MDEC and Cradle Fund on Malaysia Unicorn Plan – Health Guild News


Over the past decade, players in Malaysia’s early ecosystem have wondered: when will we have our first Unicorn based in Malaysia?

Then, in 2021, there was a sudden change and we found ourselves in the home of 3 unicorns, i.e. Carsome, AirAsia Digital, i Grup edotco.

But does that really mean Malaysia is ready to grow more unicorns? From the answers we have seen in the My DIGITAL plan, there is still a lot of skepticism about whether our government agencies can really achieve the outlined goals.

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 round table a Wild Digital SEA 2021, we had the pleasure of listening to Gopi Ganesalingam, director of the digital industry of Malaysian Digital Economy Corporation (MDEC) and Rafiza Ghazali, CEO of the group Nursery Fund explain the objectives of MyDIGITAL in more depth and address various questions from the community of initiatives.

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

Did you know: In 2013, the term “unicorn” was born thanks to Aileen Lee, founder of Cowboy Ventures, an early-stage venture capital firm. Unicorns are used to describe emerging companies valued at $ 1 billion and are often technology startups. As of November 2021, CB Insights reported that there are more than 800 unicorns around the world.

Why is Malaysia pursuing the creation of unicorns?

The virtual stage at Wild Digital SEA 2021

Gopi first stepped onto the virtual stage, stating that unicorns are important not only by definition, but by what they represent. They are larger companies, which are important in any ecosystem.

“And if we look at unicorns, the overflow effect is job creation, the supply chain: the ecosystem that unicorn unites.”

He later cited a Startup Genome report that revealed that a unicorn in any ecosystem gives a country’s gross domestic product (GDP) 10 times growth.

Rafiza participated with his own two cents, claiming that unicorns could also inspire emerging entrepreneurs and growing startups to continue. Hearing this, Dash compared it to how humanity by sending a few people to the moon helped grow the global aerospace industry.

Can our government agencies work together to achieve this goal?

Prior to MyDIGITAL, Gopi admitted that government agencies involved in the startup ecosystem used to work independently, even though they were only on a phone call from each other for any discussion.

But now, the project has brought these agencies together to leverage each of their strengths to create the desired “right” ecosystem for unicorn breeding. Not only does each agency pursue its own KPIs, but they come together to achieve a national goal.

Rafiza agreed and said that although she is technically the new girl on the blog, she has been observing Malaysia’s home ecosystem for a long time and feels as if this is the first time she sees how all the agencies communicate and work with each other.

Does Malaysia have the funds to raise unicorns?

According to the exchange of speakers, it seems that funding is not a concern, as both the MDEC and the Cradle Fund said the government has put a lot of effort into ensuring that the ecosystem is well funded.

A brief overview of Dana PENJANA Nasional / Image credit: Penjana Kapital

Just last year, Penjana Kapital joined as a government company to launch the Dana PENJANA Nasional (DPN) program. By June 2021, he had already done so collected 850 million RM, surpassing the target of RM88 million by 3.7 times. Of the total raised, 55% were also from foreign investors.

Other government agencies are also trying to promote Malaysian startups going abroad and external venture capitalists (VCs) coming to Malaysia.

But Malaysia lacks talent, right?

Dash raised that in his discussions with several startups about the pandemic, he learned that they considered talent to be scarce and costly to acquire. Without talent, it would be almost impossible to raise our unicorns. What could be done then to solve this problem?

Not to agree, Gopi clarified: “I joined MDEC in 2015 and I have always observed the fact that Malaysia has a lot of talent, either entrepreneurial talent or talents that support entrepreneurs.”

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

So the truth is that we produce good talent, but we don’t retain them much. Nor do we retain our entrepreneurs very well. Going back to the plan, this is exactly what you are trying to address.

Gopi Ganesalingam, MDEC Digital Industry Director.

Rafiza also said, “We have the talent, but they are not necessarily in Malaysia.” Despite this, she has had people who have contacted her to find out how they can contribute and support Malaysian agencies and companies abroad.

From this, he concluded that since everything is digital now, talent does not necessarily have to be in Malaysia to get involved in our ecosystem.

Added 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 larger companies were now starting to pay much more for new graduates, giving an incentive to good candidates to stay.

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

  1. Creation of 5K new startups that have a business model in operation.
  2. Increase the valuation of startups so that we can achieve our goal of 5 unicorns.
  3. Digitizing 875 thousand SMEs.
  4. Achieving the goal of RM 70 billion in digital investments.

This is how Gopi explains it, on behalf of the MDEC. In essence, the MyDIGITAL project looks like a report card, and MDEC, Cradle Fund, and other agencies are working to achieve the existing goals.

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

First would be the job creation potential of each recipient, and second, Cradle Fund analyzes the potential of a startup to obtain more funding to assess its longevity. Rafiza was glad to share that of all the Sendirian Berhad companies they have helped so far, there are still 8/10.

Third, they examine a company’s contribution to GDP. Rafiza shared that the organization’s track record shows that the job creation multiplier for each grant recipient is a minimum of 7.36x (even excluding the gig and Grab economy, whom Rafiza called an “outlier”).

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

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

As of now, a lot of information about and for Malaysian startups is very fragmented. To compile a list of all existing Malaysian startups or find out how to launch your own Malaysian startup, you will likely have to review tons of sites without the total security that you have the right information.

That’s why the Cradle Fund was earmarked RM 20 million to launch the MYStartup platform that he should address these painful points. It will be a collaborative platform to which public and private agencies can submit to share data.

“It will save time for startup founders to focus on running their business and allow them to find intellectual property lawyers, investors, support, mentors, job seekers, etc.,” Rafiza added. In late November, we could expect to see an MVP of the site.

On the part of MDEC, the agency has already launched several programs to close the gap between itself and startups. Some examples include the 22 digital hubs, working with accelerators to organize hackathons, fundraising, Grindstone Founders programs, and more.

Gopi said they have seen results with all this, so MDEC will continue to develop and strengthen these initiatives.

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The sharing of this panel by Gopi and Rafiza undoubtedly provided more context and information on why Malaysia is pursuing the creation of unicorns and how it plans to do so.

I think we’re ready to really catapult the ecosystem and create not only more unicorns, but also resilient, global, reversible, and quality startups. We have the talent, we have the people, we have what it takes, all the secret recipes to build the ecosystem. Therefore, it is only whether or not we have the heart, soul, and faith to execute all of this.

Rafiza Ghazali, CEO of Cradle Fund

Now, Malaysia’s business ecosystem and its stakeholders will wait breathlessly to see how all the set goals will be met. What results will we see over the next 4-9 years?

  • You can read more about the MyDIGITAL project here.
  • Read introductory stories from Malaysia here.

Featured Image Credit: Gopi Ganesalingam / Rafiza Ghazali

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