Malaysia Startup Ecosystem

History

Malaysia’s tech reputation started from humble beginnings – up until 1995, it was predominantly known for manufacturing as a system integrator and hardware reseller.

This all changed in 1996 when Malaysia launched the Multimedia Super Corridor (MSC).The MSC is a Special Economic Zone designed to catapult Malaysia into the information and knowledge age. Its primary objective is to attract entrepreneurs and encourage them to set up tech companies in Malaysia by offering temporary tax breaks and appealing facilities, such as high-speed Internet access.The MSC helped level the playing for many aspiring techpreneurs who wished to take their businesses worldwide.

The MSC also brought about the proliferation of Internet usage in daily activities. The Malaysian Government led the way with MSC’s Bill of Guarantees, while also launching 7 MSC flagship applications in e-government, telehealth and online business.

Communities started taking shape. Notably, the New Entrepreneur Forum, or NEF was formed as a support system for Bumiputera (Malay and other indigenous races) entrepreneurs. At the height of their movement, the NEF included a roster of over 400 companies attending networking sessions in year 2000 alone. Other pioneers include Alam Teknokrat (now SKALI), the first company to gain MSC status; The Media Shoppe and Mukmin.com.

At the same time, the mobile industry was picking up speed. Malaysian telecommunication companies were ahead of the curve, with players like Maxis pioneering WAP/GPRS in the world arena. Some of the earliest mobile companies in Malaysia like Unrealmind, iSentric, mobile88 (now iPay88) took this opportunity to put themselves on solid ground.

All of this, coupled with the timely arrival of the Dot Com boom in Silicon Valley, drove many people to leave the security of corporate jobs and created their own tech startups. When the bubble crashed in 2001, only the strongest remained – those include Lelong, Catcha Group, Cari, Lowyat, and of course, Jobstreet – which was recently sold to Australia’s SEEK for a whopping $524 million USD.

After the post-boom dust had settled, the government launched Cradle Fund – a seed fund for tech companies in Malaysia – in 2003; and the MSC Malaysia Pre-Seed Fund in 2006. The availability of more than a single source of funding enabled Malaysians to experiment and test out their ideas. Hence, both initiatives combined gave birth to more than 800 startups, with a sharp spike in 2006.

Veterans unanimously agreed that it was not one, but a series of interconnected events that contributed to the rapid growth of Malaysia’s tech scene. The main factor is – of course – the adaptation of higher Internet speeds. Telekom Malaysia (TM) – Malaysia’s main internet service provider – launched Streamyx in 2001, immediately following the Dot Com bust. By 2009, it was rolling out fiber optic services under the brand Unifi. Soon after, there was increased mobile smartphone adoption, pioneered by Maxis Telecommunications (who brought in Apple, Blackberry and Samsung Galaxy). This led to increased competition between the Telcos, which resulted in the introduction and adoption of inexpensive Data Plans to consumers. The result was phenomenal growth in apps, web services, and mobile services. Every technological advancement in Malaysia stemmed from its predecessor technology.

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Notable Startups

Biggest EXITS in Malaysia to Date, by exit amount or current market cap

Biggest PRIVATELY HELD startup in Malaysia, by estimated valuation

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Investors

Malaysian investors tend to focus their involvement during specific stages of the startup process. The early stage is dominated by Government Agencies - Cradle, MDeC, a small but growing numbers of angel investors, and small fund VCs usually with fund of less than RM50m. Growth stage and pre–IPO are dominated by institutions with an investment arm and large Government - agencies like MAVCAP, MDV, etc. Investors of different funding stages have various investment sizes, and varying frequency of investing into startups.

The majority of local startups during the seed stage rely on bootstrapping to fund projects, while others are forced to apply for the various government grants offered. Unfortunately, there is a lack of angel investors because local investors prefer more traditional asset classes such as equities and real estate. Because of this, a tax break for angel investors was introduced in 2013 to encourage more investment in tech startups.

The most common form of angel investments made are in e–commerce, listings, big data, and financial services. Government VC’s on the other hand do not normally invest more than RM1m.

According to Nazrin, CEO of Cradle, “The private equity side is growing; the venture capital side has shrunk. That’s a real challenge, because it means that, to access capital, the entrepreneurs, particularly those who have graduated from the early stages, will be forced to source funds outside of Malaysia unless we boost the private investment capacity over here, which is why Cradle plans to fill the gap with our venture capital arm.”

Most Active Malaysian Investors, by Deals Completed

SOURCES

http://www.businessweek.com/articles/2013-02-21/to-fund-a-startup-go-to-malaysia

http://www.cradle.com.my/angel-tax-incentive/

http://www.mscmalaysia.my/seedstartups/related-information-startup-entrepreneurship-ecosystem

http://www.businesscircle.com.my/cradle-mission-boost-private-investment-malaysia/

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Community

The year 2009 marked rapid growth and collaboration amongst members due to the increasing number of startup events that took place, cultivating the formation of an exciting and robust entrepreneurship community.

If you are new to the scene and wish to get reach out to other entrepreneurs in Malaysia, there are a number of events you could attend; here are some of the most notable meetups and events:

  • LVL Up KL (formerly known as Webcamp): Takes place at Mindvalley, every last Wednesday of the month. Majority of attendees are technical people.* DNA Disrupt: Locations are announced before the event, every third/fourth Wednesday of each month. Majority of attendees are executive/decision makers/project managers and the usual invite list consists of senior/top managers.
  • Open Coffee Club KL: Locations are random. Mix of audience unsure.

For more info, you can visit Calendata. However, due to the Personal Data Protection Act being enforced early this year, Calendata stopped sending emails for further updates.

Note: If any entity has the intention of organizing meetups, conferences, or events (ie: Founders Drinks) please be reminded of the Muslim community. It is advisable to look for places that do not openly serve alcoholic beverages and/or pork. If this proves too difficult, a recommended option would be to host your event at a restaurant that is specifically housed in an internationally branded hotel; though these types of hotel restaurants may serve alcohol and/or pork, the rate of Muslim attendance tends to be higher and less affected by these cultural sensitivities. (Read more on Cultural Surprises: Muslims).

StartupMamak

A quick and simple way to keep abreast of happenings in Malaysia’s startup community is to join the StartupMamak Facebook group, or even better, attend the meetup that occurs every first Thursday of the month. It is a healthy community, and most startup founders in Malaysia are active members of the group. The majority of KL startup events are covered on StartMamak as well.

Startup Penang / TE4P

For those who have a vested interest in Penang, located on the northwest coast of Peninsular Malaysia (also known as The Pearl of the Orient), be sure to check out events that are organized by TE4P (Tech Events 4 Penang).

Project Renaissance

This is a movement initiated by Mindvalley, with the long term goal of turning Kuala Lumpur into one of the best cities for Internet startups. They have a decent venue (Hall of Awesomeness) that hosts a number of community events which include LVL UP KL, KL Ruby Brigade, AWS User Group, Kickstart, IGDA KL, UX Malaysia, JavaScript Developers, QAKL, and other social-oriented startup and technology groups.

StartupMalaysia.org

StartupMalaysia.org is a not-for-profit organization that aims to help increase the number of fundable startups in the technology space by inspiring the next generation of high-growth entrepreneurs through its various programs. The initiatives and programs by StartupMalaysia.org targets at young aspiring entrepreneurs – from schools through universities and also youth in general. StartupMalaysia.org aims to ignite and catalyze 500 scalable startups by 2015.

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Local Heroes

Here are a list of people that are leading the Malaysian Startup Community by example:

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Government Institutions

Similar to Singapore and Chile, government institutions are heavily involved in the Malaysian startup ecosystem, especially in the early-stage investments. According to a 2013 interview with Nazrin, CEO of Cradle, “We have 9 [VC] companies; five of them are government-owned and the other four take money from the government in one way or another.”

Though the Malaysian government is encouraging private sector investors by building an entrepreneurial ecosystem that allows for easy participation by such companies, growth will take time. Malaysia is beginning to see more private sector participation ( i.e. Various angel investment clubs under the Malaysian Business Angel Network, corporate companies such as MyEG and Catcha Group investing in tech companies, etc.) but it hasn't reached the point of critical mass whereby the government is able to step out of the picture.

Malaysian Government Entities*

SOURCES

http://www.businesscircle.com.my/cradle-mission-boost-private-investment-malaysia/

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Private Learning Institutions

Startup education programs are plentiful in Malaysia. Here is a list of them:

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