Malaysia needs MTC-building capital, not just Silicon Valley-style financing

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Malaysia needs MTC capital

Highlights

Malaysia faces a shortage of suitable capital providers for mid-tier companies (MTCs), even though overall capital flows are sufficient within the local investment ecosystem.
The Silicon Valley-style venture capital model is unsuitable for sectors such as biotechnology and physical technologies that require longer maturation periods and high capital expenditure; Malaysian MTCs instead need active build-up capital.
The author stresses that prioritising buy-and-build strategies and strengthening MTCs will enhance Malaysia's competitiveness and economic resilience, rather than merely pursuing unicorn companies.

This article was translated from the original. Read the original version by our correspondent here.

Capital needs for building mid-tier companies

As reported by The Edge Online, this discussion developed from an article by Krystle Chan and Pearl Lee on 25 Sept 2026, which stated that Malaysia does not lack capital but instead faces the challenge of directing the right capital to the right companies. The follow-up view supports that assessment and adds that the most significant gap in the local ecosystem is the absence of suitable capital providers to scale mid-tier companies, or MTCs.

The argument is that the strong focus over the past decade on venture capital, or VC, does not necessarily align with the type of companies Malaysia needs. The Silicon Valley-style VC model typically seeks companies that can scale rapidly, are asset-light, lightly regulated and easily expandable into large, relatively uniform markets—characteristics most closely associated with software businesses.

Within this framework, when a seemingly scalable startup emerges, VC funds tend to compete intensely, driving up valuations and complicating future exit paths. The author argues that this creates a poor fit for many other sectors, such as energy transition, biotechnology, robotics and other physical technologies, which require longer maturation periods, higher capital expenditure and heavier regulation.

By contrast, Malaysia is seen as already having a base of mid-tier companies with customers, capabilities and cash flow, but which remain fragmented and lack scale. Therefore, the more relevant form of capital is not VC funding that waits for exponential organic growth, but active owners who can consolidate several businesses, professionalise management, invest in productivity and technology, and open access to regional markets.

Implications for Malaysia's industrial strategy and competitiveness

The emphasis on buy-and-build and corporate roll-up models has direct implications for the country's industrial strategy. The author argues that Malaysia does not necessarily need more unicorn companies as its primary goal; rather, it needs more strong MTCs capable of exporting regionally or globally.

This approach is considered better suited to building economic resilience, creating broader employment and potentially raising household incomes. It also suggests that national capability-building depends on matching the type of financing to the type of firms Malaysia wants to develop, rather than on the volume of capital alone.

The article also compares the VC-driven financing model in the U.S. with China's approach, which is more heavily supported by competition among provincial governments and state-guided funds. Under this interpretation, different financing systems produce different types of firms, so Malaysia needs to be clearer on whether its objective is to create a few high-value companies or build a large cohort of mid-tier companies capable of becoming regional champions.

The key conclusion put forward is that capital providers need to help build, rather than merely finance, Malaysian MTCs. This includes supporting business consolidation, management upgrades, technology adoption and the expansion of distribution networks, to create more resilient local companies within regional supply chains.

In our earlier coverage of the resilience of Malaysia's stock market and foreign investment inflows, we examined how the stability of Bursa Malaysia continues to attract global investor interest amid international uncertainty. The article also highlighted that the technology and financial sectors are expected to be key drivers of capital inflows, supported by investment in digital infrastructure and innovation, although sentiment continues to be influenced by macroeconomic factors such as U.S. interest rates and inflation.

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