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Dreaming beyond M'sia's borders

Publication Date : 20-02-2014

 

It struck me recently how much harder Malaysian and Malaysia-based start-ups need to work to get on the radar of regional or global venture capitalist (VC) firms looking at Southeast Asia.

That realisation hit while attending the inaugural Asia Leaders Summit organised by Incubate Fund and hosted at Marina Bay Sands in Singapore on February 15.

Incubate Fund is a US$60 million venture capital fund based in Japan focused on seed- to early-stage funding. So far, it has been investing in mobile technology, gaming, and Internet media start-ups.

The event, which featured panel sessions discussing investment opportunities and challenges in Asia, also showcased promising Southwest Asian start-ups alongside up and coming start-up stars from Japan and South Korea.

As expected, within the Asia Pacific region, China topped the minds of many of the VC attendees. Within Southeast Asia, the Philippines, Indonesia and Singapore garnered multiple mentions.

There was little to no mention of other markets such as Malaysia, Vietnam or Thailand, which had the unexpected effect of sparking a semblance of patriotism within me. A question to a panel comprised of VCs with investments in the region about prospects also did not get me much insight.

But it certainly got me thinking, and a lament posted on Facebook about how Malaysia is on what seemed to be no one’s radar garnered some interesting insights.

“It’s a function of market size, just like Singapore. You need ideas to expand regionally or globally from day one,” noted one friend who is actively investing in start-ups via a small Singapore-based VC fund.

Another pointed out that Malaysia is an excellent base of operations in terms of operating costs, stable government, and incentives, and that is why his company has established itself here.

“But Malaysia’s population is tiny compared to Indonesia, the Philippines, Thailand and Vietnam,” he added.

A quick check on absolute population figures for the main nations in the region lays it out in stark detail. Indonesia’s population is currently around 235 million, the Philippines 94 million, Vietnam 89 million, and Myanmar 53 million.

The only exception is of course Singapore, which despite its tiny size, boasts an affluent population and great incentives for businesses. Many companies base themselves there to pursue regional ambitions.

Yes Malaysia is also a great place to operate from, but as a market Malaysia has long been considered second-class. I have covered the technology space long enough to almost get over this fact.

What irked me was the fact that Malaysia is not even looked at when VCs shop around for investments. It’s almost like Southeast Asia just means Indonesia and Singapore to those on the outside looking in.

Sure the pundits say that regional venture capitalists prefer regional plays, but in the early stages, many start-ups seek to get validation in their home markets first to demonstrate to potential investors that their business can be replicatedelsewhere.

It’s a tough hill to climb when founders of Malaysia-based ventures are faced with the need to go the extra mile to find funding, especially when they have decided against government funding.

It’s one thing to hop on a plane to Silicon Valley to meet with interested VCs, quite another to take a trip down to Singapore just because that’s the only country the money men choose to visit on a trip to the region.

“It’s okay lah. Malaysia has never really been on anyone’s radar for anything since time immemorial, I guess it’s how much of a bottom line number we can get running a business out of this country.

“The strange thing is there are people actually making good money and they’re people you’ll probably never hear of,” said one friend in his comment on my Facebook post.

Another friend just shrugged and stated: “Start-ups should consider doing it the old fashioned way — without VCs, like (Tony) Fernandes and (Robert) Kuok. While the rest play the Silicon Valley game, we bootstrap like we have always done.”

Yes, sound advice for a nation whose entrepreneurs are long-term builders. Malaysian founders live up to the notion of a long-term commitment to the ventures they’ve given life to. They tend to build houses to stay in for the rest of their lives, not to flip for a profit a few years down the road.

But for the sake of the local start-up ecosystem, that is not quite what’s needed. We need more exits, more flipping of companies to boost the numbers of experienced founders versed in start-up pains willing to not just guide but perhaps even invest in the next generation of start-ups.

Government-funded programmes and initiatives only go so far in catalysing this part of the ecosystem. As a community, the ones who can should step in. Like it or not, the need to play the VC game will eventually come up.

One attendee I was speaking to at the summit also pointed out that the forays of Japanese and South Korean VCs into Southeast Asia have only just begun and a bigger footprint in the region will depend on how successful the first or second batch of investees are.

I truly hope that is the case and hope those early bets will spark the hunger to dig deeper for gems other parts of the region can offer.

But for local founders out there, a new mantra is needed, or rather, we as a nation must encourage our people to think beyond our borders as a basic requirement.

For startups with global ambitions, it’s a slightly different game and the onus is on them to prove the competitiveness of their offerings in the wider world so that VCs are convinced enough aboutthe eventual payout to park some cash with them.

The most profound comment from that Facebook discussion, comes from Khailee Ng who is currently busy shopping for startups under the banner of seed fund 500 Startups, which I will share here:

“I see meritocracy as a higher value versus patriotism. In many cases, discrimination in favour of a generality can be a potentially harmful bias — sexism, racism, and in some ways, even patriotism.

"Although I’ve benefited from a lot in the country I grew up in, and many foreigners and locals do create big companies with Malaysia as a hub — generating massive returns for investors — I am not blind to the fact that that I would’ve succeeded in an even larger way had I focused on more markets sooner than later, and most of the big tech companies out of Malaysia have a regional and global story as well.

“Investors will continue to invest in the best teams, the best market potential wherever it may be in this region. And this is where my attention goes as well. If one country or another is a useful piece or not in that context so be it.

“In the meantime, whatever country you come from, let your identity liberate you, not limit you — so you too can be part of where the world is heading,” he wrote.


 

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