Q: What is the Khazanah Co-Investment Programme?

Project Cornerstone is a pilot Khazanah co-Investment strategy aimed at matching every RM1 committed by co-investor(s) in exchange for minimal equity stake in startups at the pre-seed and seed stage of the VC lifecycle.

Q: What are the objectives of this programme?

This programme aims to address the funding gap in the early stage of the VC lifecycle. It is designed to scale startups in the pre-seed and seed stage, as well as to create a platform to help ensure ideas get commercialized and reach the market.

Q: What’s the catch?

In order for Khazanah to make an investment via this programme, it requires at least one other co-investor as a partner who will be investing, at their own discretion, into a business or startup. The co-investor(s) must be independent of the business or startup at the time of investment.

Q: What are the investment size criteria in terms of value and percentage of equity?

The ticket size for each investment ranges from RM10k to RM500k for equity stake in the company of no more than 10%.

Q: What are the target sectors?

The target sectors for the programme include education, sustainable development, ICT, life sciences, agri-food industries, creative industries, leisure & tourism, technology and all technology-related industries, including but not limited to electronics, med-tech, healthtech and medical devices, mobile & telecommunications, software & related services, hardware & related services.

Q: Are there geographic restrictions?

The programme is piloted in the Northern Region of Malaysia, but exercises the flexibility to invest in other parts of the country.

Q: How do I become a co-investor / participate in this programme?

No registrations are required. The Khazanah Koridor Utara (KKU) office will act as the secretariat to the programme and will keep co-investors abreast with the latest developments relating to the programme’s activities. Co-investors will be invited to pitching sessions to explore potential investments.  

Any co-investor who has potential deals on hand can approach Khazanah directly at any time. Khazanah will evaluate the proposal and revert with a decision to invest within 5 working days. 

Q: Does it cost money to participate?

No membership fee or programme fees are incurred. The only cost involved will be the investment made into the startup and other related investment costs such as due diligence, legal fees etc. Investment costs will be borne independently and is not deemed as a shared cost between the co-investor(s) & Khazanah.

Q: What formal constitution must this programme and all related parties have?

Khazanah will be making investments through a special purpose vehicle. This programme need not be formally constituted and may form around a transaction where Khazanah and the co-investor(s) have agreed to invest. The formalisation will take place at the stage of the term sheet and the shareholder agreement.

Q: Are there restrictions on the form of investment instrument?

The programme will consider ordinary equity and preferred equity, as long as there is a clear alignment interest between Khazanah, the co-investor(s) and the owners of the business or startup.

Q: How long does the process take?

The time taken varies from investment to investment.

Q: Can I recruit friends / other high net worth individuals to make up the sum of investment?

Yes. The programme does not limit the participation of other co-investors and there can be more than one co-investor per transaction.

Q: What will I get out of this programme?

Risk sharing
Capital returns
Early access to deals
Building network with like-minded individuals
Contribution to nation building

Q: What is KNB’s role & value?

Source of funds

Strong governance / Reputation / Trusted PartnerAbility to convene

Business network

Co-working space

Secretariat (Khazanah Koridor Utara office)

Q: What are the investment parameters?

There must be at least one other Co-Investor for each deal.

The company must be incorporated in Malaysia.

Pre-seed & seed funding: a minimum of RM10k, but not exceeding 500k per transaction;

The requested funding will be in exchange for 3 – 10% equity on a case by case basis;

Investment horizon: 3 – 5 years

Expected returns: 2.5x return on investment

Q: What are typical considerations in selecting the right investment opportunities?

In the case of the co-investment programme, the pre-screening process often ensures a “match” on basic requirements: the company is located within its preferred geography, growth stage, industry sector expertise, and dollar investment amount.  Additional traits for the companies include a strong management team, product that solves pressing needs and has customers that will purchase it, high growth potential, competitive advantages, and exceptional return on investment.

Q: What about follow-on investment?

Khazanah has the capital to make follow-on investments, but this no longer applies to the Co-Investment Programme. Any follow-on will require a different vehicle within Khazanah and will be dependent on a strong commercial case being put forward.

Q: What about exits?

It is expected that at the point of investment, due consideration will have been given to an exit for investors, both Khazanah and co-investor(s) alike, forming part of the rationale for making the investment. In that context, Khazanah is looking at an average expected return of 2.5 times with an investment horizon of 3 – 5 years.

Q: How can I qualify for the Angel Tax Incentive?

Co-investors who are keen to invest would have to go through the Malaysian Business Angel Network to get accredited. The accreditation will be valid for two years and is renewable. MBAN is responsible for the accreditation of individual angel investors/clubs, creating awareness and training for angels as well as monitoring angel investment statistics in Malaysia. 

For further more information, visit www.cradle.com.my/angel-tax-incentive or www.mban.com.my