More Malaysian start-ups branching out

Although Malaysia has made great strides in nurturing innovation, as evidenced by its performance on the 2015 Global Innovation Index (GII), more needs to be done to translate ideas into action The country is now embarking on a comprehensive plan to address challenges in terms of commercialisation and provide companies and businesses with the tools they need, whether professional advice or seed funding, to get their ideas to market. While Agensi Inovasi Malaysia (Malaysian Innovation Agency, AIM) is driving the push towards commercialisation, it has support from programmes that are designed to cultivate entrepreneurs, such as those operated by the Malaysian Global Innovation and Creative Centre (MaGIC), which provides training, advice and seed funding to start-ups and small businesses.

Pioneering Programme

PlaTCOM Ventures was set up in 2014 as an AIM initiative that supports both technology transfer and commercialisation, including the country’s first intellectual property (IP) trading platform, known as Innovation Business Opportunities (IBO), and the High Impact Programme 2 (HIP2), which assists small and medium-sized entrepreneurs (SMEs) wanting to take their ideas to market.

“One of the main barriers preventing the utilisation of IP by SMEs is the cost of IP valuation,” Shamsiah Kamaruddin, director-general of the Intellectual Property Corporation of Malaysia, told OBG. “Currently, options are limited to foreign valuation, which is expensive and out-of-reach for many SMEs, and so consequently we are working to train local professionals who can fulfil this function.”

The IBO is designed to spearhead technology transfer from research organisations to industry by creating a marketplace for IP and the opportunity for inventions to acquire the economic value that transforms them into innovations. PlaTCOM screens each invention for its commercial viability before it is added to the IBO in a form that is attractive to investors and industry, while its team of technology transfer managers works to drive any collaboration forward. PlaTCOM also markets the chosen inventions beyond the online platform in a regular magazine and a quarterly roadshow known as InnoSeed.

Another initiative, the HIP2-Technology Commercialisation Programme (TCP) is part of the SME Masterplan 2012-20 in partnership with SME Corporation Malaysia. It is designed to help small businesses move their concepts smoothly through to commercialisation by providing technical assistance, market information, legal advice, testing facilities, patent issues and other appropriate services. HIP2-TCP also puts SMEs in touch with early-stage financiers.

A Leg Up 

SMEs are crucial to Malaysia’s success in innovation as they make up 97.3% of all businesses, contributing 35.9% of GDP, according to SME Corporation Malaysia. Under the SME Masterplan 2012-20 the target is to expand the number of high-growth and innovative firms by 10% each year. Eligible firms must be at least 51% Malaysian-owned and have a minimum paid-up capital in cash of RM10,000 ($2480). Start-ups are exempt from the capital requirement, but must provide documents that show they are able to sustain themselves financially. Naser Jaafar, chief operating officer of AIM, told OBG that about 40 companies focusing on apps, food and engineering were accepted into the programme in 2015.

PlaTCOM also operates regular challenges and competitions to encourage inventors and researchers to share their ideas in industries seen as crucial to Malaysian development, offering significant funding to winning proposals. In early 2016 it called for proposals for collaborative projects between Malaysia and the UK to tackle the spread of mosquito-borne virus dengue fever, with up to RM3m ($743,000) for the winning Malaysian principal applicants and up to £500,000 for the winning British applicants from the British Council under the Newton-Ungku Omar Fund.

Under the 11th Malaysia Plan (11MP), which lays out Malaysia’s economic path until 2020, inclusive innovation is a major focus, with the goal being to support micro-enterprises in rural areas. The programme provides technical, financial and management support, as well as encouraging grassroots innovation.

Data Collection

As well as helping companies navigate the complexities of developing new products and bringing them to market, AIM is also behind the 1DANA portal, which was established in 2014 under the purview of AIM’s secretariat. 1DANA is a central depository for information and data on research and development (R&D) and commercialisation, with a focus on R&D spending by government ministries and agencies. The idea is not only to strengthen collaboration between the public and private sectors, academia and the public, but also to make public programmes more transparent and accountable.

In projects where AIM believes there is potential for global demand it also provides venture capital. It currently has 11 investments with a total value of RM270m ($66.8m), including digital autopsy company iGene, which was started in the UK and now has four centres, according to Naser. iGene created the technology for 3D visual autopsies which is designed to make autopsies more efficient and enable better sharing of post-mortem findings and documentation.

AIM has also invested in Bioven, a biotech company founded in Kuala Lumpur in 2002, which is conducting phase 3 trials in 10 countries for its lung cancer drug. Another important recipient of AIM support, SRI Capital Holdings is an ISO 9001:2008 certified company that uses a technology called “Devulcanisation” to recycle end-of-life tyres. The technology makes a new rubber compound that can be used to manufacture new rubber products.

Looking To Start-Ups

As interest in technology starts-ups and innovation has grown, other government agencies have also developed schemes to make it easier for entrepreneurs to secure the funds they need to advance their ideas. The Cradle Fund was set up under the Ministry of Finance in 2003 with RM100m ($24.8m) to invest in innovative business proposals, through investment programmes. CIP Catalyst, which is for entrepreneurs, and U-CIP Catalyst, which is aimed at researchers, lecturers and students, are pre-seed conditional grants targeted at technology-based ideas. Recipients can be awarded as much as RM150,000 ($37,100) to fund prototype development within 18 months. CIP500 is specifically designed to help entrepreneurs in selected industries commercialise their products, providing funding of up to RM500,000 ($124,000) to firms that are less than three years old and majority-owned by Malaysians.

The Cradle Fund also provides tax deductions for angel investors that put their money into qualified technology-based start-ups in Malaysia, provided they meet certain conditions, while the Coach and Grow Programme is a public-private partnership between the Cradle Fund and entrepreneur coaching firm Proficeo designed to help start-ups scale up their business. MaGIC was set up in April 2015 to enhance Malaysia’s start-up environment and support entrepreneurs, particularly those in the technology sphere.

Success will partly depend on creating technology-savvy young people who are prepared to take risks in their careers. MaGIC also operates an academy that runs technology boot camps to address the lack of engineers in the country, as well as an Accelerator Programme designed to make start-ups “investment ready”. In 2014 the Bumiputra Agenda Steering Unit launched a RM100m ($24.8m) grant fund specifically to help ethnic Malay and indigenous entrepreneurs commercialise their ideas, using business-pitch competitions to discover young talent.

SME Funding

Malaysia’s SME Bank also coordinates funding programmes for new businesses, including the government-backed Young Entrepreneur Fund, which is operated on sharia-compliant financing principles and provides working capital, as well as funds to buy machinery and equipment up to a maximum of RM100,000 ($24,800). The bank also operates a range of other special funding schemes, including one for female entrepreneurs.

The 11MP also specifies that equity crowdfunding will be explored to widen the range of fundraising and investment products available to businesses, as well as to allow more investors to participate in early-stage business development. SMEs, start-ups and innovative businesses are among those expected to show interest in equity crowdfunding.

Local innovation efforts have had some successes, notably with Grab (formerly known as MyTeksi), an app that has made it far easier to hire taxis and is now competing in the region alongside Uber. On-demand streaming app iFlix is taking on global giant Netflix to win over audiences in South-east Asia. With a growing ecosystem and an increasing amount of funding available to innovative firms, it is becoming easier for Malaysians to turn their concepts into businesses.

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The Report: Malaysia 2016

Innovation chapter from The Report: Malaysia 2016

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