MDEC & Cradle Fund on Malaysia’s unicorn plan

Over the past decade, players in the Malaysian startup ecosystem have wondered: When will we have our first Malaysia-based unicorn?

Then in 2021 there was a sudden change and we found ourselves at home to 3 unicorns namely Carsome, AirAsia Digital and edotco Group.

But does that really mean Malaysia is on the verge of growing more unicorns? From the responses we have seen to the MyDIGITAL plan, there is still a lot of skepticism as to whether our government agencies can actually achieve the goals set.

For a brief introduction, some of MyDIGITAL’s goals include creating 5,000 new businesses, growing or attracting 5 unicorns, and digitizing 875,000 MSMEs and SMEs by 2030.

During a panel discussion at Wild Digital SEA 2021, we had the pleasure of listening to Gopi Ganesalingam, Director of Digital Industry at Malaysia Digital Economy Corporation (MDEC), and Rafiza Ghazali, CEO of Cradle Fund Group explain the goals of MyDIGITAL in more depth and address several issues of the startup community.

The session was moderated by Dash Dhakshinamoorthy, founder of the StartupMalaysia accelerator, who shared his own contribution throughout.

Did you know: In 2013, the term “unicorn” came about thanks to Aileen Lee, founder of Cowboy Ventures, a seed-stage venture capital firm. Unicorns are used to describe startups valued at $ 1 billion, and they’re typically tech startups. In November 2021, CB Insights reported that there were over 800 unicorns around the world.

Why is Malaysia pursuing the creation of unicorns?

The virtual scene of Wild Digital SEA 2021

Gopi took the virtual scene first, stating that unicorns are important not just by definition, but because of what they stand for. These are bigger companies, which are important in any ecosystem.

“And if you look at unicorns, the ripple effect is job creation, the supply chain – the ecosystem that a unicorn brings together.”

He then cited a report from Startup Genome which found that a unicorn in any ecosystem gives a country’s gross domestic product (GDP) 10-fold growth.

Rafiza intervened with his own money, saying unicorns could also inspire aspiring entrepreneurs and growing startups to keep going. Hearing this, Dash likened it to how humanity sending a few people to the moon has helped the growth of the global aerospace industry.

Can our government agencies come together to achieve this goal?

Prior to MyDIGITAL, Gopi admitted that government agencies involved in the startup ecosystem tended to work independently, even if it was just a phone call from each other for any discussion.

But now the plan has united these agencies to leverage each of their strengths to create the desired “right” ecosystem for unicorn breeding. It’s no longer just each agency pursuing their own KPIs, instead they come together in pursuit of a national goal.

Rafiza agreed, saying that although she’s technically the new kid on the block, she’s been observing Malaysia’s startup ecosystem for a long time and feels like it’s the first time she’s seen all the agencies communicate. and really work with each other.

Does Malaysia have the funds to raise unicorns?

From the speakers’ sharing, it appears funding isn’t a concern, as both MDEC and the Cradle Fund have said the government has put a lot of effort into making sure the ecosystem is well funded.

A brief look at Dana PENJANA Nasional / Image credit: Penjana Kapital

Last year, Penjana Kapital was incorporated as a public company to operationalize the Dana PENJANA Nasional (DPN) program. As of June 2021, he had raised 850 million RM, surpassing the target of 288 million RM by 3.7 times. Of the total raised, 55% also came from foreign investors.

Other government agencies are also trying to promote Malaysian startups going overseas and outside venture capital firms (VCs) coming to Malaysia.

But Malaysia lacks talent, right?

Dash referred to the fact that during his discussions with several startups about the pandemic, he learned that they believe talent is scarce and expensive to acquire. Without talents, it would be almost impossible to raise our unicorns. What could be done then to solve this problem?

Hardly disagree, said Gopi: “I joined MDEC in 2015 and I have always noticed that Malaysia is full of talent, whether it is entrepreneurial talent or talent supporting companies. entrepreneurs ”.

“Malaysia is a small country, but if you take just one sector like banking and financial institutions, if you get out of ASEAN, many of the major players supporting banks are Malaysian companies.”

So the truth is, we produce good talent, but we don’t retain it very well. We don’t retain our entrepreneurs very well either. Getting back to the master plan, that’s exactly what he’s trying to solve.

Gopi Ganesalingam, Digital Industry Leader at MDEC.

Rafiza also said: “We have the talent, but they are not necessarily in Malaysia. Despite this, people reached out to her to find out how they could contribute and support Malaysian agencies and businesses overseas.

From there, she concluded that because everything is now digital, talent doesn’t necessarily have to be in Malaysia to get involved in our ecosystem.

Adding to this point, Gopi said, “So you can get talent from anywhere, even the best talent – if you can afford it – through any platform.”

He is also aware that some large companies are now starting to pay significantly more for new graduates, prompting good candidates to stay.

What measures are we using to ensure that Malaysia becomes a breeding ground for unicorns?

  1. Creation of 5K new startups that have a working business model.
  2. Increase the valuation of startups to achieve our goal of 5 unicorns.
  3. Digitization of 875,000 MSMEs and SMEs.
  4. Reach the RM70 billion digital investment target.

This is according to Gopi, on behalf of the MDEC. In essence, the MyDIGITAL master plan is like a report card, and the MDEC, Cradle Fund, and other agencies strive to achieve the goals it contains.

On the other hand, Cradle Fund has its own 3 metrics that it closely monitors for each of its grant recipients.

First, the job creation potential of each grantee, and second, Cradle Fund examines a startup’s additional funding potential to gauge its longevity. Rafiza was happy to share that out of all the Sendirian Berhad businesses they have helped so far, 8/10 are still there.

Third, they look at a company’s contribution to GDP. Rafiza said the organization’s track record shows that the job creation multiplier for each grant recipient is at least 7.36x (even excluding the odd-job economy and Grab, which Rafiza called “Outlier”).

Meanwhile, for each ringgit of a grant provided by Cradle Fund, a recipient’s contribution to GDP is multiplied by 3.35x. “So for each RM500K [in grants], we get a GDP contribution of RM 1.5 million, ”Rafiza said.

How will government agencies work with private stakeholders to build a unicorn rearing ecosystem?

At present, a lot of information about and for Malaysian startups is very fragmented. To compile a list of all the existing Malaysian startups or figure out how to start your own Malaysian startup, you will likely have to browse through tons of sites without being sure that you are receiving the right information.

This is why Cradle Fund has been allocated 20 million RM to launch the MYStartup platform which is expected to solve these problems. It will be a collaborative platform in which public and private agencies can participate to share data.

“This will save startup founders time to focus on running their business and allow them to find IP lawyers, investors, support, mentors, job seekers, etc. Rafiza added. By the end of November, we could expect to see an MVP of the site.

On the MDEC side, the agency has already put in place a variety of programs to bridge the gap between itself and startups. Some examples include the 22 digital hubs, which work with accelerators to host hackathons, fundraisers, Founders Grindstone programs, and more.

Gopi said they have seen results with all of this, so MDEC will continue to develop and improve such initiatives.

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The sharing in this panel by Gopi and Rafiza definitely gave more context and insight into why Malaysia is pursuing unicorn creation and how it plans to do so.

I think we’re about to really catapult the ecosystem and build not only more unicorns, but also resilient, global, investable, quality startups. We have the talent, we have the people, we have what it takes, all the secret recipes to build the ecosystem. So, it’s just a matter of whether or not we have the heart, soul, and faith to do it all.

Rafiza Ghazali, CEO of Cradle Fund

Now, the Malaysian startup ecosystem and its stakeholders will look forward to seeing how all of the stated goals are executed. What results will we see over the next 4 to 9 years?

  • You can find out more about the MyDIGITAL plan here.
  • Read stories from Malaysian startups here.

Featured Image Credit: Gopi Ganesalingam / Rafiza Ghazali

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