What is the real reason behind Khazanah and PNB’s failed investments in FashionValet?
Local e-commerce fashion brand FashionValet has found itself at the center of a public controversy. Recent financial reports have revealed staggering losses, with the company recording a cumulative RM103.3 million loss from 2018 to 2023.
But the real issue is the involvement of Malaysia’s sovereign wealth fund Khazanah Nasional Berhad and fund management firm Permodalan Nasional Berhad (PNB).
Back in 2018, they had invested a combined RM47 million into the venture. Now in 2024, it was revealed by the Ministry of Finance (MOF) that Khazanah and PNB received a paltry RM3.1 million from divesting their shares in the company, in what was described as a ‘responsible exit’.
Then on Monday, the Malaysian Anti Corruption Commission (MACC) raided FashionValet’s offices, the Finance Ministry, Khazanah, and PNB in one simultaneous move, and on Tuesday, froze 11 bank accounts worth RM 1.1 million from FashionValet’s founders. 11 handbags and 1 luxury watch with an estimated value of RM200,000 were also seized.
This latest development follows a social media post by FashionValet co-founder Vivy Yusof that sparked widespread backlash. In the now-deleted post, Yusof shared an image featuring a wall of luxury handbags she was reportedly donating to charity.
Image via vivy yusof (instagram)
The post quickly drew scrutiny from netizens, who questioned how she had amassed such a collection, particularly given FashionValet’s reported financial struggles. So how did Vivy Yusof, FashionValet, Khazanah and PNB end up here?
What really happened to FashionValet?
Before we dive into the finances, let’s roll back and bring ourselves up to speed on the rise and fall of FashionValet.
FashionValet, founded in 2010 by Datin Vivy Yusof and Datuk Fadzaruddin Shah Anuar, was once a key player in the Malaysian fashion industry. Back then, it was touted as one of the first Malaysian e-commerce platforms to focus on modest fashion and local designers.
Now, let’s take a closer look at the finances. In the years following the 2018 investment by Khazanah, FashionValet faced significant financial challenges during the Covid-19 pandemic.
Image via vulcanpost
Based on figures reported by this Vulcan post article, the losses continued to bleed from Fashion Valet, with the company reporting a loss of RM83.4 million for 2020, RM9.6 million in 2021, and RM34.5 million in 2022.
In total, FashionValet has an accumulated loss of RM127,576,371, meaning that it has not turned a profit since 2018.
FashionValet’s financial decision-making process seems suspicious
Currently, there have been many allegations about the level of corruption within FashionValet. Some critics have pointed out how Vivy’s sister Intan Safina Yusof, who was charged with criminal breach of trust in 2020, served as director for FashionValet until March 2019.
In addition, back in 2018, the chairman for Khazanah was none other than Najib himself, before he stepped down in May that same year. Coincidence?
But putting aside the widespread speculations, which are now up to MACC to prove, our own investigation into the now-defunct fashion company shows an egregious mismatch between its spending ability and the stark reality of its crippled finances.
For instance, this report reveals that the company had spent RM12.3 million on renovations in 2021. This was during a time where the pandemic was in full swing, and many ecommerce companies were opening and growing at an accelerated rate.
In another instance, these investigations into the company’s annual report shows that certain write offs could not be traced back to their source.
Consider this RM2.284 million web development write-off in the “loss from operations” section, as detailed in this screenshot:
Image via vulcanpost
Interestingly, the report states, “We were unable to obtain confirmation from both parties for the web development written off and the termination was decided by management.”
According to the whistleblower, Aliff Ahmad (co-founder of Scrut.my), said in his now-deleted Facebook post that the standard rates of web development templates should not cost as much as RM2 million, adding that the one used by FashionValet at the time (Magento) was not pricey. So how did this expense cost 2 million?
More questions arise when considering FashionValet’s 25% stake in a company called DropIt Ventures Sdn Bhd. This venture became inactive by 2019 and FashionValet had to divest it for RM10. How much did FashionValet spend to acquire it, and how did that contribute to the total losses accrued by the company?
Considering FashionValet’s poor financial track record, perhaps the real question we should all should be asking is, why did Khazanah and PNB continue to place its trust in FashionValet, all the way up to 2023?
Khazanah’s investment strategy has netted good results overall
Image via khazanah
While Khazanah’s RM47 million loss in FashionValet is significant, one must also factor in Khazanah’s overall performance. In 2018, it raked in RM7.36 billion, and more recently in 2023, it reported a profit of RM5.89 billion.
Khazanah’s venture capital portfolio is massive, and many were failures like FashionValet. For example, its RM87 million investment in Zivame, an Indian lingerie startup, was eventually written off. This figure is almost double that of FashionValet’s losses.
However, Khazanah did strike gold with Farm Fresh, the well-known local milk brand. This homegrown success story yielded a whopping 54x return, proving that high-risk investments sometimes bring monumental returns.
This “lose 9, win 1” strategy is considered typical by those familiar with the ups and downs of venture capital, where only one in ten investments may succeed. If this is Khazanah’s investment strategy, then should we really question one failed venture, especially compared to larger losses and wins in the bigger picture?
But taking this stance dodges the harder question. Should Khazanah really be allowed to use the rakyat‘s public funds, our hard-earned tax money, to back these high-risk startups?
Public outcry about Fashion Valet is now reshaping what transparency means for entrepreneurs in Malaysia.
For Khazanah and PNB, the losses in FashionValet may be financially minor compared to their broader portfolios. Yet, what angers the public is the apparent lack of accountability and transparency.
“If this is a private Venture Capital, no one is going to judge you because you are “betting” on your own money at the end of the day,” shares Frasier Hu, freelance contractor.
“Public funds have been wasted, so there needs to be transparency and yes, consequences too.”
“Sure, Khazanah has some investment arms for startups,” adds Amir Rahman, 38, an economic policy consultant, “but those don’t necessarily belong in a sovereign fund’s portfolio. Startups generally lack the accountability of regular businesses—no annual reports, fewer performance benchmarks. Just because Khazanah is structured to invest this way doesn’t mean the public should accept it without question. We’re talking about public funds here.”
Many are also critical of the founders, whose social media presence displays luxury goods and an affluent lifestyle, which seems at odds with a company heavily reliant on public funds.
Despite the founders stepping down and issuing an apology, the public remains unconvinced, with many also criticizing Khazanah and PNB for the failed investment.
“Look, Khazanah is a sovereign fund,” says Adeline Lee, 45, a financial analyst. “At this point, they have two choices: they can admit they made a big mistake, or they can admit there may have been corruption involved. Either way, someone has to go.”
Lessons for Venture Capital and Malaysian Entrepreneurs
While venture capital investments inherently involve risk, the FashionValet case underscores the importance of responsible financial management, especially in the current post-1MBD political climate. In the wake of public anger at mismanagement of funds, Khazanah, as a sovereign fund, should be expected to prioritize low-risk, high-return investments over startups prone to high failure rates.
Coupled with the rising cost of living and the lack of job opportunities for advancement, it is clear that many believe that Vivy Yusof and her husband are undeserving of having these funds entrusted to them in the first place, and should be penalized for it.
For aspiring entrepreneurs, the FashionValet story is a lesson in humility and transparency. The case of FashionValet, along with Khazanah and PNB’s investment, is a reminder that public accountability is essential.
What do you think should be done about FashionValet?
Email us at hello@inreallife.my and your opinion may be featured on In Real Life Malaysia.
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