Malaysian Global Innovation and Creativity Centre (MaGIC) hosted its first Entrepreneurs Dialogue on the 20th June 2014. Attended by 55 founders and co-founders from the high growth/ highly scalable startups space, the objective of the dialogue was to have a deeper understanding of the issues faced by entrepreneurs in Malaysia.
The dialogue consisted of a series of breakout and joint discussions, kicking off with the CEO of MaGIC, Cheryl Yeoh, setting the stage and sharing her perspectives and experiences. Throughout the dialogue, different feedback channels were activated included a ‘post-it’ wall and a virtual discussion forum on magic.userecho.
Voicing issues and ideas within breakout groups
The breakout groups were anchored along the entrepreneur lifecycle, a framework developed by MaGIC to frame the dialogue. The lifecycle consists of 6 stages in which an entrepreneur in the tech-space would go through starting with the Discovery stage till the last Maturity stage. The participants were placed into three groups named ‘infants’, ‘mid lifers’ and ‘geriatrics’, reflecting the life cycle. ‘Infants’ are those who are at the stage of discovery and validation of their products while ‘mid-lifers’ comprised of founders and co-founders of companies who are in the product development stage and evaluating the efficiency of their processes and ‘Geriatric; are owners of companies in the growth and/or mature stages.
Entrepreneurs who attended the event sharing their experiences
Despite the groupings, entrepreneurs across different stages of the lifecycle crossed and moved around the breakout rooms to contribute and share their challenges and experiences. Facilitated by the MaGIC team, the conversations were engaging with real issues on the ground debated and discussed.
Connecting among entrepreneurs
There was a clear appreciation that even though many issues faced by entrepreneurs were global concerns that were not unique to Malaysia, there was still a need to address them as well as resolving local-specific roadblocks. The dialogue was framed along these components with the following issues raised.
It was discussed that there was no aggregated repository of information to support entrepreneurs across the life cycle. Without a central location of all these information, entrepreneurs find this inconvenient and time consuming when searching for relevant content. Currently, the support system is unable and ill equipped in its domain knowledge/ entrepreneur-specific issues, to support entrepreneurs in the best routes/ options available out there in developing and growing their businesses. There is also a low visibility of Malaysian success, as well as failed stories on a local and international platform. There are many accelerators and accelerator programs offered in Malaysia, however, the awareness of the existence of these programs is low.
The participants also shared negative experiences where there was a lack of collaboration among startups, and practices of underhand tactics to remove competition instead of leveraging on each other and mutual nurturing growth within the community of startups. There is still room for improvement in terms of technology/customer networking sessions, emphasising on more face-to-face sessions. Furthermore, we lack of community and co-working spaces. It was agreed that there should be more shared working environments made available for entrepreneurs.
There is also an insufficient relevant ‘traction’, particularly local mentors to guide and support entrepreneurs in Malaysia. Another issue raised was that there is low access to business opportunities in the local market such as MNCs and GLCs. Due to this low access, this caused a shallow level of understanding of the startup industry by MNCs and GLCs which caused difficulties to collaborate. For tech and application based startups, entrepreneurs find that Malaysia is without a ‘local-friendly’ app-store unlike Vietnam and the Philippines which prioritizes local applications.
Issues being faced by Malaysian entrepreneurs includes the unability to hire and access relevant talent, to be specific, good developers and engineers that have the skills required by startups. This is caused by the fact that engineering graduates from universities are not equipped with the right and relevant skills. They lack the relevant exposure and experience of the startup industry. Cheryl shared her personal remedy which is, to learn about and to understand how programming and technology for your product words, so that a common language can be used to project market potential, even though it may not be necessary for a founder to be a hardcore coder. It is essential to gain respect from a potential tech co-founder by speaking a common language.
In addition to that, there is a broad perception by the Malaysian society that working with startups is not a stable or ‘sexy’ career. To extend on that point is that corporate jobs are favored over startups because there is a mindset that corporate jobs provide more security and stability.
Another difficulty was that quality ‘software’ houses that can effectively serve local entrepreneurs are few and far between. Examples of ‘software’ houses are Coupa Software, Invisible CRM and Kineticsware. The participants of this dialogue shared the problem that finding a suitable tech co-founder is difficult and even when found, they lack relevant leadership skills to build and manage teams. There is a restricted access to foreign talent due to strict working requirements and the difficulty to acquire MSC status.
To fund a startup is to provide resources, usually in the form of money or other values such as equipments, talent or information. Malaysian entrepreneurs found that many of the grants required are spent on product development and marketing but they do not provide for working capital and human capital development. The result is that it trains entrepreneurs to outsource their work and “buy” users. This leads to entrepreneurs not validating their market/product before building the actual product and does not contribute for organic or true user growth.
The current local investor pool is also found to be too conservative and risk-averse to invest in startups because there is low and insufficient strategic investors. Entrepreneurs also lack the awareness of the different approaches and mechanisms of funding.
It is ideal for any startup to be able to expand on an international level. However, Malaysian entrepreneurs are found to be generally not prepared, in term of resources and knowledge of the market, to expand beyond Malaysian boundaries. The issue is that it is a mindset among local startups to be very locally driven and not regionally or globally centric. There is also a negative general perception of Malaysia as a startup destination although it is less expensive and bureaucratic in comparison to other nations. An article by Mikaal Abdulla, explains that startups in Asia face more difficulties as compared to those in Silicon Valley but has no doubt that Asia will rise to the occasion where the very same entrepreneurs that are struggling with these challenges today will solve the problem for tomorrow’s entrepreneurs.
Some entrepreneurs felt that the MSC status is not suitable for startups and that there should be a ‘startup friendly’ component. Examples of these problems were the requirements for startups to move into very expensive “Cybercity” or “Cybercentre” buildings that they can’t afford, time consuming application processes and people who pay high fees to “consultants” to acquire the status.
Another problem faced by Malaysian entrepreneurs is that financial institutions are not startup friendly. They have a risk-averse mindset which makes it very tough for a startup to open a bank account and also to accept payments from customers.
Moreover, compared to Singapore, the process of registering a company in Malaysia is a lot more tedious and expensive. Where it costs SG$ 300 to file an online application in Singapore, in Malaysia it costs RM2,600 to file a paper application which is a requirement under CoSec. Malaysian companies also cannot easily accept payments from foreign customers in the United States, Australia or United Kingdom unless they have a local bank account in those countries which makes local startups more difficult to build a “global” company. Til this day, there is no equivalent payment gateway that helps entrepreneurs in this area.
Large Malaysian corporations of GLCs are also not incentivised to use local software and products where they prefer to use products from Google or Amazon which are not charged with GST tax as they are not based in Malaysia. This causes those products and software to be cheaper than Malaysian products, which is a counterintuitive incentive to support local products. Lastly, Malaysian startups are not allowed by banks to mention who their customers are which makes it very difficult for startups to sell their value proposition to other potential clients.
Breakout session, according to the life cycle
While many issues were raised, the dialogue was positive and solution-oriented with participants contributing past experiences in overcoming these challenges. The session closed with the CEO highlighting different initiatives being planned across the horizon including a planned Entrepreneurs Council, MaGIC Academy just to name a few.
Participants networking and sharing perspectives
Overall, participants found the dialogue engaging and were able to build strong relationships and networks not only with the MaGIC team but with other fellow entrepreneurs as well. Participants also said the dialogue was different from all the others they had attended and felt optimistic that tangible improvements to the ecosystem will happen.
Solutions to these issues where discussed with some detail and MaGIC is currently in the planning and development phase of a series of initiatives which will be launched throughout the year.
More engagement sessions with entrepreneurs will be organized to continue to build momentum and to tangibly solve some of the issues faced.