capital of Malaysia as some local MSC companies cannot attract enough talents.

We believe, of course it is good that the government take the initiative to promote local business and create a more vibrant start-up eco system.

The fact is, entrepreneurs must learn to not rely solely on the government initiatives for their businesses. As Dato Rajan puts it, we need to learn to be Merdeka in our minds if we want to succeed.

One thought on “What next after the Budget?”

  1. I was initially quite happy to see the allocation in the Budget 2009 for VCs because I thought it was a commendable effort by the Government to help start-ups, especially those in the pre-seed stage. After all, the 2 main grants from MOF are churning out quite a big number of graduates from their programmes.

    I was very happy for the entrepreneurs. Until I spoke to an industry expert on it. The expert explained that the VCs choose to interpret and define the phrase “early stage financing” to their own advantage without truly giving out monies or investments to start-ups and seed level entrepreneurs. To my own understanding from the explanation given, early stage financing is defined as the pre-IPO level in VCs’ terms, which is many levels AFTER seed funding. The VCs still get to enjoy their 5 year tax exemption, and the entrepreneurs in the pre-seed and seed levels will still struggle to get investments for their ideas/projects/businesses.

    IMHO, in order to truly assist entrepreneurs and help these ideas grow into world-class businesses, the phrase “early stage financing” should be taken out altogether from that particular Budget allocation. A clear definition should be given on the terms “start-ups” and “seed capital” to avoid exploitation.

    Yet, at the end of the day, one cannot wholeheartedly blame the VCs for not wanting to invest in start-ups and in the seed level. 30% is too much of a risk for them and there’s no guarantee that the ideas will succeed in transforming themselves into a profitable business.

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