How can Malaysia make itself a hub for startups?

Malaysia has been on a roll, welcoming foreign direct investment (FDI) in the form of Tesla and Amazon Web Services along with the likes of Microsoft and Google slated to expand to the country.

The phenomenon may be an indication that Malaysia is all set to become a global tech hub, which minister of international trade and industry Zafrul Aziz has reinforced on many occasions.

However, this has gotten the business sector talking as to whether these international tech giants will get enough financial support from the Malaysian government to thrive.

Recently, SC’s chairman Awang Adek Hussin said that there is a significant lack in what has been done to establish Malaysia as a startup hub. Though the startup industry has seen positive developments in recent times, it is far from sufficient for Malaysia to become a hub where young entrepreneurs can thrive, which is a problem that needs swift attention.

Don't miss: 'More needs to be done to establish MY as a startup hub,' says MY's Security Commission 

Is Malaysia doing enough for its startups? 

Instead of commenting purely on the situation, industry players A+M spoke to shared insights from their personal experiences in setting up shop in Malaysia.

Ashvin Anamalai, CEO of newly set up boutique agency, DNA Creative Communications, said even though Malaysia has made the efforts to promote its startup ecosystem, it is not without its flaws. “One of the main challenges these startups face is the struggle of securing sufficient funding, especially for early-stage startups seeking investors or venture capital - an issue that all our experts highlighted.”

“In addition to that, finding the right talent with the necessary skills for their ventures can be challenging, resulting in a skills gap,” he said. In his personal experience of setting up an agency, Anamalai observed that finding and keeping talented employees is a struggle, especially since startups are competing with established companies and multinational giants for the same pool of skilled individuals.

True enough, funding seems to be the crux of the issue here. Manu Menon, CEO and founder of Youthopia shared similar frustrations stating that angel investors only seek to invest in a ‘sure thing’ or a Malaysian version of a successful startup from overseas. “We also have gaps regarding the availability of mentors with a proven track record. Those who do make it and manage to have a decent exit, don’t seem to avail themselves to the next generation of entrepreneurs,” he said.

In his experience of setting up Youthopia, Menon noted that having to juggle different roles to make ends meet took from his ability to devote himself to his startup. “After a number of pivots, we now have traction and are showing signs that we are on the right track. It’s taken us four years and surviving a pandemic to get where we are today.”

Although the government involvement and banking are crucial for startups to flourish, Syed Nasir, business chief at The Clan noticed a risk in this model of operation leading to complacency, with local startups relying too heavily on grants and not being pushed to develop innovative and sustainable business models.

“Startups need more than just initial funding to grow; they require ongoing mentorship and opportunities to scale cross-border,” Nasir explained.

What can be improved?  

Menon believed that while Malaysia’s startup ecosystem has a long way to go, two ways in which it can be improved is with the introduction of funders who are willing to risk their money on unproven, original ideas at the nascent stage, as well as successful entrepreneurs who are willing to risk their time to genuinely help other entrepreneurs succeed.

From the point of view of a startup, Anamalai believed startups need to get creative and find unique ways to showcase its unique company culture, offer attractive benefits beyond just salary as well as create a work environment that fosters growth and innovation. In terms of how Malaysia can aid startups, Anamalai thinks that investing in education ensures that there is a continuous flow of talented individuals who are all set to power up the startup ecosystem.

He shared:

It's like creating a pool of go-getters and innovators who can bring fresh ideas and energy to fuel the growth of startups in Malaysia. With the right education and support, startups can soar to new heights and make a real impact on the economy and society.              

Bikesh Lakhmichand, founding partner of venture capital firm, 1337 Ventures concurred, stating that focusing on education and opportunities for collaboration are the most efficient ways to encourage growth and empower the local Malaysian ecosystem players, from funders to mentors, and more to create a sustainable impact to benefit the startup ecosystem as a whole.

Related articles:
'More needs to be done to establish MY as a startup hub,' says MY's Security Commission
AirAsia partners alternative protein startup Green Rebel for meatless meals onboard
Former Fave leaders Joel Neoh and Audra Pakalnyte launch fund to support startups in SEA