Surviving the ‘trust deficit’ in Malaysia

• Implications of a trust deficit in entrepreneurship ecosystem is substantial and can hurt
• Need to introduce innovation into older companies, SMEs to avoid being a “Toys R Us” story

“WHO’S your principal (technology provider)?”

That was the question I was asked 7 years ago as the CEO of a startup in the mobile engineering software space after many hours of meetings with a C-level executive in Malaysia. Somehow, it seemed hard to believe that we, a Malaysian company called Aexio, had our own proprietary software technology in the very niche area of 3G Layer 3 Call Tracing. 3G Layer 3 Call Tracing what? Precisely. But, we did.

Last Friday in Kuala Lumpur, I attended Bill Reichert’s talk on the “Future of Innovation” and one of the key points he made was that about industry and startups. Reichert is a venture capitalist who is managing director of Garage Technology Ventures, a seed and early stage VC.

“Engage industry. Get government out of the way,” was his point. As he explained, it became clear that his point was that Industry needed to be more open to work with startups, either as purchasers or collaborators and that government should encourage that, though not necessarily through regulation.

It got me thinking back to when I first started in 2005. There was no such things as apps and entrepreneurship in Malaysia, in itself, was a startup concept, at least compared to how it is understood today. For those of you who know Cradle, they were only 2 years old then and quite a startup in themselves. Whilst there were local companies that supported, collaborated and purchased from us, others struggled with the idea that a locally established company could produce software in such a highly specialized area, without the help of any outside principal, and doubted our ability to do so.

Fast forward to 2017 and as I sat in a roomful of students, entrepreneurs, VCs and corporations, it seemed that this trust deficit had never existed. With the rise of the app ecosystem and the local success stories like MyTeksi (now Grab, of course!), Lazada and the many others, no one questions today, the ability of local talent and startups to achieve great success.

The implications of a trust deficit in the entrepreneurship ecosystem is substantial. In 2007, we had a few competitors in our telco market producing call trace based software, all of whom were overseas at the time. But the fact that they were in markets where telco operators seemed far more open and collaborative such as in the US and Europe meant that they scaled far faster and grew far larger than we could over a couple of years. The result of this was that we had to adopt a business strategy targeting niche global markets, a strategy which ultimately worked well for us at the time as we penetrated under-served markets such as Oman and Eastern Europe but came at a greater cost. It could have made a difference if corporations locally were more open, collaborative and receptive at the time.

Today, times are different and much improved. Entrepreneurship is sexy, major success stories abound and government linked entities like Cradle and MDEC really have done their part in encouraging and moving ahead the entrepreneurial ecosystem in Malaysia. Corporations too have woken up to the fact that innovation is key to their future success and, in fact, key to their future survival. The ecosystem is now far more open and collaborative. Or, is it?

In my conversations with entrepreneurs and corporations over the last months, I find that there is still more to be done. There are corporations who want to be involved and encourage innovation but are not sure where to start and others, who have traditional business models that are generating healthy cash flows, may still struggle with the initial conversation on why and how to introduce innovation into their companies.

As Reichert pointed out, industries and corporations need to engage with startups and government can play a part by subtly helping build this bridge and smoothing the waters between without being heavy-handed. The underlying question beneath increasing this engagement between industry and startups is not only why we need innovation but really, how do you introduce innovation into older, more mature companies and to the SMEs that make up the backbone of Malaysia’s economy only if to avoid being a “Toys R Us” story. That’s the question and conversation that needs to be furthered in Malaysia today.

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Andre Sequereh sold his telco startup in 2013 to a French telco software player and since then has been quietly working at Paying it Forward to the Malaysian startup ecosystem.

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