Is Malaysia ‘losing out’ to Singapore?

By A. Asohan April 15, 2013

Echelon satellite event here a great opportunity for local start-ups, but also illustrates gap between Malaysia and Singapore
Events premier sponsors Cradle and Mavcap however believe that Malaysia has ‘hidden strengths’ that are coming to the fore

ONE of the region’s leading tech start-up conferences is holding a satellite event in Kuala Lumpur this week, part of the lead-up to the main event in Singapore in June. But while it’s great to see Echelon back in Malaysia for a second time, it raises questions of how well the Malaysian start-up scene is projecting itself regionally.

Some industry pundits would of course say that it’s not a ‘zero-sum game’ – such events and successes feed into and reinforce the regional ecosystem, which is great for everyone involved.

There is also no denying that ties between the start-up communities within South-East Asian countries, which events such as Echelon help build, create an exponential effect, not only in terms of market growth but also in terms of technological innovation.

Is Malaysia ‘losing out’ to Singapore? When social recruitment website Tribehired.com, whose early-stage investor was Malaysia’s Ministry of Finance agency Cradle Fund Sdn Bhd, recently closed a seed funding round worth about S$696,000 (US$557,070) led by Singapore investors, it illustrated the synergies possible between the two countries’ ecosystems.

Tribehired was also a participant in an accelerator program operated by Singapore-based JFDI.Asia, whose co-founder and chief executive officer Hugh Mason (pic) said that the deal showed “the benefits when Malaysia and Singapore collaborate to support innovative start-ups.”

“Tribehired’s talent was first spotted by a Malaysian government fund and, with support from both private and public investors in Singapore, the business has been able to exploit opportunities in both markets to grow much faster than it would have done in either alone. Now, Tribehired is helping to fill jobs and create wealth on both ends of the causeway,” Mason said.

And e27, the media company behind Echelon, has made no secret of how important Malaysia is to its regional expansion plans. “Malaysia continues to be a close ally to Singapore, and vice versa,” says its chief executive officer and co-founder Mohan Belani.

“We always seek to improve connections and opportunities for users of our platform with the South-East Asia ecosystem.

“We believe that through future events, editorial features and partnerships in Malaysia, we can foster a better understanding of the uniqueness in each market and promote more business opportunities to our users,” he adds.

But it is also undeniable that Singapore has executed so well on so many initiatives – whether it’s government programs; its universities being able to nurture the right kinds of knowledge and attitudes; or its venture capital and angel investor community being relatively less averse to risk-taking – that the island-state is getting most of the attention.

In fact, it’s one of the reasons why Cradle has decided to be one of the two premium sponsors for the Echelon Malaysia Satellite event this week.

Malaysia vs Singapore

“Echelon is a well-established regional event that is participated in by start-ups all across Asia and when I first attended an Echelon event in Singapore, there were hardly any Malaysian companies involved,” says Cradle chief executive officer Nazrin Hassan (pic).

“As a result, despite the high level of industry activity and development here, Malaysia or Malaysian start-ups do not get any recognition in the regional space,” he says via email.

Cradle is sponsoring the Echelon satellite event here for three main reasons, he says:

TO strengthen Malaysia’s position on the regional start-up map;

TO highlight that we do have some high-potential start-ups here that should be recognized by local and regional investors; and

TO encourage our start-ups to participate in more regional-based events and to compete and benchmark against their regional peers.

While he acknowledges that Malaysia does not sell itself well enough, Nazrin says he prefers to think of the positives that Malaysia can leverage off Singapore, rather than thinking of it from a purely competitive perspective.

“There are of course natural advantages that Singapore has built up as a developed country, a regional hub and the West’s window to South-East Asia – but the fact is, it’s a small country and it has to depend on other countries for entrepreneurial talent.

“There is no reason why start-ups from other countries cannot capitalize on what Singapore has built to their own benefit,” he adds. “Think of it as an advantage – you can remain within your own country where the costs are far lower and you can use Singapore as your marketing and talent recruitment arm to the region and the world.”

Still, Nazrin admits that Singapore had done very well in putting in all the elements – education system, government initiatives, participation by universities, capital market – needed to create a vibrant start-up ecosystem.

But he adds that a comparison between Malaysia and Singapore “is almost always a flawed one.”

“One is country with 28 million people and the other is a city state with four million people. There is much more flexibility and nimbleness when it comes to Singapore’s decision making – it’s like running a city. Perhaps a better comparison should be between Singapore and Kuala Lumpur.”

“Singapore also has a very open attitude when it comes to accepting foreigners, although that comes with its own fair share of backlashes when the locals are disadvantaged.

“Their Government is willing to invest in a very aggressive way when required – that’s very clear – but very few people have asked whether their returns has been commensurate with what they’ve invested, especially when foreign research talents use their resources and then walk away, whether with or without success,” he adds.

Malaysia’s strengths

But Nazrin also believes that Malaysia has done a disservice to itself by not selling itself well enough.

“Malaysia tends to under-sell, even in the areas where we have more,” he says. “Malaysia has a stronger ecosystem than many countries in the region, with far better access to funding and value-add programs.

“You’d be hard-pressed to find a country in South-East Asia where the economic growth is still going strong, where there is no shortage of interest or budding talents in entrepreneurship, where the Government support for entrepreneurs is strong, where access to credit is one of the best in the world, and where English is spoken widely.

Is Malaysia ‘losing out’ to Singapore? “We also have the advantage of cost, relatively, when it comes to setting up businesses. And the private sector is gradually playing its role in leading economic growth again,” he adds.

When it comes to Malaysia’s ‘hidden strengths,’ Nazrin’s views are pretty similar to those of Jamaludin Bujang (pic), chief executive officer Malaysia Venture Capital Management Bhd (Mavcap), the Malaysian Government’s venture capital arm.

In fact, he believes that Malaysia has many of the same advantages that Singapore boasts of, but adds that “perhaps there is a need to work with each other more closely.”

“Malaysian universities, like Universiti Sains Malaysia, Universiti Kebangsaan Malaysia and Universiti Teknologi Malaysia have been very active in commercializing their research and development (R&D),” Jamaludin says.

“The Malaysian Technology Development Corporation (MTDC) for example has been actively working on commercialization programs with these universities, with more coming up, via its graduate entrepreneurship program where it funds attractive projects.

“MTDC has even been operating incubators in these universities before the introduction of the graduate entrepreneurship program.

Still, Jamaludin acknowledges that there are challenges that Malaysian start-ups face – and chief among them is mind-set.

“Start-ups in Malaysia need international exposure – they have to think from the very beginning that they produce products for the world, not for Malaysia only,” he says.

“That would also mean that they have to rely less on government contracts, and have to be very sensitive to changes in technology development elsewhere in the world.

“Technology products have limited life span and if companies are not able to change fast, they will become irrelevant in a very short time,” he adds.

This is why Mavcap is actively exposing its investee companies to the world through its linkages with foreign venture capitalists and advisors, he says.

Singapore’s strengths

Leveraging off Singapore’s strengths is why both Cradle and Mavcap are sponsoring the Echelon Malaysia Satellite event.

“Both Mavcap and Cradle are involved in discovering, investing and nurturing start-up companies,” says Jamaludin. “Mavcap has been in this space since its incorporation in early 2001 when only a handful, if any, of VCs were involved in funding ICT start-up companies.

“There are not many private VCs in this space even now, and they are limited by their small fund size. With their limited income, they are not able to sponsor events like Echelon.

“This is where Mavcap and Cradle can play their developmental roles respectively. Both of us have been working closely together over the years and we share our experiences, deal-flows and other matters consistently for mutual benefit.

“While this event may benefit Cradle more in terms of seeking suitable start-up companies to fund and develop, Mavcap can benefit from the networking, industry exposure and perhaps even co-investment opportunities with others in deals that fulfil our investment criteria,” Jamaludin adds.

Cradle’s Nazrin echoes his views on the need for international linkages, saying he hopes that the Echelon satellite event here would attract local start-ups which would like to participate more actively in the regional scene.

Cradle wants to see start-up that are “willing to look at capitalizing on possible opportunities within the region, be it for market access, funding, talent, benchmarking, etc,” he says.

“If we want our start-ups to think global from day one, perhaps a closer step would be if they could be a part of a growing regional community of start-ups – they can then understand the landscape in different markets in the region.

“It all starts with an understanding of what’s outside our own national borders. Being part of a regional community like the one created by Echelon will provide our entrepreneurs with more confidence in planning their foray into regional markets,” he adds.

Both Nazrin and Jamaludin believe that the Malaysian start-up ecosystem is growing from strength to strength, with the latter noting that with the establishment of the Malaysian Business Angel Network or MBAN last December, the country has a more “complete entrepreneurial, funding, networking and knowledge-sharing ecosystem.”

In fact, Nazrin argues that Malaysia is not lacking much. “Many of Singapore’s success stories are of Malaysians whom it has attracted there.

“I believe that once the Malaysian ecosystem strengthens and matures, there will be less of a gap between the two countries,” he adds.