Government’s role in the startup ecosystem

By Gabey Goh September 8, 2014

Startup failure rates are high, and they’re supposed to be
Propping up mediocre enterprises should not be the concern of govt

Government’s role in the startup ecosystem IT is always an enlightening experience when I hear from Malaysian founders or startup community leaders after they get back from a trip to a South-East Asian nation.

“Bangkok is just crazy! It’s so dynamic and there’s so many interesting things happening,” one would gush to me as he mentally plans his next visit.

“You need to check out Vietnam! The depth of talent is just insane and they’re so creative when building solutions,” says another.

“Jakarta is just absolute chaos but the kind of startups you find there and the problems they’re trying to solve are just so inspiring,” shares yet another.

And so on, and so forth.

“You know what it is,” I’d say, after a few memorable anecdotes have been shared. “That’s what happens when government doesn’t really care about startups.”

That retort of mine makes a little more sense when I tell you the stories I’ve heard about Malaysia’s own startup ecosystem, from visiting foreign nationals I encounter.

Be it during formal interviews or over casual drinks, the reviews have been uncomfortably consistent in their No 1 observation: “The Government here is really, really supportive of startups.”

Yes, that’s right. That’s the No 1 statement I have heard from foreign visitors during my still-too-short tenure (it’s only been just over two years) observing the space.

Not that the country is a great place to source for new and innovative startups to invest in. Not how vibrant the ecosystem is, nor how impressive the depth of talent. Not how local entrepreneurs with their stories of failures or successes form a source of inspiration and best practices.

Of course, these do get mentioned, but they’re usually lower down on the list after startup players from other nations finish expressing their pleasant surprise about the first fact.

I don't blame them, as even Silicon Valley – with its origins as a beneficiary of contracts and grants from the US military-industrial complex – has always been largely left to its own devices.

It’s not often that government does as much to help develop and create an ecosystem that is conducive to the creation of business as Malaysia’s has, through successive administrations.

I’m not going to spell them out in full, as typically required, as that would eat up too much precious column space.

But as an indication of government involvement in the space, here’s a quick roll call of some of the agencies that deal with startups: MDeC, MaGIC, Cradle Fund, SME Corp, Genovasi, Unik, AIM, MTDC, Tekun, Teraju, Mavcap, MDV and even MyIPO.

Quite an alphabet soup of public sector entities tasked with overseeing and helping entrepreneurs, is it not? I am quite certain that the only other South-East Asian nation that comes close is our fine neighbour down south.

Now, to be clear, I’m not being ungrateful or anything.

Government’s role in the startup ecosystem When the Multimedia Super Corridor (MSC Malaysia) project was first announced in 1996, it held the then visionary goal of repositioning the nation as a “player” in the world’s digital economy – impressing even richer, developed nations.

It was a much-needed push that was only possible at a national level. It helped spur Malaysia’s now mature ICT industry. It also marked the blossoming of our creative content industry and inspired an entire generation to think beyond traditional career paths and professions.

It’s been 18 years now, and alas, there is more public sector involvement than ever before in this quest to propel an entire country to developed nation status.

With the looming deadline that is Vision 2020, many have recognised that the lowest hanging fruit in achieving goals lies in how well the startup ecosystem performs in creating companies, technologies, jobs, and attracting direct foreign investment.

It has gotten to the point where you can’t seem to go anywhere or get anything done without some sort or form of government patronage.

The mandate of government is to help the most number of its citizens with every action it chooses to take – which, despite finite resources, all the good people working in various agencies have strived to do.

But you can’t help everyone, and you really shouldn’t either. Startup failure rates are high, and they’re supposed to be. Funding or propping up mediocre enterprises should not be the concern of the Government; after all, you have much bigger fish to fry.

Public funding should be channelled toward key grants to spur research and development in universities, or to startups focused on improving the nation in areas such as public transport, education and youth empowerment – rather than trying to rival Facebook’s IPO (initial public offering).

So dear government, you need to start letting go of projects and start focusing on policies.

Good Malaysian entrepreneurs and good startups are not as elusive nor as few as you think. They’re out there, quietly building their companies.

The worthy ones don’t need or want your money, but they do want your help in making it easier to get things done.

Ask me about noteworthy policy developments in recent years, and I can only think of one, which is the introduction of the angel tax incentive.

Malaysia needs more policies that are centred on enabling the startup space, for that is the route that would truly impact the most number of people.

If I could offer but one humble suggestion as a starting point: How about the creation of a special visa class for startups to hire key foreign talent, administrated and regulated by an existing agency?

Not entry-level code monkeys mind you, but practitioners in fields of expertise the country does not yet have.

Because let’s be honest, MSC Status is not for startups – but the perk of unrestricted employment of foreign knowledge workers has meant that many an ill-informed venture has painted itself to a corner trying to access that privilege.

Just some food for thought.