Between 2008 and 2016, the startup ecosystem contributed RM3.4 billion to Malaysia’s Gross Domestic Product (GDP), creating 80,600 jobs, and by 2030, it is projected to contribute RM30.8 billion to the GDP. With a diverse talent pool, high quality of living and robust government support, Malaysia is primed for an explosion of the startup ecosystem. But for that to happen, there must be ready land, making our soil arable for startups to flourish.
To understand the land is to understand its encumbrances. For Malaysia, the five main challenges to the startup ecosystem are: Funding: More needs to be done to draw in private investors. While there is already robust government financial support, it is important that the government takes on a role as enablers to avoid direct competition with venture capitalists and private funders, in order to grow the pool of startup funding, while ensuring that investment momentum remains strong at the later stages of a startup’s life cycle.
Talent: 45% of Malaysians agreed that they spot good opportunities, but would not start a business for fear of failure, while 75% of Malaysian students are concerned with what others think of them if they fail. Addressing deep cultural concerns is one of the keys to building up a robust talent pool that has a healthy risk appetite. Dato’ Lai Pin Yong, Co-Founder and Chairman of BlueChip Venture Capital, said in a panel discussion, “In order to grow in the sector you are in, you need to hire people with the relevant domain knowledge, so it is crucial that we look into the “people” aspect of the business.”
Innovation: There exists a missing link between research and commercialisation. Research shows that there is initial support for startups, but market experts only get involved towards the final stages of the process, ultimately creating a mismatch between the initial idea and its end product.
Policies & Regulations: Malaysia’s current policy and regulatory landscape often falls short of providing sufficient long-term support for startups. For instance, many startups face difficulty in finding support because various agencies with overlapping functions make it a complicated process. It is imperative to create a more conducive business environment where data, policies and governing agencies are more consolidated, transparent and seamless. “Before the current administration came in, the goal was to cultivate five domestic unicorns, and so the ecosystem was geared to support the bigger startups.
However, the KL20 initiatives announced will create an ecosystem that can support startups at varying stages,” said Dato’ Amirul Feisal Wan Zahir, Managing Director, Khazanah.
Market environment: The majority of the accelerators and incubators are local and lack a prominent international network. Government procurement processes, eligibility and assessment criteria remain obstacles to new startups.
How we address these concerns will determine how fertile our land is for the startup ecosystem to thrive. A number of factors must come together simultaneously for businesses to find success, and more importantly, stay successful.
Although Malaysia possesses the drive and many strengths, the road to progress will require great change and courage.
