The Asian startup scene has been heating up recently, with increasing numbers of new companies being established in this country every year. But what exactly does this mean?
In this article, we’ll explore the startup scene across Malaysia, including the pros and cons and the optimistic side of it. Furthermore, we'll also share how you can hop on and make your mark in the Malaysian startup community – both as an entrepreneur or as an investor! Read on to learn more about what’s going on in Malaysia’s startup industry.
Glimpse into the current state of startups
Technology ecosystems are becoming more democratised, and Asia-Pacific is home to some of the world's most important tech centres. Malaysia is a strategic location as it is easily accessible to other ASEAN countries. Since Malaysia is the region where the start-up industry is emerging, there’s nowhere better to look for new opportunities than to eye on Malaysia as a potential hub for global start-ups looking to expand and succeed in the area.
Malaysia is well-positioned to readily act as a testbed, giving access to a variety of marketplaces since it is heavily involved in the global supply chain with major local manufacturers in the EMS and E&E sectors setting the bar high. As these businesses are having commitments or other reasons, they are inclined to be more risk averse. In this case, industry participants are encouraged to take advantage of this by considering any potential partnerships with start-ups through the lens of a new business cooperation model.
These businesses are increasingly nurturing start-ups to achieve a win-win outcome. As larger organisations have greater resources, start-ups tend to leverage those resources to save money and focus more on developing their concepts, innovations, or ideas into actual products. Malaysia has an estimated 3,000 startups, accounting for around 0.25 percent of the country's 1 million registered businesses that are growing in this ecosystem.
Given these advantages, Malaysia is considered as one of the emerging start-up ecosystems with its strengths that makes it a good choice for being a hub of global start-ups.
Why do we lack unicorn startups
Although Malaysia is one of the top countries in the region, we are facing challenges that we are lacking unicorns. A unicorn is defined as a startup that has reached a valuation of US$1 billion or more. Although in plenty of forms, news discussions and social circles, entrepreneurs can agree on one thing: we need more unicorns in Malaysia! However, there are many hurdles that slow the growth of startups in Malaysia.
The economy is heavily reliant on digital and technological advancement. However, Malaysia is facing a shortage of talent with tech skills, especially tech developers. The gap is filled by people coming from other countries such as Singapore. Many local talents choose to leave after a few years’ tenure due to the lack of support in our tech industry which led to a higher loss of intellectual property.
Aside from being a big employer of talent in the country, unicorns do things differently. They have so much innovation and disruption that their presence shapes a better society by improving people’s lives. Besides, the existence of unicorns creates job opportunities for talents which helps the growth of the local job market at the same time. They tend to attract all sorts of talent from around the world, creating a more talent-dense workforce. This will help them to contribute more to society with huge spillover effects to the wider community, through increased purchases, house prices and economic growth in the country.
Many people didn’t realise that if we don’t create a unicorn, Malaysians will always see entrepreneurship as an act of risking all their money for nothing.
Our Ecosystem is still immature
The startup ecosystem in Malaysia is still very traditionally dominated by big corporations. They are not incentivised to innovate, and generally like to maintain the status quo. One of the main reasons is that most Malaysian corporations do not understand what a startup actually is. Most of them think that startups are just new companies without any experience or know-how in their field of business. They believe that because they have been in business for several years now, they have all the knowledge needed to succeed in their field, which means that they don't need a startup's help at all. This could not be further from the truth!
Startups have a lot of innovative ideas that can aid big companies to be more cost efficient, generate higher profits and utilise their resources.Another factor is because some people in Malaysia feel threatened by startups because it represents innovation and change which can cause disruption to their monopoly or market dominance over certain industries. In fact, they do not want any competition at all which is not healthy for our Malaysian economy in the long run. Lastly, big corporations tend to be slow when it comes to adopting new technology or new ways of doing things. For example, they are somewhat unwilling to adopt the idea of remote working due to the fact that they believe working remotely is less productive as compared to working in the office. In contrast, studies have shown that working remotely can be effective in boosting productivity and employee satisfaction among other benefits such as cost savings etc..
This can be seen in many sectors ranging from banking & finance to insurance where strict policies on remote working or having flexi-time (working from home) is beneficial to both the employees and employer. All of the reasons have indicated why startups are unable to grow faster in such an ecosystem.
Startups are high risk but high reward, here’s why
Most startups in Malaysia do not have much funding from VC investors or angels as compared to other countries. For example, Singapore has been able to create many unicorns including Grab and Carousell which have collectively raised over $1 billion in funding so far. （Malaysia carsome）
A need for mindset shift.
Besides, another reason is that people do not like changes. They stay in their comfort zone, and this issue results in our entrepreneurs lack the courage to take risks. We become complacent when we are in our comfort zone for too long and any action to create changes will be difficult.
Grants affecting the effectiveness of our startups
Although Malaysia is blessed with government grants and support for individuals, the problem here is that this only creates more bureaucracy and red tape for startups. We need to create an ecosystem where people are comfortable taking risks and being innovative in their businesses. There should be no fear of failure because if there is then there will be no new ideas or products coming out of startups or even SMEs (small and medium enterprises). Lack of an ecosystem between early stage investors and entrepreneurs. There is no connection between the traditional investors with money and the hustling entrepreneurs which need the funds in order to grow. There is no platform in place where everyone can freely share their ideas and mingle among one another. Without this ecosystem, it is hard for any founder to grow their startup as they lack the capital needed to survive in the hard wilderness of the market.
Conclusion
We need more programs like the Malaysian Global Innovation & Entrepreneurship Centre (MaGIC) which helps entrepreneurs build products from scratch and take them all the way through until their product is ready for market launch. As well as providing access to mentors and resources for startups such as startup accelerators, incubators and co-working spaces around Malaysia so that they can network with other startups from around the world and gain valuable insights from each other's experiences while building their products together.
Once we improve the problems we are facing, I believe that our entrepreneurs will become the vehicle to change society and lead us to a better future.
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