Entrepreneurship and innovation are the two keys to success in economic development providing for wealth creation and a rising standard of living. Furthermore, the commercialisation of innovation and the growth of entrepreneurial firms require that risk capital is available, in particular at the early stages of a firm’s growth. Most companies seek to raise venture capital to support or stimulate economic growth. Other companies raise venture funding to establish credibility or to access resource networks which their venture capital partners have developed through years of experience. A seasoned venture partner often becomes a valuable confidant, advisor and sounding board for an otherwise lonely chief executive or founder. Today’s global business environment is increasingly competitive requiring decisiveness, broader relationship networks, abundant financial resources, and a global presence in order to compete effectively. The venture capital (VC) relationship can often bring that exact mix of support in addition to financial funding.
According to VentureSource, in the US, drug-focused companies received $4.09 billion (65%) of the $6.30 billion that venture capitalists (VCs) pumped into healthcare during 2004. Valuations of life sciences companies have climbed steadily in the past five years, reaching a median valuation of $32.5 million in 2002, up from $17.7 million in 1998, an 80% increase. An aging baby boomer population; a growing drive to eradicate cancer and diabetes; a fear that infectious diseases may be used as tools of war and other factors have come together to help drive up venture capital interest in the life sciences.
Recognising the importance of venture capital (VC) as an important source of financing for technology intensive enterprises, the government under the National Biotech Policy has wooed companies with incentives as well as a strong VC base. Government-backed organisations and private venture companies have begun to venture into the biotechnology industry. Among them, a regional VC firm, Netrove Ventures.
Founded in 1999, Netrove is a regional venture capital and corporate finance advisory firm that provides capital and venture advisory services to fledging companies in the region. Boasting an impressive clientele list including Hovid (Malaysia), Genic (Korean), Hor Yan Hor (Malaysia), Leroy (China) just to name a few, Netrove banks on its strengths in their regional network with offices in Hong Kong, Hanoi, Beijing, Guangzhou and Malaysia and associated offices in Seoul and Singapore. It focuses mainly on risk capital investment and fund raising, corporate finance advisory, IPO, M&A advisory and investment opportunities in the region.
Speaking to Netrove’s Chairman, Mr. Teh Kim Seng, it is easy to appreciate the behind humour, the multitude of knowledge accumulated by his vast experience dealing in the legal, corporate advisory, M&A and corporate finance, venture capital and technology industries in Asia. “Our basic strategy in investing is very simple, when good companies come along, we’ll invest,” he quipped. “Looking at this pragmatically, at the end of the day, a “good” business is defined by its ability to keep creating and building new economic and enterprise valie. Hence, at Netrove, we are looking for companies with high growth potential and scalability in new sector or sectors that are still growing fast.” Simple yet a profound thought.
To reduce risk, Netrove employs a hands-on approach in their investment style, working with the companies as an active management. Banking on their years of experience, they assist the companies in various aspects including incubation, technology development, expansion etc. and help steer the companies away from trouble should the need arise. Upon establishing itself, the company would then be brought to a more regional scale, as to maximise the company’s full potential.
Looking at trends in the market, Mr. Teh opined that Malaysian biotech companies should be banking on its strengths to establish themselves. “Pharmaceuticals have always been the world of the West, having had a long history, with much of the infrastructure well in place, including laboratories, research clusters etc. and plenty of money already invested,” he commented. ” Malaysia ‘s key strengths lie more in the agri-biotech segment, eg. biodiesel, nutraceuticals and health supplements / nutrients, as well as the herbal industry where Malaysia could bank in on its vast biodiversity.”
However, such lofty ideals are a tough act to follow, as there seems to be a lack of drive in the industry, despite strong attempts by the government to stimulate it. Citing the example of Singapore, currently a leader in medical biotechnology in the region, Mr Teh noted that there was a huge initiative by the government in the 1990s, where huge funding was made available, paired with strong marketing, easy access to grants and matching services helped the industry to breakthrough and establish Singapore as a market leader over time. He believed that Malaysia should look into emulating such initiatives and form biotechnology clusters, allowing the community to give support onto itself.
“We have the potential to grow into a regional hub. Just as Korea and Japan has established themselves as the leader in products for skincare, Malaysia has a role and the potential to harness itself as a leader in biotech for Asia for certain chosen niches.”
(Source: Malaysian Biotech Information Centre, 30th June, 2008)