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Problems in the Malaysian startup ecosystem and how to fix them

Not many people disagree that Silicon Valley is the number one startup ecosystem in the world. But in case anyone doubts it, here’s a fact proven by Startup Genome’s Global Startup Ecosystem Report 2021.

Scoring a perfect 10 in all categories (namely performance, funding, connectivity, marketability, knowledge, and talent), Silicon Valley is known as a hub global innovation and home to countless unicorns.

But this article is not about the power of the San Francisco tech hub, but about Malaysia’s own startup ecosystem.

In the same Startup Genomes report that verified Silicon Valley dominance, Malaysia’s Kuala Lumpur is not in the top 30 global startup ecosystems. However, KL is recognized as 21-30 in the top 100 Emerging Ecosystems list, with a value of US$16.1 billion.

That’s certainly something to be proud of, but is Malaysia’s ecosystem really growing fast enough, especially when compared to our regional counterparts?

Four industry experts spoke on the topic during a panel at Wild Digital Southeast Asia 2022 titled “Environmental Adaptation: Building a Brighter Startup Ecosystem”.

With Aaron Sarma, general partner at ScaleUp Malaysia, as moderator, the experts sharing their insights are Karl Loo, founder and COO of ServisHero, Effon Khoo, founder and CEO of Kakitangan.com, and Ahmad Kashfi, senior vice president, ecosystem development at Cradle Fund.

Recognizing Malaysia’s Challenge

According to ServisHero’s Karl, Malaysia is actually quite an attractive space for international investors. Regarding the opportunities for digitization, Karl also said that Malaysians have a good reputation for being able to build organizations and scale in the region.

Effon from Kakitangan.com also mentioned that startups are stronger today, especially having survived the pandemic.

But if that’s the case, why is Malaysia’s ecosystem still lagging behind?

Ahmad Kashfi (as Kash, as moderators and panelists call him) has an idea.

Cradle Fund is an influencer in the early stages of Malaysian startups, established under the Malaysian Ministry of Finance in 2003 / Image Credit: Wild Digital

In the Malaysia Startup Ecosystem Roadmap 2021-2030, penned by a group of experts in the startup field, five main challenges in the identified ecosystem. This includes:

  1. Lack of capital driven by the private sector;
  2. Lack of domestic and foreign talent with the necessary technical and digital skills;
  3. Lack of a clear path from idealization to commercialization for startups;
  4. Lack of strong policies and regulations to provide a sustainable startup environment;
  5. Lack of validation and support; lack of ability to penetrate the cross-border market.

These are all problems that MYStartup, an accelerator organized by MOSTI and the Cradle Fund, aims to solve.

According to Kash, it is important for Malaysia to create an “economic flywheel,” which generates enough centrifugal force to energize and boost Malaysia’s ecosystem.

Get support from private and public organizations

If you’re into our local startup scene, you’ll know that there’s a lot of government involvement and support.

Just to list a few, there are MOSTI (Ministry of Science, Technology and Innovation), MDEC (Malaysian Digital Economy Corporation) and MRANTI (Malaysian Research Accelerator for Technology & Innovation). ).

Interestingly, this level of government intervention seems to be quite unique to Malaysia, at least according to the panelists.

While all the government support is great, this leads to the question the moderators ask — is Startups in Malaysia rely too much on government intervention to get the job done? Do too much this show will end make local founders complacent?

“Let’s take a step back and clarify our role in the whole scheme of things,” Kash said. “We are only facilitators and we should remain only as facilitators, not as mentors or business experts.”

“What we should do is focus on what we do best, which is making sure we put in place the best policies for startups to thrive,” he continued.

As such, Kash noted the importance of business (private sector) involvement—Something he sees is becoming a trend. Companies are more aggressive when it comes to investing in startups, whether that be monetary or otherwise.

This benefits both the startup and the company, as with new sources of capital the startup has more room to grow, which in turn can be channeled back to its own growth. company.

Kash concluded, “Because [corporates] know if they don’t innovate, they’ll be disrupted. “

The title of the conference is “Handshake Adaptation: Building a Brighter Startup Ecosystem”

This is why the MYStartup initiative also includes names like Petronas and Microsoft, among others coming soon. According to Kash, one common thing the team hears from these corporate partners is that they want to work with startups, but they don’t know how.

The reason that private sector participation is important in the first place is that the private sector often facilitates investment.

In addition, these large corporations can act as a safe haven and exit for startups.

According to Karl, if more exit scenarios exist in Malaysia thanks to the involvement of private institutions, the sector will attract more investment while providing incentives for founders.

And of course, this will be important for talent retention.

Develop a larger talent pool

Recently, the issue of “talent” has been raised frequently in Malaysia. Or rather, it was the subject of the conversation.

For Karl, it is a real threat that Malaysia is losing its talent to other markets.

“Now more than ever, tech workers have more options,” he said. “They can be digital nomads and remote workers in Bali, they can work in any Southeast Asian country because tech talent is in high demand.”

ServisHero is a platform where users can search for home and business services

From his experience, many employees even asked to move to another office – typically their Singapore office, which is doing a great job of attracting global talent and global network.

“The talent wars in the region are very real right now,” says Karl. “Many of our neighboring countries are being very proactive about this, so it’s time for Malaysia to be very aggressive.”

The solution for Effon is to build a larger pool of talent with improved educational standards.

On top of that, Kakitangan.com CEO also thinks it’s time to go beyond just retaining talent. He suggested that the process to get a work visa should be more streamlined, as he believes the solution lies in attracting foreign talent rather than retaining domestic ones.

If this can be achieved, it will certainly allow Malaysian startups to access a larger and better talent pool.

– // –

There is no doubt that Malaysia’s startup ecosystem has a lot of potential. The Wild Digital SEA conference scene is a testament to that.

However, the potential is not enough. Action needs to be taken to realize those potentials, requiring help from both government support as well as private sector involvement.

Stakeholders must also come up with incentives to attract global talent, and the education system in Malaysia should nurture a better, more optimized talent pool.

As Aaron put it: “It takes a village to raise a child, it takes an ecosystem to raise a startup, and we all have to work together to make it better.”

  • Learn more about Wild Digital here.
  • Read more articles about Wild Digital SEA here.

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