But one venture-capital organisation is trying to change the old ways of doing business through affirmative, yet discreet, action.

Malaysian Venture Capital Management Sdn Bhd (Mavcap) isn't making a big deal about it but its recent funding of 10 investee companies, the bulk of which are small IT (information technology) players, is an indication of its intent.
The 10 are part of the 28 investee companies that Mavcap had invested in as at Dec 31 last year. A wholly owned subsidiary of the Minister of Finance Inc, Mavcap was established in April 2001 and entrusted with RM500 million to be invested in the information and communications technology (ICT) sector.

Mavcap chief executive officer Mohd Azwar Mahmud says that to date, a total of RM79.78 million has been invested in the 28 companies but only RM44.64 million has been disbursed. Since 2001, Mavcap received 1,119 applications seeking RM8.45 billion in funds.

The fund manager invested directly in 10 companies. Its four outsourced venture-capital partners X to which it granted RM25 million each X invested in the other 18.

The 10 investee firms are IT Surplus Sdn Bhd, Aztec Wireless Solutions Sdn Bhd, Full Seasons Technologies Sdn Bhd, GameBrains Sdn Bhd, Grenidea Technologies Pte Ltd, Innotive Corp, NuSuara Technologies Sdn Bhd, Payment Transaction Technologies Sdn Bhd, Sigmax services Sdn Bhd and UnrealMind Interactive Sdn Bhd. They were revealed to the press by Mavcap last week.

The investee companies are involved in various ICT businesses covering wireless applications, business processes, security encryption, smart cards, software, mobile games, education, electronics, microelectronics microsystems and biotechnology.

The most interesting of the lot is IT Surplus. A two-man company incorporated on Aug 16, 2001, it won a contract to build and manage the ICT infrastructure and provide ICT services for the 4,500-acre Proton City project in Tanjung Malim, Perak.

Bashah Abdul Aziz, who holds an 85 per cent share in IT Surplus, estimates the deal to be worth 3.0 per cent, or RM120 million, of the RM4 billion township project.

Hilmihazim Abdul Rahman, a director, owns 5.0 per cent of the company, while Mavcap, which provided seed funding of RM500,000, got a 10 per cent stake.

Bashah, who is also IT Surplus executive chairman, says he approached Mavcap late last year with the Proton City proposal and secured its approval in six months.

Bashah, the founder of Electronic Commerce Technology which masterminded the Real Rewards loyalty programme (he has since sold that off) with Telekom Malaysia Bhd, had a tentative deal with Proton City Development Corp Sdn Bhd (PCDC), the developer of the project, but needed the funds to kickstart the deal and to persuade Telekom to partner him. PCDC is a joint-venture company established between Hicom Bhd, Perusahaan Otomobil Nasional Bhd (Proton) and Khazanah Holdings Bhd.

It is believed that some big players with deeper pockets were also eyeing the deal and had hoped to cut in on it, but Mavcap¡'s entry managed to swing it IT Surplus' way. Mavcap is also expected to invest further as the project proceeds.

The cost of laying out the IT infrastructure alone is expected to be between RM15 million and RM20 million says Bashah who envisions deploying broadband, Wi-Fi, voice-over-Internet protocol and digitised utility services such as remote metering, to name a few.

Telekom will lay the fixed line and IT infrastructure while IT Surplus will deploy broadband services and manage the portal. Prospective buyers of Proton City properties will be able to choose the ICT services they want installed in or provided to their new homes or offices via the Net.

Bashah says his role is also to help integrate Proton's IT system with its 18 manufacturing vendors so that information flow is seamless.

The finer details have yet to be finalised but IT Surplus will likely offer a 60:40 revenue-sharing deal with Telekom Malaysia. The company will further split its earnings with Proton City.

IT Surplus may be a newcomer on the local technology scene, but Bashah was a systems engineer with IBM for three years before striking out on his own with the Real Rewards programme. He says Mavcap was attracted to his vision of a digitally wired-up Proton City.

He was able to leverage on his previous business relationship with Telekom, which signed a memorandum of undertanding with it two weeks ago to install the IT infrastructure at Proton City. Mavcap's Azwar was among those present at the ceremony, which was witnessed by Second Finance Minister Datuk Dr Jamaludin Jarjis.
Mavcap introduced its 10 companies at the event.

IT Surplus' experience clearly shows that having Mavcap on board helps. Organisations that might otherwise not bother with these untried IT players would be more willing to consider them.

Mavcap's progress can be described as aggressive. According to Ministry of Finance data, the venture-capital industry invested RM109.3 million in 42 companies in 2001, when Mavcap had yet to start investing. Last year, however, Mavcap accounted for RM79.78 million, or 67 per cent of the previous year's total.

Some 46 per cent of Mavcap's current portfolio comprises seed investments and as at last December, Mavcap had committed RM162 million of which RM103 million went to its outsourcing agencies. Another RM58 million was channelled to seed and direct ventures.

From a technology perspective, Azwar says Mavcap continues to seek "new-to-the-world" or disruptive propositions that essentially seek to change the way things are done without necessarily being hugely innovative. He cites the example of Grenidea Technologies, which uses oil palm fibre waste to produce non-toxic biodegradeable food containers that will do away with non-environmentally friendly Styrofoam packs, for instance.

In the area of disruptive capabilities, he cites NuSuara Technologies, a Malaysian-based firm that focuses on voice-activation technology through the use of natural language processing that's similar to what REDTone is doing but which is a lot more sophisticated. The technology is Malaysian-owned too.

Azwar, however, recognises that seed deals may not necessarily spell major success for Mavcap but stresses its commitment to bridge the funding gaps from seed to early-stage companies.

"Venture capital is like sending people to space. Mavcap is the launching pad and it comes with associated risks and complexities. We understand that some will make it to stardom and others will diminish into a black hole. Like the space shuttle programme, Mavcap will be resolute even in failure and not be deterred by casualities. We will continue to be relentless in achieving our goals and aspirations," he says.