by Paramjeet Kaur

August 3, 2000

The Government can help create a vibrant venture capital industry by providing tax incentives to attract foreign venture capital companies to Malaysia as well as ensure a proper exit for these funds, which would usually look to divest their investments after a certain period of time.

Walden Internatonal Investment Group (WIIG) executive vice president Chok Kwee Bee said the Government may also want to consider relaxing the rules in equity holding of these companies.

Chok, who has been seconded to head the WIIG's joint venture with Bank Industri, BI walden Management Sdn Bhd (BIW), which was set up in 1990, said this would help stimulate an inflow of foreign funds in Malaysia.

WIIG is a US-based venture capitalist located in the Silicon Valley, Palo Alto. Headquartered in San Francisco, it has branches in 12 countries including India, China and the Philippines.

She pointed out since BIW ventured onto the scene 10 years ago, the Malaysian venture capital industry has grown tremendously, not only because of the proliferation of venture capital companies but also due to the increase of business angles as well as corporate players looking to get into the game such as Berjaya Group or the TH Group.

She said the advantage for companies such as WIIG, of being in the Malaysian venture capital scene at the moment, is that it can tap into its group resources when it encounters technologies new to Malaysia, which may already be established in the U.S.

She said in its early days in Malaysia, BIW did not have much opportunity to make use of its Silicon Valley expertise in evaluating high technology companies, so its first fund of RM10 million was spent on manufacturing companies.

Chok added that for BIW, Walden does the evaluations while the funds are sourced by Bank Industri from the Government or corporate players.

However, if additional funding was required, Walden was able to tap into its group resources sometimes into the billions.

She said when the company had invested its first fund, Bank Negara allowed it to take its second fund offshore to gain experience in investing in technology companies in the Silicon Valley.

By 1996, she said, BIW was already actively investing in various companies and helped set up a wafer foundry Siltera Sdn Bhd (formerly known as Wafer Technology Malaysia), in Kulim.

"This investment of US$1.5 billion (US$1 = RM3.80) came mainly from our parent company, with contributions from local investors such as Government investment arm, Khazanah Nasional Bhd.

Local entrepreneurs have complained that most venture capital companies in Malaysia have a banking background without the requisite expertise to evaluate their companies and thus these companies find it difficult to obtain funding.

Chok, while admitting this, pointed out that the "new economy" by its very definition is "new" and everybody is still learning about it. "If we don't understand, it is the entrepreneur's job to explain it to us."

How does BIW evaluate a business plan?

Firstly, she told entrepreneurs, be concise. Business plans should not be more than 20 pages long. "If the idea interests us, we would conduct some research on the product or service being offered. Generally, we would look at the viability and market perception."

She added that BIW would also look to meet the management at the outset to ensure that its two key criteria, drive and integrity, are present. She said that BIW is capable of recognizing both factors in a company and, in addition, it will do a rough survey to see how the business community perceives the potential investee.

If all goes well, BIW will send the company a "letter of interest." Once the preliminaries are out of the way, she said, BIW will conduct an in-depth due diligence, which usually takes six weeks, looking into legal approvals and documentation as well as the technology.

"For example, if we were evaluating a search engine, we would test its speed, scalability and performance. Local specialists, with hands-on experience will conduct the evaluation process and if the need arises we will tap the Walden Group experts," she said.

The business model is also taken into account, especially its ability to generate revenue, marketability and adaptability to changing conditions. Chok added that once a company is up and running, BIW will require a seat on the board to continue guiding the company.

"We would not be involved in the day to day operations, but would be more focused on strategic planning, for example, we would look at taking the company regional and global.

"At BIW, we believe in value-adding. Our goal is for our investment to succeed and get listed. We help the company in any way we can, sometimes even by coaching the chief executive officers to be more press friendly and marketable, which is lacking in most Asian entrepreneurs."