By The Star Bytz,

29 May 2012

The private sector must take the lead in angel investment in technology companies in order to achieve quality of growth in the industry.

“The Government can provide the floor but the private sector has to raise the ceiling,” said Nazrin Hassan, chief executive officer of funding agency Cradle Fund Sdn Bhd, at a press conference during the Asian Business Angel Forum 2012.

He noted that the funding gap was most noticeable in the high-tech sector, with many venture capitalists shifting their investment focus to private equity investments from early-stage funding.

“There are currently less than nine venture capitalist funds still active in the sector; we used to have three times as much.

“We hope to boost the investor pool with increased participation from potential investors, such as high net-worth individuals,” Nazrin said.

He also shared that Cradle is in the midst of discussions with government and industry stakeholders to offer incentives, such as tax relief for angel investments and losses.

“We have been in discussion for the last two years on how to make angel investment in high-growth companies more attractive, and we are now at the stage where we are confirming the mechanics,” he said.

Other initiatives include looking at establishing a framework and platform for crowd-funding, with industry players such as the Virtuous Investment Circle (VIC) – an independent not-for-profit angel investment group – now in talks with the Securities Commission.

Crowd-funding is an approach where people pool money and resources together, typically via the Internet, to support a particular project, company or cause.

Bob Chua, chairman of VIC said that a lot of parallels and lessons can and are being taken from mature markets such as Britain.

“Britain back in 1995 was exactly where Malaysia is today, with the need to intensify private sector investment to further grow the startup scene.

“Initiatives such as having tax relief and crowd-sourced funding have done much to take them to today’s number of 15,000 angel investors,” Chua said.

Also announced at ABAF was the Malaysian Business Angel Network (MBAN), an initiative slated to kick off later this year.

Championed by Cradle under the guidance of the Ministry of Finance, MBAN is to support the development of innovation and entrepreneurs.

It is intended be the agent of growth and will also be tasked with forming strategic partnerships with similar organisations around Asia to ensure cross-border investments, collaborations and partnerships to raise the profile of the region and its businesses.

“There is a lack of data for quantifying the size of the angel investor market and MBAN is one way to gather more accurate numbers. Currently the visible market locally stands at about 120 angel investors,” said Chua.