Malaysia’s Khazanah to continue supporting start-ups, ‘unexpected factors’ behind FashionValet woes: Minister

Mr Amir told Parliament that venture capital – despite its high risk and uncertain future – plays a crucial role in spurring economic growth and facilitating Malaysia to achieve a high-income status through innovation and sustainable development, according to local news outlet The Star.

“Khazanah’s investment in FashionValet was made seven years ago and since then, there has been an overhaul in Khazanah’s investment approach and the process of choosing investments has also been tightened, including start-ups and venture capital,” he said. 

FACTORS THAT NEGATIVELY IMPACTED FASHIONVALET 

Having said that, Mr Amir brought up several “unexpected” factors contributing to the downfall of FashionValet such as the impact of COVID-19 pandemic and cash flow issues in raising funds. 

The pandemic had led to the eventual closure of its physical stores and a significant decline in demand for its premium clothing – the core of FashionValet’s product offering. 

“The Movement Control Order (MCO) during COVID-19 significantly hindered these operations and diminished demand for premium products,” said Mr Amir, referring to the series of national quarantine measures implemented by the then-Malaysian government in response to the pandemic. 

The second factor Mr Amir highlighted was a shift in e-commerce trends, particularly the rise of local fashion brands in the modest fashion sector. These brands have leveraged independent e-commerce and accessible platforms like Facebook, intensifying competition for FashionValet – established in 2010 as an e-commerce marketplace for homegrown fashion labels to reach a wider audience. 

“The shift forced FashionValet to shut down its platform and instead focus on its own brands, dUCK and LILIT,” he was quoted as saying by news platform Berita Harian. 

Lastly, Mr Amir said that funding challenges was another factor as FashionValet struggled with cash flow constraints. And although the firm had sought new capital, existing shareholders like Khazanah and PNB were unwilling to increase their investment due to the associated risks.

Mr Amir stressed, however, that both Khazanah and PNB – which were minority investors in the firm – had taken proactive steps to support FashionValet through strategic guidance and offering financial advice. 

“The challenging fundraising environment at the time also hindered FashionValet’s attempts to secure fresh funding.

“To remain operational and resolve cash flow issues, FashionValet urgently required capital from new investors, but they did not receive many offers from new investors,” he was quoted as saying by The Star. 

The minister added that both Khazanah and PNB had acknowledged that FashionValet’s returns had fallen short of projections. However, the government plans to review the governance process to strengthen the management of government-linked companies in Malaysia. 

“With the MACC investigating and an internal audit underway, Khazanah and PNB must be allowed time to complete their review and the final findings will help improve governance without the involved GLICs,” Mr Amir said, referring to government-linked investment companies.

He added that the government will continue to place strong emphasis on the control of public fund usage.

Ms Vivy and Mr Fadzaruddin – the FashionValet founders who came under scrutiny for their luxurious lifestyle despite the company’s failure – have apologised for the losses and announced their resignations from their respective roles as creative director and chief executive officer on Nov 1. 

National news agency Bernama reported that the couple have continued giving their statements to the MACC as of Nov 13 – marking the sixth day that their statements have been recorded by graft-busters. 

MACC has also frozen several of the couple’s private and company bank accounts containing about RM1.1 million on Nov 6.