ViC: Angel investment community largely neglected

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KUALA LUMPUR: Virtuous Investment Circle (ViC) chairman Bob Chua (pic) is a frustrated man. That is because four years after the establishment of ViC, the non-profit group of independent angel investors which aims to grow angel investment in the country has yet to facilitate a significant deal that it can take credit for.

Stressing the importance of angel investing, he urged the government to take ownership of the financial angel community, warning that it being neglected could lead to capital flight and brain drain.

“I’m not happy with our progress. We need funds, we need resources, and we need a government agency to take ownership. We also need to be more structured. We need to run it like a proper organisation, and we need more people who are full-time looking at deals,” Chua told The Edge Financial Daily in an interview recently.

Essentially, ViC helps entrepreneurs find angel investors. It does not take any stake in the company but only vets business proposals. If the idea is attractive enough, it forwards it to a list of potential investors.

But with less than 10 angel investors today, ViC is struggling to be recognised by the Registrar of Societies Malaysia (ROS) and awareness about its service is very low. It probably doesn’t help that most ViC members are media shy as they do not like to publicise their deals due to possible failures, said Chua.

“We have seen a lot of deal flows among us, some may lead the deal, or we might join in as a club deal. It is still happening. But mostly, everyone is doing their own thing. ViC is loosely structured and we don’t have public awareness. If a company is looking for angel investor, it won’t know where to go,” he said.

Angel investor’s are high net worth individuals who provide capital for a business start-up, usually in exchange for equity. They use their personal disposable income and professional experience to invest in the growth of small businesses. Usually, they invest about RM500,000 to RM5 million in a single deal.

Currently, Malaysian Business Angels Network (MBAN), an official trade association for angel investors and angel clubs, oversees the major financial angel communities, namely ViC, Pikom Angel Chapter and Endeavour Malaysia. But more needs to be done to create a sustainable angel investment ecosystem, stressed Chua, an angel investor himself.

“The association (MBAN) is there for no purpose, really. They don’t even know the numbers [of deals and members] themselves. They should capture the information about what’s the size of [the] industry and how many deals have been concluded,” he said.

“We can claim that we have large numbers in our group, but how many members are successfully closing deals?” he asked.

The angel investment community is presently not regulated, but Chua said government agencies in Malaysia have sufficient financial resources to step in and undertake a big top-down restructure of the whole ecosystem.

“It’s a chicken and egg situation. If you don’t have the structure, entrepreneurs won’t know where to look for funds and the angels won’t have enough deal flows,” he said, adding that angel investing is “extremely important” to a country’s development.

“If you don’t see that [angel investment], you won’t see innovation, job creation and tax contribution,” he stressed.

Going forward, ViC will be looking for high net worth individuals as well as “the rich second or third generations” instead of professional angel investors.

“We are targeting people our age who wish to be involved in sexy deals. They can be a grandson of business tycoon or those who work in a big corporation with extra money to invest,” Chua said.

 

This article first appeared in The Edge Financial Daily, on October 27, 2014.