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The Startup Landscape in Malaysia

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With a sound foundation in science and technology education, Penang should be able to reap the rewards for which it has dedicated time and investments. We take a quick look at the numbers on startups and the resources needed for an optimum environment.

The e-commerce sector is the most popular for startups, while social enterprise and service and consulting slightly trail behind (Figure 1). The e-commerce sector contains big names such as online auction site Lelong.my and fashion shopping website FashionValet. Ridehailing company Grab has a total equity funding of US$680mil, making it one of the largest companies in the services industry.

As seen in Figure 2, there are four main funding rounds for Malaysian startups. Seed funding raises capital for market research and initial development for fledgling startups. Series A, B and so forth are intended to scale the startup, with each funding round laying the foundation for expansion and further market research.

MaGIC, 2015. Startup Database. https://www.startupdb.asia. Accessed Aug 22, 2016

[1]

Yap, C., 2016. Growing M&A in tech start-up space. Focus Malaysia, 6-12 August, pp. 24-25.

[2]

Table 1 shows that the start-up mergers and acquisitions (M&A) scene has been quite busy as of late. As one of the possible exit strategies for startups besides an initial public offering, acquisitions by major firms are the ultimate financial goals of most startup founders. Acquisitions may help the acquiring firm eliminate redundancies in its industry and improve operational efficiency due to synergistic support from the acquired firm. However, studies indicate that almost 70% of M&As fail[3]; hence, any acquisition of a startup ought to be viewed with that knowledge in mind.
According to Figure 3, Penang sees the largest number of startups in the services sector, encompassing IT and marketing services. One of the largest startups is infographic design app Piktochart, which has over two million users as of April 2015[4].

Penang has a wealth of competent coders and IT experts, with eight institutions offering courses in IT/Computing and SEGi university offering up to a doctorate degree. Most institutions in Table 2 do not cap the number of students they enroll, encouraging aspiring coders to apply.

Penang has the third highest number of hotspots (Figure 4), offering a conducive environment for the startup ecosystem. A reliable and fast internet connection is one of the bare necessities for startups, since most of their operations are web-based.

@CAT Penang-Co-working open space: A project initiated by InvestPenang Build-up area 36,400 sqft[5] RM14mil to lease, RM5mil in refurbishment[6] 70+ working spaces, 20+ active users[7]

The state government remains committed to winning the future by mastering disruptive technology, fuelled by the growth of tech start-ups. Startups are encouraged to utilise the co-working space as there is still a lot of capacity left.

  • [1]MaGIC, 2015. Startup Database. https://www.startupdb.asia. Accessed Aug 22, 2016
  • [2]Yap, C., 2016. Growing M&A in tech start-up space. Focus Malaysia, 6-12 August, pp. 24-25.
  • [3] S.Christofferson et al., 2004. Where Mergers Go Wrong. McKinsey Quaterly, May 2004.
  • [4]Piktochart, https://piktochart.com/
  • [5]InvestPenang, n.d. InvestPenang-Investment Updates. http://www.investpenang.gov.my/files/investmentupdates/29/CAT%20WYCE%20Write%20up%20-%20(21-7-2014).1420166801.pdf, accessed Aug 23 2016.
  • [6]Chief Minister's Desk, 2015. Official Portal of the Chief Minister. http://cm.penang.gov.my/index.php/darimejaketuamenteri/1710-winning-the-future-by-mastering-disruptive-technology-innovation-automation, accessed Aug
    22 2016.
  • [7]Author’s own estimation
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