Acer to raise VC fund to US$1b
By Julian Matthews
Thursday, July 08 1999

CYBERJAYA, Malaysia--Acer will enlarge its venture capital fund fivefold to US$1 billion from US$200 million in the next three years.

Chairman and CEO Stan Shih told CNET Asia that Acer currently has three funds spread over key markets in the US, Taiwan, Southeast Asia, Israel and Australia.

Shih said the funds were part of Acer's strategy to move into Internet-related and software industries, particularly Intellectual Property (IP) and service sectors.

"This began a year ago and is the new direction of Acer on top of pure hardware manufacturing. We have to leverage on IP and services to enhance our competitiveness. That is critical. It is the future and we don't have a choice. But it won't be easy," he said. He spoke to CNET Asia at the third international advisory panel meeting of the Multimedia Super Corridor project held in Malaysia.

Shih previously said software would make up a third of Acer's revenue and one-sixth of its income by 2010. Today, software accounts for less than 5 percent of the hardware manufacturer's revenue.

He said Acer may set also up a US$20 million venture capital fund to support Multimedia Super Corridor companies in Malaysia.

‘"We are considering setting up a fund dedicated to the MSC of about US$20 million," said Shih. He said Acer was willing to fork out half of that sum while the other half would come from local sources. "We don't want to go it alone and hope to get other interested local parties," he said.

If Acer's new fund materializes, it will the second fund set up directly to support MSC companies hungry for capital injection.

The Malaysian government recently set up a RM120 million (US$31.6 million) venture capital fund after it failed to pique the interest of foreign venture capitalists.

Shih expressed reservations about the government-led fund set up by MSC promoter Multimedia Development Corporation (RM100 million) and government investment arm Khazanah Nasional (RM20 million). "Venture funds should be set up by private sector. All the decision-making shouldn't relate to government policy only," he said.

Shih said as result of the crisis, Malaysia may take a longer time to realize its ambitions of making the MSC a regional multimedia hub. He said one of the key elements it lacked was local financial and private sector commitment.

He said in talks with global investors, the concerns on the MSC also centered on the lack of human resources and on whether Malaysia was an ideal choice to do research in high-tech industries. "Many are still in wait-and-see mode although they are ready and willing to go in once the picture is clearer," he said, referring to negative publicity generated from Malaysia's political and financial crisis last year.

He said he was impressed with the MSC's progress since he last attended the panel meeting in February last year. "It's very impressive and moving in the right direction," he said, but added its continued progress was one of pacing.

"If you build up too fast and fail, you lose investor confidence. If it is too slow, it is missed opportunity. The MSC in my mind is no longer a 'vision issue, it's an implementation issue," he said.

He said Malaysia has addressed many of the "big picture" issues but now needed to be more focused in its approach.