In Malaysia’s Startup Ecosystem, Perception Is Everything

The reason why startup companies like Grab leave Malaysia, or have a hard time scaling in Malaysia, is not only because of a lack of tax breaks or foreign investment regulation, but also because of a branding and perception issue. In Malaysia, perception is everything, and many Malaysian entrepreneurs and founders question the perception of Malaysia in the eyes of outsiders, foreign investors, and even other locals as a credible and proven place to build businesses.

This issue manifests itself in two ways: the first way is that founders in the early stages of getting their startups off the ground believe that they must start their companies outside of Malaysia to gain credibility before returning to Malaysia to grow. These founders are hesitant to incorporate their companies in Malaysia or to have their companies based only in Malaysia because of a perception that ‘made in Malaysia’ is associated with a lack of quality.

Therefore, even though for all intents and purposes these entrepreneurs are operating Malaysian companies, they choose for the company to have an address in neighboring Singapore so they can say as much to local and foreign investors, or they choose to pitch their company outside of Malaysia before they pitch it in the country. Iskandar Md Sah, a Malaysian media executive and entrepreneur, brought my attention to this phenomenon, and himself looked outside of Malaysia when trying to promote a new business venture. Iskandar is a busy man, splitting his time between his duties as the CMO of thevocket.com, a Malaysian equivalent of Buzzfeed News, and his role as Founder/CEO of the Jetpack Coworking and Events Space. When Iskandar was looking to build awareness and get feedback for Jetpack five months after it launched in 2015, he travelled to Dublin, Ireland to showcase the business at the Web Summit. He is of the opinion that it’s more effective for Malaysian startups in their early stages to increase visibility outside of Malaysia as opposed to focusing on local promotion.

The second way the perception issue manifests itself is that established Malaysian startups that have achieved early success immediately look to other countries with more conducive conditions to attract large-scale investment and expand regionally or globally, as exemplified by Grab’s move to Singapore.

While locals, investors, and the media focus on the reasons to look elsewhere for large-scale growth, there is little mention of the steps Malaysia is taking to rectify this situation, such as providing startups with a 10 year tax exemption and implementing a Global Acceleration and Innovation Network (GAIN) program to “provide advisory services and expertise to potential local technology companies.”

The perception issue creates a vicious cycle in which prospective Malaysian startups don’t have a fair shot to grow and prove existing stereotypes and perceptions inaccurate or exaggerated because the very perceptions they’re hoping to prove wrong undermine their ability to market themselves and raise capital. Malaysia’s startup community must work to rescue these startups, and develop the Malaysian ecosystem, through domestic private investment and smarter government-entrepreneur collaboration.