More to boosting entrepreneurship than just giving out money

• Government initiatives to boost entrepreneurship in Malaysia missing ‘customer’ element
• Even Silicon Valley took off because a very important customer needed a major product

THE national Budget 2014 first announced last October recognised the development of entrepreneurs as a key element in generating economic growth. One of the initiatives to develop entrepreneurs was the recently-launched Malaysian Global Innovation and Creativity Centre (MaGIC), a one-stop centre to empower entrepreneurs.
 
One of the important aspects of this empowerment is the provision of financial assistance to register and patent intellectual property of budding entrepreneurs.
 
The recognition of intellectual property protection is a step in the right direction. In any entrepreneurial venture, there is an element of creativity and innovation that gives the entrepreneur an edge over the competition. It is necessary to protect this element; otherwise all the entrepreneur’s efforts would be in vain.
 
Financing the filing of the patent application, right up to the grant stage, would free the entrepreneur to focus on developing the intellectual property further, or to develop even more intellectual property.
 
If left unprotected, a good invention or creation may be lost to larger competitors that are in a better position to commercialise the product or service at a more affordable price, leaving the original inventor or creator without any financial benefit or reward.
 
Adequate protection of a company's intellectual property is a crucial step in deterring potential infringement and in turning ideas into business assets with real market value.
 
The provision of financing on the whole can be a godsent to any entrepreneur, and Budget 2014 also made provisions for this. To reduce graduate unemployment, the Malaysian Government is encouraging graduates to venture into entrepreneurship.
 
Under the Graduate Entrepreneurship Fund, which will be managed by SME Bank, RM50 million (US$15.3 million) will be made available in the form of soft loans of up to RM500,000 at an interest rate of 4%.
 
Seventy percent of the startups in Malaysia rely on family funding to get off the ground, and only 16% manage to get funds from venture capital, banks, or grants, according to data from SME Corporation Malaysia. With initiatives like the Fund, these figures can hopefully be reversed.
 
However, these measures do not determine the eventual success of an entrepreneur. What is more important than protecting the innovation and having access to financing is having customers.
 
One of the biggest obstacles to entrepreneurship, whether in Malaysia or anywhere else in the world, is the ability of an entrepreneur to win customers. It is not easy for a new market entrant to win over a customer and this problem is not easily overcome.
 
In trying to find a solution, one needs to turn to the Silicon Valley to get some clues.
 
The success of Silicon Valley has often spawned arguments about what elements are needed to replicate its success. The winning formula is often attributed to building a science park next to a research university, providing subsidies and incentives for chosen industries to locate there, and creating a pool of venture capital.
 
However not many people realise what started Silicon Valley in the first place.
 
What transformed a once two-lane highway cutting through acres and acres of nothing but farmland and tiny hamlets into what is arguably the most important commercial technology centre in the world is because a very large customer needed a very important product.
 
In the early 1960s, the US Government was looking for a solution to land a man on the moon “before the decade was out” in reference to then John F. Kennedy’s famous ‘Man on the Moon’ speech made in May 1961 when he was president of the United States.
 
In the quest to win the space race, the National Aeronautics and Space Administration (NASA) was prepared to pay any company any amount of money for electronic chips that could work on the rockets and function under extreme heat.
 
This challenge kick-started a scramble by companies to assemble the best minds to come up with the solution to snag that contract.
 
And the winner of that race was Fairchild Semiconductors – which grew bigger and bigger from the space programme; which spawned many more companies known as ‘Fairchildren;’ which spawned even more companies in what Silicon Valley is today.
 
It is therefore important that the Malaysian Government doesn’t stop at just dishing out money but rather, become a customer with a potentially large order and a big vision to get entrepreneurs to start innovating to clinch that deal.
 
In that manner, many entrepreneurs and many innovations can be created at little or no cost to the Government.
 
The entrepreneurs will compete with each other to create the winning innovation knowing that there is a big reward, in the form of a big contract, at the end of the tunnel. And if an entrepreneur manages to succeed at delivering the correct solution to the Government, then he or she will be rewarded with even more orders.
 
At the same time the Malaysian Government would be able to solve a pressing need or problem with a ‘Made in Malaysia’ product.
 
With the endorsement and use of the innovation by the Malaysian Government, these entrepreneurs can then take their innovations overseas. Convincing foreign buyers will be easier since the product has been tried and tested and has the Government as a buyer.
 
The Malaysian Government has to start looking at buying Malaysian innovations to solve immediate and pressing problems, with the criteria being that the innovations must be of the right quality and the right price. After all, if Malaysians don’t buy products made by Malaysians, who else will?
 
Justin Santiago is the founder of Enzo Global which provides strategic communications services. He blogs on legal issues at What's Your Problem.
 
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