A great market, lower costs, skilled labour, and many more reasons make it a perfect opportunity for business expansion.
BEAM 7 Feb, 2017
Malaysia is arguably one of the best places to start a business in this period of time, and even better for startups.
Having a team with experience in building and scaling multiple businesses across SouthEast Asia (particularly Malaysia and Singapore) over the past 8 years, we're even more convinced today that Malaysia is definitely one of the best places for business expansion in SouthEast Asia, especially for Singaporean startups.
There's no doubt that Malaysia still has many shortcomings to attract more regional startups and investors to the country, however all that may begin changing in the coming years. Here's why:
1) Good Market Size with Accessibility
Although not the biggest country in the region, Malaysia definitely has a pretty sizeable population. There are over 22 million people living in Peninsular Malaysia alone, where over 1/3 of the population are living in urban (city) areas. Kuala Lumpur (the capital of Malaysia) alone has 1.7 Million people, and the population is continuously growing.
However, a large population alone isn't everything. What's crucial is that a very large population of Malaysians living in urban areas have access to internet, telecommunication, and banking services, making it a great market to target for technology-based companies.
2) Many Untapped Opportunities and Infrastructure Gaps to Fill
Malaysia is still a developing nation with much to do in terms of infrastructure development. Many services that exist in city areas still do not exist in smaller towns and satellite cities in the country.
A large number of these services that are lacking can easily be provided with technologies that startups are already building. If offered in a cost-effective and reliable fashion, they could be an excellent revenue stream for startup companies. Some of these areas include (but are not limited to):
3) Great Road Access and Proximity to Singapore
For Singaporean startups, Malaysia is just a bridge away.
With the introduction of more low cost carrier airlines and continuous improvement to road/rail accessibility between the 2 countries, it is becoming increasingly cheaper to travel in and out between both countries.
Not to mention most major cities in Malaysia can now be accessed by highways, making it a lot easier (and faster) for regional expansion to take place at lower costs. This also presents a great opportunity for more logistics startups to enter the market and tackle less populated areas that larger firms would ignore.
4) Increasing Governmental Support
The Malaysian government is much more active in supporting startup companies than they were several years back.
With the introduction of MaGIC's accelerator programme and organizations like Cradle Fund (providing grants financing) and MDEC (providing support and accessibility services for startups), this can be an excellent opportunity for startups to accelerate their growth/market penetration into the region without incurring high costs.
5) Lower Operating Cost & Cheaper Labour
This is a big one - operating costs. Over 80% of startups spend nearly half of their monthly expenses on labor and operations, if not more.
Being able to reduce these 2 main expenses of the business can dramatically increase the survival rate of the company, especially during the early stages of growth. Not to mention an overall lower burn rate will greatly increase the chances of a company being sustainable in the long run, which often leads to more investors willing to take risks in them.
Due to the lower exchange rate of the Ringgit to many foreign currencies today, hiring talented & skilled labour (as well as other capital intensive equipment) in the country is also a lot more affordable compared to before.
Lower the cost = Lower the risk = Increasing the success = Win.
6) Similar Cultures, Skilled Labour
Aside from the cheaper costs for hiring, Malaysia has plenty of incredibly bright and skilful people who are seeking better career opportunities today.
With the advent of more startups rising in the country, more and more investors are starting to recognize the advantages of investing in Malaysian companies due to the lower cost of operations.
As a result to that, many of these companies are able to provide decent compensation for job seekers who are keen to pursue a career in a company in it's early stages. Not to mention many growing startups offer better compensation incentives (and fun work environments) to many large corporations.
As Malaysia has a similar culture and demographics to Singapore, communicating and working with Malaysian people feels nearly the same as working with a fellow Singaporeans.
Many Malaysians also speak 3 or more languages/dialects (English, Malay, Chinese, Tamil), making them great candidates for startups that are exploring new markets outside the country.
Many startups today have also taken up the baton of providing skilled education programmes to young graduates, training up more and more programmers/designers that end up working in startups and large companies.
7) Growing Internet & Smartphone Market
Malaysia has an ever-growing smartphone & internet market. As of 2017, Malaysia has over 65% in mobile smartphone penetration and over 68.1% of internet penetration in urban areas.
As more and more of these technologies are made accessible to smaller cities around the nation, this will present a green field for startups looking to tap into those markets.
With Malaysian companies like Avana.asia providing a simpler solutions for anyone to start an online business, this significantly lowers the barrier of entry for more and more people to retail their products online at very low maintenance/setup costs.
8) Many more corporates entering Malaysia
Today more and more multinational corporations are choosing Malaysia as a hub to base their operations (and data centres) for the South East Asia region due to lower costs and stability in the region as a long term corporate investment.
This not only brings an increase in overall corporate investments within the region, but an ever-growing opportunity for corporate acquisitions to take place with startups looking to sell their existing business to a larger entity.
9) More Venture Capital, Angel Investors, and Corporate Support
More and more investors and corporate firms are starting to take a more active role in setting up investment funds, accelerators, and incubation hubs as they begin recognizing Malaysia as a better place for lower risk (and lower cost) investments.
With Cradle Fund actively co-investing together with many more Singapore-based venture capital firms today, this will greatly increase the opportunity for more startups to raise more seed and growth capital to scale regionally.
With the addition of many new accelerators, pitching events, and incubation hubs/working spaces, startups will not only be able to acquire the necessary financing to scale and go regional, there's plenty of potential for high investment returns for smaller investment firms as well.
10) New companies Act makes it easier and cheaper
With the amendment of the new companies act in 2016, setting up and maintaining a business in Malaysia is a lot easier and cost-effective than before. Some of the new changes to the act include the following:
In conclusion, Malaysia today is definitely a country that has tremendous potential for startups to take advantage of as a great place to validate ideas and to propel their growth to the next stages.
With BEAM being more active in connecting the business world across markets via our online platform and on-ground events, we will definitely be increasing support for facilitating transitions and expansion of startups into the Malaysian market at greater scale this 2017.
Should you need assistance in expanding into Malaysia, do get in touch with our team for support.
Sign up to connect with the community