Venture Capital

To Fund a Startup, Go to Malaysia


To Fund a Startup, Go to Malaysia

Illustration by Ana Benaroya

When Jim Buck was looking for investors to fund trials for the implantable heart device his startup is developing, the search took him far from the usual stops in Silicon Valley and Boston. He made four trips to Asia last year, courting investors in Singapore, Hong Kong, Thailand, and Malaysia. “Companies like ours with very promising technology that in years past would have been funded very richly are struggling to find money to even stay in business,” says Buck, a veteran of the cardiac implant industry who became chief executive officer of Mardil Medical in 2010.

The Plymouth (Minn.)-based company, which has four employees, raised $5 million from Malaysia’s government in January and is setting up a research office and hiring engineers in Kuala Lumpur. Mardil’s earlier investors, including the Indian venture capital fund Ventureast, also put in just over $1 million.

Buck, who previously worked for a heart device startup that raised $50 million in 2007, at the height of U.S. investor interest in medical device makers, says that back then “it never would have even crossed my mind to look to Asia.” Since then funding from U.S. VC firms for medical device makers has dropped 35 percent, to about $2.4 billion last year, according to data from the National Venture Capital Association.

The government of Malaysia formed a $100 million fund three years ago to invest in startups as part of a broader 10-year plan to develop high-tech industries. The former British colony has a per capita gross domestic product of about $17,000, similar to Russia’s and less than half that of the U.S. The state aims to become a high-income economy by 2020. “It’s all about creating wealth in the country,” says Mark Rozario, CEO of the fund, Agensi Inovasi Malaysia.

The fund has made seven investments so far. Mardil is its first deal outside Malaysia, but Rozario is looking for more. “It’s an opportunity for us to take advantage of what’s happening in the U.S.,” he says. “The lack of funding sources there is something that we certainly tap into.” Attracting a U.S. startup is a big deal for Malaysia: When Buck went to Kuala Lumpur to sign the deal in January, he met with the prime minister.

Other countries’ funds are also showing interest in backing foreign ventures. In 2009, China’s sovereign wealth fund created a VC arm, WestSummit Capital, with an office in Palo Alto. Last year, Marin Software, an online advertising company headquartered in San Francisco, raised $30 million from a group of investors including Singapore’s investment fund. Cash-rich states “might allocate 1 to 5 billion bucks to go and invest in little companies,” says Michael Maduell, president of the Sovereign Wealth Fund Institute, a Las Vegas research and consulting firm. “That’s very common, and that’s kind of off the radar.”

For Buck, Kuala Lumpur is an attractive place to do business. Because of the difficulty in getting new devices approved by U.S. regulators, Mardil plans to conduct its clinical trials in Europe and Asia and sell its products there first. He eventually hopes to set up what he calls a “center of excellence” at the National Heart Institute in Kuala Lumpur, known as IJN, to perfect the implant procedure and train doctors from around the world.

Mardil’s product, called VenTouch, is a sort of jacket that surrounds the heart to help valves close properly, preventing blood from leaking backward. Implanted through the ribs, it’s meant to be a minimally invasive treatment for functional mitral valve regurgitation, a common condition that can lead to heart failure in severe cases. The current treatment involves open-heart surgery to repair valves. Buck says 600,000 Americans would be eligible for the treatment, though only 6 percent of that number get surgery now.

With the new funding, Mardil is increasing the size of its staff, with four new hires planned for Kuala Lumpur and six or eight in Minnesota. Buck says carrying on business between Minnesota and Malaysia has been easier than he expected. Taking advantage of the 14-hour time difference, he gets on conference calls after putting his kids to bed. He expects to travel to Malaysia two or three times this year. The trip takes 28 hours, with a layover in Tokyo. He flies coach.

Buck has no plans to uproot Mardil from Minnesota. If trials demonstrate the company’s technology works safely, he expects the next step will be to partner with a big device company such as St. Jude Medical, where he worked for a decade, or Medtronic, both based in the Twin Cities. But the road there runs through Malaysia. “These are very educated, sophisticated, hungry people that want to do good, that realize they’re on the brink of major growth,” Buck says. “Conditions didn’t exist for them to get their foot in the door five years ago like they do today.”

The bottom line: Malaysia has set up a $100 million fund to invest in startups, including high-tech companies in the U.S. and elsewhere.

John_tozzi
Tozzi is a reporter for Bloomberg Businessweek in New York.

We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus