KUALA LUMPUR: Government-linked investment companies (GLIC) need better oversight and monitoring of proceeds invested in startups to prevent the recurrence of the FashionValet debacle in the future.
The hosts of the Keluar Sekejap podcast, Khairy Jamaluddin and Shahril Hamdan, advocated the move in their latest episode, saying that experienced oversight by GLICs could have detected the issues with FashionValet early on.
Khairy said when Khazanah Nasional Bhd and Permodalan Nasional Bhd (PNB) invested in FashionValet in 2017, there was no process or precedent for such investments into a startup.
"Monitoring of the investment might have been weak. Usually, when venture capital invests in a startup, they actively monitor their investment and have certain red flags that they would address by questioning the management.
"Why was this done? Why was that done? And if we look at the statement from the founder of FashionValet, they admitted that they scaled up too quickly. That should have been an early red flag for Khazanah and PNB, prompting them to consider slowing things down."
However, Khairy said this was not done, leading to a position to cut losses and sell FashionValet at a very low value.
Previously, it was reported that FashionValet saw five consecutive years of losses before the investment where a check of financial account filings of the company between 2012 and 2017 showed that its losses widened to RM10.7 million in 2017 from RM166,793 in 2012, before Khazanah and PNB's investment in the company in 2018.
Khazanah and PNB later invested RM27 million and RM20 million, respectively, into FV in 2018.
Meanwhile, co-host Shahril Hamdan suggested that investment firms establish a vehicle to manage investments into startups.
He said the issue lies with having better expertise to handle investments of startups.
"If we use intermediaries, (such as) venture capitals (VC) that make investments, they might not only spot the investment opportunity better, but they are also more equipped to intervene.
"Khazanah and PNB might question why certain decisions were made. They can ask questions and even take some steps to address it. Perhaps they'll use the same bureaucratic processes as they would for other investments but startups require different forms of intervention.
"Maybe it requires just a chat with the founder, or maybe they need to bring in a superstar from another country to fix the problem. This type of return generation is better suited to a venture capital firm with the expertise and approach for direct investment," he said.
Earlier, it was reported that Khazanah PNB lost RM43.9 million from the sale of their minority investments in Malaysian online fashion retailer FashionValet.
This was revealed during a written reply by the Finance Ministry published on the parliament website.
Following the debacle, its founders Datin Vivy Yusof and her husband, Datuk Fadzaruddin Shah Anuar announced their decision to step down from their positions in FashionValet due to the ongoing issues surrounding the sale of Khazanah's and PNB's stakes in the company.
On Nov 2, Malaysian Anti-Corruption Commission chief commissioner Tan Sri Azam Baki confirmed the probe into the RM43.9 million loss incurred by Khazanah and PNB in FashionValet, assuring that the investigation would be "fair and professional."