The Next Big Thing

Advancing Malaysia’s Start-Up Ecosystem

In the era of Industry 4.0, impact-driven innovation is what Malaysia needs to emerge triumphant in an environment of disruptive technologies. Eager investors and technocrats are on the look-out for companies that are set to challenge the status-quo with creative technologies and viable business models. In challenging the traditional ways the industry operates, these tech firms are injecting new value to the market. In order to be competitive, Malaysia needs a cohesive digital economy that can support the startup communities in the country. 

The Southeast Asia (SEA) tech-startup market is on the rise. According to Singaporean fund venture capital firm, Cento Ventures, total value of tech investments in SEA start-ups reached US$12 billion in 2018. From 2015 to 2018, the total value of tech investments outstripped those of other growth markets – Latin America, Middle East and North Africa (MENA) and Africa.  

Despite the decrease in total value of investments in 2019 to US$7.7 billion, mainly due to fewer ‘mega-deals’, SEA remains a promising hotbed for tech investments. This is driven by a burgeoning internet economy and a healthy start-up ecosystem. 

Focus on the Local

There are a number of tech start-ups based in Malaysia that have managed to raise funds of more than US$100 million. These include Carsome, Fashion Valet, CarAsia, iProperty. These also include successful Malaysian start-ups that have expanded outside the country – Grab, Iflix, PropertyGuru, Jobstreet and MOL. 

While Malaysia may be an attractive place for new tech enterprises to start-up, it faces issues when it comes to getting them to stay. For instance, Grab had to move to Singapore in order to raise the funding it needed. 

Malaysia has also been lagging behind Indonesia, Singapore and Vietnam in terms of total value of capital investments in tech start-ups. In fact, the average investment value in Malaysia from 2015 to 2019 was the second lowest in the region, only in front of the Philippines.

When addressing the reasons for the slowdown in funds raised in Malaysian internet companies, the e-Conomy SEA Report 2019 highlighted that one factor might be attributed to the lack of homegrown unicorns in the country. 

Source: Cento Ventures
Source: Cento Ventures

The Fascinating Thing about Unicorns 

SEA is home to sizeable number of tech start-ups. This includes 10 unicorns (start-ups valued at more than US$1 billion) and three decacorns (start-ups valued at more than US$10 billion) the likes of e-commerce platform provider Sea Ltd and ride hailing services Grab and GoJek. 

Encouraging the setting up of tech start-ups – both local and foreign – in Malaysia will draw tech investors, such as venture capital firms, into the country. This will motivate more tech start-ups to set up in Malaysia, reinforcing the digital economy ecosystem here. 

In the long run, this will attract tech multinationals to Malaysia facilitating technological and expertise transfer. This allows Malaysian tech companies and start-ups to scale up, opening up new high skill job opportunities in the market. 

A booming tech start-up ecosystem complements Malaysia’s aspirations to be at the heart of the growing SEA digital economy, currently led by Singapore and Indonesia. The potential is definitely there.  

Kuala Lumpur was ranked as the 11th emerging startup ecosystem in the world in the Global Startup Ecosystem Report 2020 by Startup Genome. This reflects the potential for Malaysia to drive high value economy founded on a robust and inclusive tech startup universe.

Initiatives like the Highway to a 100 Unicorns are definitely a push in the right direction. This trilateral collaboration between Microsoft, Malaysia Digital Economy Corporation (MDEC) and the Malaysian Global Innovation and Creativity Centre (MaGIC) seeks to further advance the startup ecosystem in Malaysia.

International Business Review speaks to the representatives from Microsoft, MDEC and MaGIC, as we hone in on Malaysia’s local startup ecosystem and how it serves to accelerate Malaysia’s digital transformation and economic resilience.

Expanding the Universe
K Raman, Managing Director of Microsoft Malaysia

Microsoft is a force that has transformed communities and businesses across the globe. Microsoft Malaysia’s Managing Director, K Raman explains Microsoft’s vision to do more for businesses and individuals to IBR. The Highway to a 100 Unicorns is an exciting initiative by Microsoft that will facilitate the growth of the nation’s tech industry in a bid to drive Malaysia’s road to economic recovery.

"We believe today’s local startups can potentially become tomorrow’s Microsoft, and help shape Malaysia’s economic recovery and resilience."

K Raman, Managing Director of Microsoft Malaysia Tweet

The Highway to a 100 Unicorns was first launched by Microsoft in India in 2019 with the objective to strengthen the local startup ecosystem. Following its success in India, the programme was expanded to 16 countries in the Asia Pacific, including Malaysia. Through this initiative, eligible start ups will gain global market access support, access to funding, ongoing mentorship and technology guidance in Microsoft Azure, artificial intelligence, machine learning and more.

The world around us has changed significantly, impacting the way business is being done. We are seeing tech unicorns such as Grab and Netflix thriving in this digital world – with no assets, only technology. In the hopes of nurturing the next Grab or Netflix, or even the next Microsoft, the initiative aims to empower startups  to realise their full potential to deliver real impact to the world. To this end, we are proud to have the support from MDEC, MaGIC and Cradle, whose expertise and reach will complement Microsoft’s global programme. 

 

Technology for the Future 

Technology will continue to play a critical role in enabling an inclusive economic recovery, Hence, we are committed to helping our customers, communities and nation deploy and adopt this technology.

This is especially important as the pandemic has made digital transformation a necessity. We saw two years’ worth of digital transformation in less than two months. A recent study by Microsoft with IDC Asia Pacific reveals that 77 percent of Malaysian organisations are speeding up digitalisation in response to the pandemic. 

In an environment where businesses are rethinking their business models, innovating and adapting, Microsoft plays a pertinent role in ensuring that customers have access to the resources they need to recover and to enhance their digital capability.

In the long term, Microsoft will continue to support customers in the areas of smart investments that leverage on cloud, intelligent solutions and security. We believe it is not enough to deploy new technologies – organisations must also build from them. Tech intensity is key to business resilience. 

We’ve always believed that any success in digital and technology requires both the adoption of tools as well as own people’s capabilities – what we term as tech intensity. Essentially, technology is a tool, but people are key enablers. In this regard, skilling is a huge priority for Microsoft to help our communities recover, respond and build resiliency for the future, thus becoming a hub for global tech collaboration.

Microsoft has partnered with LinkedIn and GitHub for a global skilling initiative to help individuals enhance digital skills. Locally, we have also partnered with learning institutions to implement upskilling programmes for students.”

At the Forefront of Malaysia’s Digital Transformation
Surina Shukri, Ceo of MDEC

MDEC was established to lead Malaysia’s digital economy. As an enabler for the future via digitalisation, MDEC strives to build an ecosystem that can assist local enterprises, including startups in the areas of talent, funding and market expansion, thus further enhancing the country’s attractiveness as the preferred choice for digital sector investment. MDEC CEO, Surina Shukri, highlights how strategic partnerships with corporations like Microsoft and MaGIC will build a market ripe for digital and technological intervention, locking Malaysia as the Heart of Digital ASEAN.

"MDEC continues to position Malaysia as the Heart of Digital ASEAN. As it further reinforces its role as a regional powerhouse for the digital economy, part of which includes launching global champions, it will pave the way towards engaging and embracing the Fourth Industrial Revolution."

“The digital economy in SEA carries a combined potential value of US$300 billion and there is a race for one country to become the global hub for this region. In order to attract sizeable middle level tech investors and start-ups, and scale-up technology investors, collaborations with Big Techs such as Microsoft, IBM, HP Enterprise, Alibaba Cloud and Huawei is a given.

Collaborations with technology leaders not only accelerate digital transformation of local businesses but also provide regional and global market access to Malaysian technology companies. MDEC is also working with global partners the likes of Mastercard, UN Capital Development Fund (UNCDF) and TikTok to create a solutions-driven start-up scene that can help address digital inclusivity.

This is part of its efforts to strengthen the start-up landscape in Malaysia. Other initiatives include the Global Testbed Initiative (GTI) which aims to attract foreign tech companies to launch and test their products in localised testbed zones, focusing on dronetech. Locally, MDEC continues to work with our ecosystem partners like MaGIC, Malaysia Technology Development Corporation (MTDC) and Cradle.

MDEC is also investing in talent development through collaborations with companies like SAS, Google and Coursera. This, in the long term, will increase the pool of digital talent in areas, such as data sciences, cyber-security, software development and even digital content development.

 

A Tech-Savvy Malaysia

In this current economic climate, digital connectivity in Malaysia proves to be the lifeline for businesses in Malaysia. This relates to plans to widen availability of 4G and fibre networks, alongside the launching of 5G networks, in line with the National Digital Network (JENDELA). This will increase Malaysia’s appeal as a hub for global technology collaborations in the region.

MDEC, through our Global Growth Acceleration division, is also working with the Malaysian tech diaspora to provide targeted mentoring for Malaysian tech companies in popular tech areas such as artificial intelligence. This division is also working with Malaysia External Trade Development Corporation (MATRADE) to help expand Malaysia tech companies’ footprint around the world which will pave the way for market expansion of Malaysia’s current and emerging tech companies.”

Enhancing the Innovation Value Chain
Dzuleira Abu Bakar, Ceo of MaGIC

True to its name, the Malaysian Global Innovation and Creativity Centre is where the magic happens. With a vision to create a vibrant and sustainable startup and social enterprise ecosystem, MaGIC’s work has impacted more than 100,000 entrepreneurs, with value creation of RM1.9 billion. An agency under the Ministry of Science, Technology and Innovation (MOSTI), MaGIC CEO, Dzuleira Abu Bakar, highlights how it is advancing the creative and inclusive entrepreneurial culture to strengthen Malaysia’s position as a nascent innovation nation.

"MaGIC has provided our community of startups, investors and ecosystem players with capacity-building programmes, market and funding opportunities and regulatory assistance that impacted more than 100,000 aspiring and seasoned entrepreneurs with overall value creation of US$465 million."

Dzuleira Abu Bakar, CEO, MaGIC Tweet

“With first-hand knowledge and expertise in the local startup ecosystem, MaGIC is a suitable collaborator for the Highway to a 100 Unicorns initiative. MaGIC’s role is to grow local startups to be competitive locally, then scale regionally and globally through our capacity building programmes. This also includes market and funding opportunitiesas well as regulatory assistance.

MaGIC has been positioned as a pivotal player to increase innovation-driven enterprises in Malaysia, building a progressive business climate for these businesses to thrive. To this end, we work with local and international government agencies and corporates to facilitate the value chain of innovation.

Recently, we also played a vital role under the Malaysian Government’s PENJANA initiative, for programmes that specifically target startups and social enterprises. COVID-19 has created game-changing opportunities for nations to bounce back and establish economic resilience via innovation and creativity. Meanwhile, MaGIC continues our efforts regionally through our ASEAN Centre of Entrepreneurship, Global Accelerator Programme (GAP), Global Market-Fit Programme (GMP) and MyStartup Hub to encourage international networking and the exchange of knowledge and expertise, and to promote Malaysia as the preferred choice for innovative startups from around the world.”

Malaysia is well-poised to position itself at the centre of foreign investments in Asia. The country is ranked 12th among 190 economies and fourth among Asian countries by the World Bank’s Doing Business 2020 Report. In the World Economic Forum’s Competitiveness Report 2019, Malaysia was also ranked 27th out of 141 countries and placed 2nd in ASEAN. Expanding the local tech universe will further strengthen Malaysia’s offerings to global supply chains. It would do well for Malaysia to have 100 Unicorns or more. 

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