Malaysia may be one of the best places in the world to start a business according to the World Bank but it’s not known for spawning new start-ups. An accelerator aims to change that by luring innovative start-ups to Malaysia.
A call for 80 start-ups to join the fourth cohort of a four-month acceleration programme run the Malaysian Global Innovation and Creativity Centre’s (MAGIC) opens tomorrow. The programme is set to start in July.
Over the next month officials from the accelerator will make a number of stops in surrounding Asian countries as well as in Europe to recruit applicants.
Launched in 2014, the government-run MAGIC aims to accelerate new start-ups. The initiative borrowed heavily from the success of Start-Up Chile (see this post on its impact), following a collaboration agreement signed between Chile and Malaysia in 2014.
The programme has two streams – one focusing on the regional market and another on social enterprises.
Unlike Start-Up Chile, MAGIC’s main acceleration programme doesn’t provide seed funding (social enterprises however receive 30,000 ringgits), but has instead negotiated benefits worth over $400,000 per start-up from companies such as Google and Microsoft.
After four months of acceleration with help from experienced entrepreneurs, start-ups pitch their ideas to investors.
MAGIC has an annual budget of between 40 and 50 million ringgits ($9m to $11m) which covers the accelerator and the initiative's other programmes, MAGIC chief executive Ashran Ghazi (pictured above) says.
MAGIC's first cohort kicked off in July 2015 at the programme’s Cyberjaya campus near Kuala Lumpur with 77 start-ups (the organisation stipulates that 60% of start-ups have to come from Malaysia) drawn from over 1,000 applications.
The first cohort contained companies serving agriculture, big data, clean tech, design, ecommerce, gaming, healthcare, media, security, and travel.
MAGIC has yet to release any figures on the impact that the accelerator has had so far. However a spokesperson from MAGIC told Small Business Insight that 38% of participants from the regional market stream in the first cohort were able to raise almost $6m in total.
Some of start-ups that received funding include Katsana, which raised $893,000 for a solution which helps motor insurance companies analyse driver behaviour. Another firm, BurgieLaw, raised $200,000 for a solution which helps users solve their legal issues.
Another participant Eggbun Education, a South Korean startup, was able to apply key learnings from the programme to expand into Southeast Asia effectively.
MAGIC says it expects at least 20% of startups to raise funding within six months. The accelerator claims that 2,600 Malaysians were engaged through information sharing sessions the programme held across six states and 15 university campuses.
In some respects Malaysia has of recent made cutting-edge changes that will benefit entrepreneurs - by crafting rules for peer-to-peer (P2P) crowdfunding. By November last year the Securities Commission had registered six platforms.
Malaysia was also one of the first emerging market economies to put in place a regulated framework for equity crowdfunding in 2015 (see this post). As of October last year, 11 Malaysian SMEs had raised a total of 8 million ringgits ($1.8m) via the six platforms.
Last month Malaysia’s stock exchange announced that a new SME market is expected to be introduced in the second quarter of the year.
Too few start-ups
Yet just 4.7% of adults in last year involved in starting or running a business or less than three and a half years, reveals the Global Entrepreneurship Monitor’s latest global report released last month. This places Malaysia 63rd out of 65 countries that GEM ranks.
Fewer than half of all Malaysians view entrepreneurship as a good career choice, while a mere 4.9% of Malaysians say they intend starting a business in the next three years.
This is surprising as of the 65 countries ranked by GEM last year, Malaysia was placed relatively high when it comes to having an enabling environment for entrepreneurship – particularly in the availability of finance, R&D transfer and internal market dynamics.
Dampened by good jobs
Deputy Dean of the Bank Rakyat School of Business and Entrepreneurship Associate Professor Dr Roland Xavier believes start-up creation has been dampened by opportunities to get well-paying jobs and greater opportunities for further education.
In a 2014 study analysing Malaysia's entrepreneurship performance, Xavier and colleagues stressed too that the Malaysian government's push for entrepreneurship has resulted in "entrepreneurship on steroids".
"Steroidal entrepreneurship will not last. It only serves to conjure a view that meets data statistics and government agencies. When the waves of competition both regional and global arrive those businesses will not survive," say the authors.
Without a change in culture and more initiative from Malaysians themselves a sustained entrepreneurship drive cannot last. Malaysia it’s clear is in need of some magic if it is to get more adults interesting in starting their own business.
*The original post was updated on March 3 to include the response from MAGIC.
Timm is a South African who writes on small business. He was last in Malaysia in 2012. Follow Small Business Insight on Twitter at @Smallbinsight.
Stephen Timm is a