USA VC vs Malaysian VC

Today in St. Louis, I had the opportunity of meeting Tom Melzer. Tom is a senior financial figure in the States, being served in the Federal Reserve under 3 Presidents. In my discussion with him, I can summarize the drastic differences between an American VC and a Malaysian VC...here are the main ones.

(i) American VC tend to be very focus in particular sector (ICT only or Biotech only or Medical Devices only etc.) , Malaysian VCs will invest in many sectors.

(ii) Because of their focus, the American VC has the depth and can put in substantial business building expertise

(iii) Both country VCs will tend to invest in later stages rather then Idea and Seed.

(iv) 8% dividend rate for its pref shares (non -cumulative) for US VCs compared to Malaysian VC rate of 10% - 25% cumulative dividend pref shares.

(v) The insurance, pension and large funds tend to invest in the VC industry (about 5-10% of their funds). In Malaysia most funds come from the Government.

(vi) American Private Investors in VC funds tend to have direct tax credit by expensing out the mgt and operational fee of the VC management company. Investment premium tax allowance is at 15% instead of the 30% rate for personal income tax.

Tom did highlight that VCs tend to invest in later stages and that there are many aspects of the eco-system that gets to work before a VC invests into a company....

(i) A strong incubation to assist in the physical and soft infra of new and later stage companies.
(ii) Strong demand for a particular sector or specialization e.g. the medical faculty in Washington University, St. Louis has a large R&D budget that provides an economic stimulus in commercialization.
(iii) Networking by the local business councils bringing together funders, entrepreneurs, university and other relevant specialists.
(iv) Grants and angel funds to provide funding in the early stages of the venture. These are funders prior to the VC investment.