At Echelon 2014, we had people coming over from different parts of the world. It was highly edifying to get to know them and the places they hail from.
Seeing a large number of participants from our neighbour, Malaysia, piqued our interest to know how it is to be a startup in the country. We asked the participants about the challenges in the startup ecosystem there.
Each answer was different, yet a common picture emerged as we progressed.
Baucar and Core Visual Learning Arsyan Ismail is the Founder and CEO of Baucar (pronounced “Bao-char”), which offers location-based advertising using iBeacon technology. According to him, major challenges for startups are in marketing, especially with technically sophisticated products that require educating customers. He also highlighted underdeveloped VC and angel investor networks and an over-reliance on government grants as an area of concern in the Malaysian startup ecosystem.
Ng Wei Chong of Core Visual Learning, which offers a visual math studio for teaching primary-level mathematics, offered a more specific experience centred on education products. According to him, major challenges that startups face are the intense competition within the education market and also bureaucratic hurdles. Due to red tape, clearing products for use in schools is both long and tedious, with a startup needing to be established before having any chance of penetrating the broader market.
Tide Analytics Ivan Loh is the Product Development Manager for Tide Analytics, which provides data analytics tools for enterprise users. He identified a post-seed funding gap as one of the challenges, with investors focussed on bigger businesses with more traction than riskier startups. Gaining a foothold in Malaysia is tough, he said, due to consumer-facing apps dominating the attention of Malaysian investors.
While entrepreneurs are focussed on B2C activities due to scaling, less people focus on B2B activities, making it difficult for data analytics firms and enterprise-focussed ventures to find either investment or traction. Although it is easy for startups to get established in Malaysia, following up and getting products to the market is difficult.
WaryBee Bernie Eng, the Co-founder of WaryBee, a hardware startup for personal safety device, commented that challenges are greater for a hardware startup. Most programmes and accelerators are suited only for software startups, with insufficient funding and limited facilities for hardware products. He noted a pattern in hardware startups of seed funds generally spent developing software portion, leaving no funds for hardware or marketing.
Hardware development requires labs being sourced, as most accelerators lack proper facilities and tools for hardware. Eng noted the impracticality of buying tools and equipment, due to the expense involved, sharing that sourcing for labs and buying equipment inflated costs for hardware startups, while facilities are also not easily accessible in Malaysia.
ONz and InstaB William Yap, the Founder of ONz, a social network for sports players, highlighted the difficulties facing software startups like his. Primarily, because of a lack of developers in the market, given a greater demand for developers than the supply.
Tang Tung Ai and Fong Huang Yee are the Founders of InstaB, a social network for parents. The problems they stated in the Malaysian market, related to their startup, is the slow adoption of new technology, making it difficult to implement it and test its features. VC infrastructure is underdeveloped, along with a post-seed funding gap. However, they did note that with the startup ecosystem limited but growing in scale and awareness, combined with generous government grants available, the situation is slowly improving.
1337 Ventures Bikesh Lakmichand is the Founding Principal and CEO of 1337 Accelerator. Asked about market difficulties in Malaysia, he said it is funding gaps, majorly in Series A funding, though seed funding is easily available in the form of government grants. Another difficulty he shared is the time for government grants to be approved and transferred over, taking four months or more.
This puts startups in a difficult position; they either run out of funds or suspend operations while waiting for the grant money. A lack of VC firms also hamper growth prospects, with private sector funds and networks lacking. Most startup funds are also spent on developers, leaving no capital for marketing or customer acquisition.
Joan Soon, a Creative Mentor with 1337 Ventures who helps with content marketing, noted that many Malaysian startups are strong in development, with an emphasis on product development. However, product launches suffer from not understanding how to market a product and getting it to the market. Noting that 1337 Ventures have startups with effective products, the major issue is a marketing gap that leaves them unable to create awareness and acquire customers.