The need for a Vibrant Technology Venture Capitalists Sector in Malaysian Innovation Technology Industry.

-
photo: oneeighty.co.nz

Often, technology startups have trouble scaling up to profitable business venture from pilot scale. Majority of Tech startup failed at this stage. This is the phase often dubbed  the valley of death phase due to the very high risk in the venture. In the US, this phase is bridged by bold venture capitalists who embraced the risks while prospecting very high potential returns. In Malaysia normally the funding in this phase are covered by grants from government instead of the venture capitalists. Unfortunately this come with  problems  that results in less than optimum outcome.

The problem is that the grant and soft loan from government does not help in terms of business viability and vitality that venture capitalists would otherwise lend. They don’t necesarily come with the resources with business acumen and tenacity needed to be injected into the new startups. They are rather like cushions and crutches that does not really prepare the startups for the business world. It is up to the startups to make their business grow and take the jump. Sometimes they conduct mentoring programme with assistance from other proven serial entrepreneurs. But then again, these mentors treat their mentee as such, not real partners. They are not in with the risks the tech is facing, its not their money afterall. Apart from this, with the looming financial stress the nation is facing, we cannot expect this type of financial assisstance from the government to continue indefinitely.

Venture capitalists in the US come in not just with the money, but also with proper due diligence, business experience, market share or even experts that will help the company on daily basis. They go all out with ‘swim or sink’ attitude because they are also taking the risks. Its their money too. In Malaysia all these govenrment aids come with only expectation of meeting milestones, or oftentimes being treated as just another experimental project. Not surprising a lot of tech commercialisation in Malaysia wrap up once the grant is finished.

What is needed is for a gutsy and vigorous Venture Capitalists Sector that specifically focus on new tech ventures. This is the sector that now we need to turn our focus on. We have venture capitalists players here in the country, but their psyche is not fully geared towards new tech venture, and their less than gutsy attitude does not help.

We also misplaced our hope in already established businesses and industry giants to fill this gap. No, they dont have the apetite for new tech ventures with their associated risks. They want the tech to proof its business viability before they want to acquire the tech. In other words they expect to buy inventions that is already ready to fly off the shelves.

Why Venture Capitalists? Because only they have the biggest appetite that matched the high risk that comes with tech venture. The primary business model for venture capitalists is to sell off the company after an agreed period, between 2-5 years, with low or negative returns in the early years. VCs may exit their investment by IPO, private exit (acquisition, secondary sale, or buyback) or by writeoff (liquidation). Its a risky business, but their returns are manyfolds than normal business growth. These super returns actually fire their apetite for the risky tech ventures.

Most venture capitalist in Malaysia are not psyched to invest in new tech venture. They are rather contend with capitalising in already proven good business model looking for growth. As a results, the default party to fund the growth of tech startups is the government. The reason for Malaysian venture capitalist industry not playing a bigger role in tech commercialisations need to be understood. Perhaps what is needed is some attention by the government to look at this industry. Perhaps in terms of regulatory assisstance, sandbox period, incentives, promotion etc need to be injected to invigorate this vital sector and missing link in tech commercialisation in Malaysia.

Zaky Jaafar
Excerpt from an email piece written on 7/6/2018 by Author

Comments

Post a Comment

Popular posts from this blog

Intellectual crisis in Malaysian Academia: In search of an overall philosophy

-
Image
We often refer to the progress of western civilisations in terms of their contributions in science and technology. We believe if we can have access, or even replicate their technological advancement as well as achieve the same level of prosperity, we will reach the same status they enjoyed as developed nations. With relative prosperity that enabled us to acquire the best technology out there, the best infra and with democratisation of information, by right, we should be behaving and thinking like one. But yet, something is amiss. Our mentality, our culture, our politics, don’t seem to reflect one. Why can’t we do this? Do we lack the psycho-sociological make up to stand like one? (cite K Mahbubani, “can Asian think?”). Why don’t we feel like living in a developed society? We don’t behave like one, even worse, our collective way of thinking as a nation doesn’t seem to be beyond those of ancient civilisations, stuck in bygone era. If we look at our public dialogues more often than n
Read more

From Ubercab to Uber: The Needed Paradigm Shift in Malaysian Education

-
Image
When UberCab decided to ditch the word Cab from its name, it was a revelation in the importance of stepping back and doing less and not doing more. This is something that our education system in Malaysia can learn. We are at the time  when doing something different almost always mean doing something new, the idea of doing away with unnecessary baggage as a way to progress is almost unheard of. In 2011, when Uber CEO decided to change it's name from UberCab to Uber, one of its team asked "If we ditch the word Cab from UberCab, then we are Uber what?", as if Uber cannot stand on its own as a word. Nevertheless the company proceeded changing the name. The move was quite significant in the history of the company. San Francisco Municipal Transport Authority has been threatening UberCab with many potential lawsuits due to its unconventional practice in cab service. By getting rid of the idea of the company as a cab service, and reposition itself as a non cab service,  it simply
Read more

The Scientific mind and modern world crisis. (In search of an overall academic philosophy- part 2)

-
Image
In my previous article , I talked of the absence of an overall, cohesive philosophy for Malaysian academia. This time the focus will be on a particular philosophy permeating academic realm,  pushing out alternative paradigms aggressively. Instead of bringing about cohesion, it divides academia and degrades it into fragmented chaos. Philosophy is not a subject favoured by contemporary scholars. Any discussion bearing any abstract concept  would quickly be labelled "rhetoric" and not worth serious attention. What matters are real 'empirical' hard data. Swift judgement based on scientific data would be the hallmark of modern and sharp intellectualism. For academia, this is unfortunate. It creates the current crisis or paralysis currently infecting it. Ironically, for all the low admiration of philosophy currently in academia, it embrace one particular philosophy religiously. Admit it or not, this particular attitude highlighted above originates from A particula
Read more