2015 a watershed year, with caveats

• Malaysia put on the map, but beware the possible startup exodus
• Ongoing challenge getting private sector here to invest in startups

 
2015 was a year of progress for the Malaysian tech ecosystem, especially when it came to startups, but whether the good news outweighed the bad is debatable, according to the panellists at the first Digital News Asia (DNA) Disrupt monthly networking event of 2016.
 
It was a year to remember in terms of private investment in the tech startup space, said Jamaludin Bujang (pic above), chief executive officer of Malaysia Venture Capital Management Bhd (Mavcap), the Malaysian Government’s venture capital arm.
 
“To me, 2015 was a watershed year for private investment in the startup space. You hardly heard of them [private investors] doing that before 2015, and I am sure the momentum will continue in 2016,” he said during the panel discussion in Cyberjaya on Jan 5.
 
Last year saw Mavcap busy with two private investment funds: The Axiata Digital Innovation Fund (ADIF) launched in late 2014 with an initial fund size of RM70 million (US$16 million at current rates), and a US$50-million fund with China’s Gobi Partners.
 
To date, Mavcap has invested in seven startups via the ADIF and has received approvals for about five deals for its partnership with Gobi Partners.
 
“So, yes, I feel that 2015 was a good year in terms of investments and deal flows,” Jamaludin quipped.
 
Cyberview Sdn Bhd managing director Faris Yahaya concurred, saying that “we managed to attract one multinational company (MNC) and 20 small and medium enterprises (SMEs) to Cyberjaya.”
 
Cyberview is a government-owned company and the advisor to the Government on development matters relating to the city of Cyberjaya.
 
Last year saw Faris and his team at Cyberview working closely with other government agencies, such as national ICT custodian Multimedia Development Corp (MDeC) and Malaysia Investment Development Authority (MIDA), to woo foreign MNCs to set up a presence in Cyberjaya.
 
Throughout 2016, Cyberview and other related agencies visited companies, associations and relevant authorities in France, Switzerland and Germany in these efforts.
 

 
Faris (pic above) was quick to note that it takes time for foreign companies to decide whether they want to set up an office in another country, and argued that such trips were also necessary to lift Malaysia’s profile.
 
In terms of the country’s profile, Proficeo Consultants cofounder Dr V. Sivapalan said that 2015 was a year that put Malaysia on the global map of startup ecosystem players and investors.
 
“That’s actually thanks to MaGIC (Malaysian Global Innovation & Creativity Centre),” he said, referring to the government agency officially launched in April 2014 to boost entrepreneurship in the country.
 
“I want to thank Cheryl Yeoh not only for putting Malaysia on the map in terms of entrepreneurship, but … also on the map of investors as well. So that was a big change in 2015,” he added.
 
Yeoh was the first chief executive officer of MaGIC, and will be leaving the agency this month after announcing her surprising resignation late last year.
 
Sivapalan (pic below) said a lot of foreign investors and venture capitalists (VCs) were visiting Malaysia to look for deals, but cautioned that this was not entirely good news.
 
“The downside is that when these guys start to invest in Malaysian companies, they would want them to move their head office to be based in Singapore.
 
“This is because the VC’s head office is in Singapore, and they would rather use Singapore laws and all that,” he said.
 

 
The obvious example would be GrabTaxi, South-East Asia’s first ‘unicorn’ or startup valued in excess of US$1 billion.
 
The company, originally known as MyTeksi, was founded by Malaysians and built out of the country – boosted by grants from the Malaysian Government – before expanding regionally. However, it found most of its subsequent funding in Singapore, and eventually moved its headquarters there.
 
The lows
 
But despite describing it as a watershed year for private investment in the startup space, Mavcap’s Jamaludin said the ‘lows’ of 2015 included the ongoing challenge of trying to convince the private sector to look at investing in startups.
 
“I think their mindset needs to change. Perhaps some of the larger companies are feeling comfortable with their positions, especially since so many sectors are regulated in Malaysia,” he said.
 
“But they need to start asking what if it becomes a free market, and what if there’s more competition from outside – what will your profits actually be?.
 
“Government-linked companies (GLCs) in Singapore are already venturing into it [the startup space], and we are still not doing it in a big way,” he added.
 
And Mavcap’s low point may stretch into 2016, with the Malaysian Government expected to reduce the amount of money allocated to the agency under the 11th Malaysia Plan, the latest in a series of five-year national development programmes.
 
“I wish the Government would not slow down investments in us, because this is about investing in startups, and about building companies, expertise and networks, which is very important if one wants to grow the economy,” Jamaludin argued.
 
Meanwhile for Faris, he said that one low point of 2015 was the decision by one MNC to move its IT backbone services from Malaysia to India.
 
Although he did not name the company, he was probably referring to Shell Malaysia’s announcement last May that it was going to move the IT jobs from its Cyberjaya Business Operations Centre to Bangalore, India.
 
Related Stories:
 
Disrupt #26: The highs and lows of 2014
 
Disrupt #28: Highs & Lows of 2015
 
DNA on BFM: In Malaysia, women are rocking IT
 
 
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