There is more to the startup ecosystem other than Kuala Lumpur
Christopher Quek 9 Oct, 2017
If you are not in Malaysia, you might have assumed all startup activities in the country lie in the heart of Klang Valley, where the capital Kuala Lumpur (KL) is part of. But also silently brewing and bubbling in startup activity are the hubs of Penang in the northwest and Johor Bahru (JB) at the southern tip.
What are the interesting unique characteristics of each city’s startup ecosystem? And how do they fit into the overall Malaysian startup ecosystem?
BEAM speaks to three ecosystem evangelists for their insights.
“The entrepreneurship culture is very entrenched in Malaysians. Therefore the business ecosystem is very vibrant because many people have aspirations of starting something on their own,” shares Stephanie Ping, CEO and Cofounder of WORQ.
It is this entrepreneurship culture that contributed to Malaysia’s successful startups such as Grab, Jobstreet, MOL and Airasia.
“Malaysian entrepreneurs are world class. We have entrepreneurship in our blood and it is just going to grow. I think the track record speaks for itself and we just have to be more supportive of talented and promising companies and more will come down the pipeline.”
KL and the surrounding Klang Valley has over 7 million people and contributes the one-third of the nation’s GDP.
Being in KL has its advantages, as there are many startups operating out from here. “The KL scene is very lively,” Ping says. “Since technology and new economy businesses have the largest potential for growth, many entrepreneurs naturally gravitate to these segments.”
And the hustle and bustle is clearly seen by the numerous amount of co-working spaces available, including WORQ and are seen as gathering points for meetups. Many tech meetups are seen on meetup.com in KL. BEAM itself conducts many entrepreneurial gatherings for startups and investors to connect.
The government entrepreneurial units are based in Cyberjaya on the outskirts of the capital. The likes of MDEC, the agency in-charge of transforming the nation's digital economy and MaGIC, an accelerator for startups, brings more vibrancy and support into the ecosystem.
Ping adds that Cradle, another government agency, is a good starting point for serious early stage startups to leverage on. “Their programs, like the Coach and Grow, are extremely useful and the value they bring to the system has been many folds.”
Fintech has been a common theme, judging from the startups that comes through the WORQ co-working space. Some examples are PolicyStreet and Billplz. There are also overseas startups bringing in blockchain like Owlting from Taiwan and the NEM foundation, which promotes the blockchain industry.
Startup founders are from a varied background. “Some are as young in their early twenties while others are in their forties and fifties. Their education background is also varied. I've heard of a successful entrepreneur who did not go to college who is now successfully bringing his startup to Australia. On the flip side, there are also people who are highly matriculated and doing very well.”
Ping does not feel that anything unique about KL startups, but rather a nationwide trend among businesses. “Malaysian SMEs and startups have a ‘muhibbah’ culture of helping each other, which is crucial to early stage startups.”
She is an advocate of branding which is necessary to improve the startup scene in Malaysia. “In my most recent visit to Singapore, which is a country I admire a lot, I heard that the government has a program that subsidizes companies in their branding. I think this is a brilliant idea and quite frankly whoever thought of that is a genius! Malaysia too should have something like this so that our product gets the right amount of attention, the country gets the right message across and people take notice of the extremely vibrant ecosystem here.”
Penang is a state in the northwest with a population of about 1.8 million. It derives almost half of its GDP from manufacturing with over 3,000 tech-related manufacturing firms based there, earning its name as the “Silicon Valley of the East”.
Penang has come full circle in the types of startup products and services being produced. He shares, “The previous generation, mostly from the manufacturing industry and above 35 years old, are in the enterprise and B2B verticals, with a handful of startups in hardware & IoT.
The new generation are around 24 years old and are recent graduates from college or university. They have a tendency to move towards B2C web and mobile consumer fronting products. These are hardly sustainable businesses, which they soon realised that. So now we see a gradual move back to the core capabilities of enterprise, B2B, hardware & IoT. “
“Penang is a great place for deep tech, hardware and IOT. We have seen successful startups like Vitrox and Ameulus that have done enterprise solutions and have gone for IPO.
We hardly have young successful founders, as the new generation are consumed by the ‘unicorn’ hype, and lack experience and exposure. In general, those successful are usually serial entrepreneurs in their thirties.”
On the community development front, Khoo shares a few avenues that startups can connect to. “There is a maker space run by Penang Science Cluster which provide facilities for hardware & IoT startups. Entrepreneurs may check out the Scoopoint Coworking space. Or to find out the happenings in Penang, you can connect on the Startup Penang facebook group.”
Penang has unique advantages for startups. “We are less noisy and crowded compare to KL, leading to a less hectic and stressful lifestyle. There is a great life and work balance, which encourages creativity. Operational costs are low. With the industry and manufacturing sector, we have great engineering talent with experience from local & multinational companies.”
It is Khoo’s wish to get more involvement from the private & industry sectors. He also hopes that there will be more quality events and activities that focus on building startup and founders.
Johor is the southern state of Malaysia, with its capital JB. Its economic growth is largely boosted by the Iskandar Johor project, which encompass over 2,217 square kilometres in size and drew over RM105b in investment commitments in 2012.
Johor as a market is an untapped opportunity waiting to be sowed by startups, according to Mico Sing, Marketing Manager of Timev Asia. She explains, “The education and awareness on digital and technology are not as strong as other main cities such as Kuala Lumpur. We have countable number of companies providing training-related activities in the southern region.”
Another interesting observation is the rise of co-working spaces expanding in Johor due to the demand from solopreneurs and freelancers.
Startup founders in Johor are the generally university graduates in their 20s and 30s. These founders, she describe, are trying to make a change and encourage tech adoption in Johor, but lack resources and support to do so.
Despite these limitations, community efforts are driving the ecosystem together. Sing shares about Hangouts Malaysia, a startup acceleration program by City University London and located inside The Imagineering Institute. The Johor International Youth Hub, which is under the Iskandar Regional Development Authority (IRDA), currently building facilities and preparing training for youth entrepreneurs. There are also regular networking activities conducted by BEAM and JB Dream Entrepreneurs.
The culture of Johor entrepreneurs positively contributes to the development of the ecosystem.
“In Johor, communication is transparent and every team member gets the opportunity to speak. Working among colleagues is similar to working with friends, where there is a generous sharing of ideas and knowledge.”
She finds that this culture of transparent communication should be extended into the startup network. “The startups are located in a scattered manner like in Desa Tebrau, Johor Baru, Nusajaya, having low interaction among each other. The city needs more entrepreneurs and strong support groups/organizations to bring people together for collaborations, meetings or events.
In general, Johor Bahru has a great potential to grow in terms of training more talents, improving the ecosystem and getting startups funded to get to the next level.”
Christopher Quek is a news correspondent for BEAM. Managing Partner, TRi5 Ventures. Mentored over 800 startups. Loves writing about entrepreneurs and startup ecosystems in South-East Asia. Read his full range of articles on his personal blog.