How to start a startup in Malaysia
If you are reading this, you’re probably a Malaysian starting his/her first startup and wondering whether to start or a non-Malaysian thinking of launching your startup in Malaysia or planning to based your startup operation in Malaysia while serving your home market. Here are 4 advice that I hope helps you in your journey :
Before I continue, let me share a bit about myself to put some credibility on this topic that I am about to share. My name is Dominic and I am a Malaysian. Although I wasn’t born here, I have spent more than 20 years in Malaysia to appreciate how unique Malaysia is compared to other countries. In 2013, I quit a well-paid job with an international bank to start my own startup. By June 2013, I began working on my first startup called Adz (a smartphone advertising platform). Within our first year, we were successful in securing interest from notable customers, such as Disney, Sony, Ikea and many more. In February 2015, Adz was awarded a MYR150,000 grant from Cradle. So every now and then, I meet new and talented individuals asking me for my experience and advice on how to start a startup, so I thought why not write it down and share it with you, the public and individuals who are interested in this topic.
1. Understand your market/customers
…founders of startups are well aware of their value proposition but don’t know how relevant their value propositions are in relation to their market or customers.
I’m sure by now, you might have come across various resources/articles saying one of the most critical component before you start your startup, is the value proposition to your customers. I decided to place the understanding of your market/customers first because I came across many founders of startups are well aware of their value proposition but don’t know how relevant their value propositions are in relation to their market or customers. To give an example on this, businesses that worked very well oversea may not work well in Malaysia. Something that worked well in its own country just prove that the business’s value proposition is valid however that value proposition might not be relevant in Malaysia. I would also like to point out that the market in Malaysia is a very unique environment. You are probably aware that Malaysia is made out of 3 main race, Malays, Chinese and Indians. And the percentage of these race in terms of population are approximately 70%, 20% and 10% for Malays, Chinese and Indians respectively. What makes Malaysia very unique is that a value proposition may work well for one race, may on the other hand have devastating effect on another race. Furthermore different race plays different economy roles, for examples the Malays play a majority role in the civil sector and government-linked corporations; whereas the Chinese and Indians are more active in the private sector. Using Forbes as a reference, in 2015 among Forbes’s Top 50 richest Malaysian, approximately 90% of the individuals on that list consist of Chinese and Indians. However there is a limit on how much research and understanding you can achieve without testing your product. This brings me to my next point.
2. Test your product
…you don’t really need an actual product/prototype to start testing your product…
Sometimes to fully understand your market and customers you need to your test product. Now I caution you, when I say test your product, it doesn’t mean coming up with a complete working prototype. Taking a lesson from the book called “The Lean Startup” by Eric Ries , my key take away from that book is to come up with features that are relevant to your users and test them. I apply this by testing my product at the earliest stage possible, even when it remains just an idea. I would test my idea by asking friends, mentors, random strangers, users and customers for their opinions and feedback. After that, I will test an early stage of the product by showing them a basic mock up, some of these mock ups were made up of random props that I could get my hands on. Notice even at this stage, no actual resources were spent on the actual product or a prototype. From there an only when I am confident after going through a few rounds of the above, I will spend the money to begin working on the physical prototype. Therefore, you don’t really need an actual product/prototype to start testing your product while the insights you gathered from these test will be priceless to support the growth of your business. To move beyond the early stages of product development, you may need a lot of financial resources. When you are unable to provide these financial resources, you may need to raise funds…
…raise the fund internally first to support your business, gather traction then raise funds from investors.
If you are a startup looking for funding and you truly believe that you have the next million/billion dollar idea where investors should invest in you immediately… I have some bad news for you, it is rare for investors in Malaysia to fund you if you are still at the pre-seed and seed stage. Furthermore it is extremely rare for you to raise amounts that are more than a few hundred thousand MYR. This is extremely important for me to emphasise this, as I want to highlight the various articles that you may read over the internet about startups raising big amounts during early stage is something that rarely happens in Malaysia. Sometimes I believe your odds of striking the lottery is higher than successfully raising funds for your startup during its early stages in Malaysia. So if you are planning to start your own startup in Malaysia, it is very important that you are fully aware of this and the funding climate in Malaysia. Many individuals that I spoke to, believe that their startup will start to generate some revenue (or profits) within 6 months. On the contrary, the harsh reality is only a very small number of startups in Malaysia will generate revenue within 6 months and most likely the revenue generated is a very small amount. Thus if you are really committed and determine to see your startup is successful, you will need to build up a large “war chest” for self-survival while sustaining your startup. Do this by saving early or asking the famous 3F of startup for funding which are Family, Friends and Fools. When I started working, I knew that I wanted to start my own startup. With that mindset, I started to save more than 60% of my salary to build up my war chest while having a very “bootstrapped” lifestyle. However there are some glimmer of good news for you. The good news is that the funding environment in Malaysia is slowly maturing due to many government initiatives like Cradle and MaGIC and success stories such as Groupmore (which became Groupon), MyTeksi, SAYS, Jobstreet and many more. However you shouldn’t take it for granted and rely solely on external investments or grants to support your business during the early stages. As the process may take a very long time, (our grant with Cradle took more than 6 months from submission of application to confirmation, and as at April 2015, we have only receive MYR5,000 out of the MYR150,000 grant) and to avoid wasting precious time that would be better spent at growing your business. If you are truly confident with your startup, do whatever is necessary to raise the fund internally first to support your business, gather traction then raise funds from investors. While you are focusing on your business, it is important for you to build up your network with investors. This brings me to my final point…
4. Build your network
…it is equally important to develop your networks beyond your customer…
The old saying “it’s not what you know, it’s who you know” is an important saying within the Asian business community, this is equally true for Malaysia. In my observation, most founders would only focus their effort on networks around their customers. However I realised that it is equally important to develop your networks beyond your customer, other equally important networks such as networks with your startup peers and potential investors. Being a founder isn’t an easy journey and that journey can be very lonely. On top of that, you will experience many challenges that are very unique to running a startup and it takes some one in the similar situation to understand these challenges. Having a network of startup peers will serve as your support group with an added bonus that your peers’ startups may offer synergies for collaboration and partnerships. On top of that, the process to secure investment from investors is a long process, thus it helps to slowly build up your network with investors while developing an impactful relationship with them. Imagine the process of raising funds as something similar to dating, with the ultimate objective is getting your partner to say YES when you propose for marriage, this is just like getting your investors to say YES to invest in you. Just like you would never immediately propose for marriage when you just met the person, therefore never immediately ask potential investors to invest in you when it is your first meeting with them. Similarly to dating, the process to understand each other’s objectives and requirements takes time. As different investors invest at different stages of a startup, I recommend that you establish some level of mutual agreement on milestones with the investors. With an agreed milestones, this allows you to come back to the investors with new development and progress of your startup while allowing you to revisit the fund raising topic. Although fund raising is not my biggest priority at this moment nevertheless I take the effort to build my networks with potential investors while helping my peers to connect with to them.
The decision criteria on these 4 points were based on the chance that if I had the opportunity to give myself a few critical advice before I started my startup, what advice I would give. Thus I hope these 4 points were relevant and insightful to you. Do you agree with these? Is there anything else you would like to me share? Or let me know what you think by reaching out to me at Twitter @dkkteoh , email dom(at)theadz.com or drop a comment below.