KL’s start-up scene has been going from strength to strength, charting a path to a vital economic role in Malaysia.
Powered by technology and the increasing popularity of e-commerce, the start-up sector is made up of a wide variety of disruptive businesses finding creative niches which more traditional business practices had previously missed.
At 5.8 percent, the contribution of e-commerce to the Malaysian GDP is much lower compared to in China or the United States, which are at around 21% and 35% respectively. However, the Malaysian market is growing rapidly and this proportion is expected to increase in the coming years.
A PwC consumer survey in 2016 showed that 48% of Malaysian consumers are making monthly online purchases, and these numbers combine to show clear growth potential in this area.
Globally, just the sharing economy portion of the start-up sector is expected to be a US$3.1 trillion industry by 2025, valued at US$270 billion as of 2017.
According to Malaysia Digital Economy Corporation’s (MDEC) Director for B40, Nordarzy Razak “The sharing economy in Malaysia will be worth between US$10 to 14 billion by 2025, creating 1.2 million jobs for around 540,000 youth freelancers (aged 18 to 34 years old).”
Young and Hungry
The biggest home-grown success in the start-up sector is undoubtedly Grab, the ride-hailing service that recently bought over Uber in Southeast Asia for a 27.5 percent share in the company.
Co-founder and CEO Anthony Tan was still in his 20s when he launched MyTeksi, and just five years later, the rebranded company known as Grab would gain a reported US$6 billion (RM25 billion) valuation.
In 2017, The Edge named Grab the highest-value tech start-up in Southeast Asia after it announced that it would be raising up to US$2.5 billion from its latest round of fundraising, which included a confirmed US$2.0 billion from Japan’s Softbank and Chinese ride-hailing giant Didi Chuxing.
In this new economic model, unicorn companies – start-ups valued at over US$1 billion – can raise significant capital without the need to go through the traditional method of a stock market listing.
Even for Tan himself, scion of a top business family, he struggled to explain how his idea would work.
“My family had a tough time understanding what I was trying to do and I don’t blame them,” Tan told the FT.
The youthful energy, innovation and tech savviness of the start-up ecosystem melds beautifully with Malaysia’s increasingly urban and youthful demographic who are comfortable trying new things and take the digital world as par for the course.
The institutional support for digital innovation and entrepreneurship in Malaysia is also strong with public and private initiatives such as Alliance Bank’s annual BizSmart SME Innovation Challenge and the Ministry of Finance’s Cradle Fund, one of the first investors in Grab.
For FashionValet’s Vivy Yusof, her start-up’s big break came via competing in a reality TV programme to win a RM1 million investment from MyEG, the government’s concessionaire for electronic solutions and services.
Vivy too was in her 20s at the time, and today, Fashion Valet is one of the largest fashion sites in Southeast Asia and a pioneer multi-label online shop featuring over 400 designers and brands from the region.
Working in a more forward-looking sector like fashion, Vivy told online business portal Asian Entrepreneur that, “Meeting local brands every day and convincing them of this new idea was easy because they were excited about the new online shopping phenomenon, and with my blog following, we connected the two parties (designers and customers) together.”
But she faced familiar difficulties when looking to raise money.
“We met with a lot of VCs and financial institutions. The conservative ones did not want to take the risk and did not understand the huge potential of e-commerce in South East Asia,” Vivy recalls.
The future of the start-up economy in Malaysia is looking bright as these early successes pave the way to a growing market.
“E-commerce is constantly expanding, the potential is enormous and I think smart investors know that,” Vivy concludes.
And Malaysia’s youth look ready to participate, expand and bring more creative disruptions that have yet to be imagined.