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This article first appeared in Enterprise, The Edge Malaysia Weekly on April 13, 2020 - April 19, 2020

Malaysia’s burgeoning start-up and private business ecosystem has undoubtedly been influenced by a host of government agencies over the last two decades. In fact, these agencies are often credited with creating the favourable conditions that were necessary for Malaysia to shoot up the World Bank’s Doing Business rankings over the last few years.

Enterprise spoke to a number of agencies to get a sense of their effectiveness and impact on the ecosystem. On the whole, while positive strides have been made by all, some agencies are further along than others. For example, in some instances, there has been a lack of simultaneous performance tracking of participating start-ups. In others, there has been no tracking at all.

Additionally, there continues to be functional overlaps between the agencies. These overlaps extend to their various grants, investments and training initiatives. Nevertheless, their leaders have been actively working to minimise overlaps, particularly in the last few years. This is reflected in the more well-defined programme parameters.

For example, all the agencies provide some form of start-up or entrepreneur training. However, Cradle Fund is now well known throughout the market as being entrenched in the early-stage start-up ecosystem, so its bootcamps and training programmes reflect that. Also, barring a brief foray into equity investments, the agency operates almost exclusively as a grant-giving organisation.

The Malaysia Digital Economy Corporation (MDEC), on the other hand, is looking to work with more mature technology companies, those beyond the Series A and B funding rounds. However, it still has long-standing mandates to work with early-stage entrepreneurs and individuals wishing to start online micro-enterprises.

Both Cradle and MDEC have a decidedly technology-heavy bias. While this is undoubtedly important for a digital economy, they have been perceived as alienating certain portions of the start-up and small business ecosystem. After all, some of the country’s most exciting private businesses are not known as tech players. Famous examples include Tealive, fast food franchise Marrybrown (the company boasts more than 500 outlets worldwide), local fashion label Pestle & Mortar, snack food manufacturer Munchy’s and restaurant chain PappaRich.

The Malaysian Global Innovation & Creativity Centre (MaGIC) has taken to pushing the country’s social enterprise agenda and has performed quite admirably in a relatively short span of time. Unlike the other two agencies, MaGIC is not as focused on tech start-ups.

Rather, it has a broader focus on conventional start-ups that are not necessarily entrenched in technology, but provide significant value to the economy. As the youngest of the agencies however, there are gaps in data and performance tracking that otherwise would have added significant value.

SME Corp Malaysia, meanwhile, has had mixed results with its implementation of the SME Masterplan 2012 - 2020. Despite being announced back in 2012, a number of key programmes were only launched in earnest as late as last year. Having said that, a major win for the agency was the establishment of PlaTCOM Ventures, in collaboration with Agensi Inovasi Malaysia. PlaTCOM was envisioned as a national-level entity meant to drive the technology commercialisation portion of the masterplan, which it did to great effect over the years.


The hand that rocks the Cradle

Cradle Fund has been perhaps the most progressive and innovative of the government start-up agencies thus far. It commenced operations as a standalone agency in the early 2000s and its efforts — particularly in the latter half of that decade — coincided with a significant upswing in locals venturing into technology start-ups, whether as founders or investors.

The agency sought to catalyse the still nascent start-up scene via a combination of grants, minority investment stakes, active capacity-building and training programmes. Crucially, in the final few years of the late Nazrin Hassan’s leadership, he took concerted steps to track the performance of certain agency programmes. In September 2018, an impact study on the Cradle Investment Programme (CIP) was unveiled to the public.

Although referred to as investments, these were grant programmes. The impact study was groundbreaking in the detail and depth it went to in order to track the effectiveness of the grant money spent. On this point alone, Cradle has set an example for other agencies to follow.

While acting group CEO Razif Aziz readily acknowledges that there are improvements that need to be made, Cradle has had a profound impact on the start-up scene over the last decade. And he has the hard data to demonstrate this. This perhaps will be one of the more enduring legacies of Nazrin.

According to Razif, the agency received RM189 million between 2009 and 2019. Roughly half was spent on grants while the other half was spent on Cradle’s short-lived equity investment programme.

One of the agency’s flagship grant programmes, the CIP Catalyst, is said to have been particularly successful. The effectiveness of grants provided under CIP Catalyst — an ideation-stage grant — is measured by commercialisation, or number of products sold.

“Being an ideation-stage grant, people or businesses that have great ideas come to us, and we fund them. That programme has enjoyed a roughly 64% commercialisation rate,” says Razif.

But herein lies a problem. There is no minimum commercialisation requirement for CIP Catalyst recipients. “The easiest way to put it would be on a ‘products sold’ basis. Once the first sale is made, we would consider the company as having successfully commercialised its product,” he says.

This is an exceptionally low bar for a grant programme that provides a single entity with up to RM150,000. The agency does not track, nor does it require grant recipients to provide or commit to minimum revenue figures either. There is not even a requirement to disclose revenue figures to better track the effectiveness of the grant for that particular business.

Razif explains, “Instituting stipulations like these would require us to commit resources towards tracking the relevant metrics. The CIP grant programmes were never designed to be long-standing initiatives with recurring deliverables, like the old Multimedia Super Corridor status.”

Further, on a practical level, grant programmes do not lend themselves to longer-term performance tracking, he adds. “Our ability to compel and collect data ends at a certain point; once the company has completed the grant process [having received the money] and started selling. If they do not provide us with any data, we really cannot compel them to do so.”

Cradle Fund used to have a number of other grant programmes, notably the CIP 300 and CIP 500. These grants were meant for companies that were slightly more mature than those applying for the CIP Catalyst. Nonetheless, all these are meant for early-stage start-ups.

The CIP 300 and CIP 500 grant recipients were tracked using an altogether different metric, known as follow-on funding. “After our initial pump of funds, we track the success of the grant recipients based on their ability to attract further funding. The CIP 300 and CIP 500 programmes saw a follow-on funding rate of 19% and 20% respectively.”

The follow-on funding rule does not make a distinction between private and public sector funds. Thus, a CIP 300 recipient would be considered to have successfully received follow-on funding, regardless of whether it came from another government agency or a private sector venture capital firm.

Over the years, there had been a concerted push by the government for Cradle to gradually move away from the grant model. In fact, this is something Razif’s predecessor, Nazrin, had spoken about on a number of occasions. Due to the increasing momentum from the government to scale down grants across the board, Cradle shuttered its CIP 150 and CIP 500 programmes and replaced them with the CIP 300 grant, which continues to exist.

In mid-2014, Cradle made its first foray into equity investments, with the announcement of co-investment partnerships with a number of private sector venture capital firms. In 2017, it launched its DEQ 800 investment initiative.

“The reason we went into equity investments was to try and bridge the gap between our grant programmes and the available private sector funding in the Series A tier, so as to keep start-ups chugging along,” says Razif.

At this juncture, an unexpected event turned things on their head. With Cradle’s investment aspirations barely a few years old, the 2018 general election saw the Pakatan Harapan coalition sweep into power, under the leadership of Tun Dr Mahathir Mohamad.

Cradle’s overarching strategy to move away from grants in favour of investments was reversed. It would no longer be pursuing an investment strategy but rather, continue acting as a grant-giving agency. Additionally, having previously been under the purview of the Ministry of Finance, it was now parked under the Ministry of Energy, Science, Technology, Environment, and Climate Change (MESTECC).

The result of these changes are that Cradle’s existing equity investments are now effectively in limbo. For the moment, Razif says the agency will continue to hold on to these investments until he receives a definite solution from the government as to the long-term treatment of the shareholding. “We’re presently executing the business plan approved by the [Cradle] board which includes managing the portfolio to achieve the best returns possible for its stakeholders,” he adds.

According to him, Cradle currently has a little under 30 equity investments on its books.

“We played a leading role as far back as the early 2000s, providing grants and catalysing the first few generations of digital companies in Malaysia. Our target companies have now changed, but our overall strategy remains the same. We want to lead the way and catalyse interest in areas that we believe will yield major economic and social good.”



Malaysia Digital Economy Corporation (MDEC) CEO Surina Shukri took the helm in January last year when her predecessor Datuk Yasmin Mahmood resigned after nearly five years of heading the agency. One of Surina’s top priorities was to break down any silos that may have built up over the years.

“When you are talking about innovation, which is something we want to instil in businesses, you need diverse and cross-functional teams. In the digital age, where multiple industries regularly intersect, thanks to technology and data considerations, our teams need to reflect that ability to be cross-functional,” she says.

Having taken over at MDEC for just over a year, Surina and her team have either spearheaded or been involved in a number of major policy introductions and initiatives meant to encourage businesses to double down on technology solutions.

The agency announced in June last year that it was working with the Immigration Department and Home Ministry to create a work visa programme for technology freelancers. The visa was being created to fulfil the demand for blockchain experts in the country.

In December, it announced a partnership with US-based programming school General Assembly (GA) to set up operations here and provide locals with technical and programming courses. GA boasts 20 campuses, over 10,000 hiring partners and more than 40,000 full-time or part-time graduates.  

Earlier this year, MDEC entered into a strategic collaboration with Bank Simpanan Nasional (BSN) and SME Bank to channel matching grants for small businesses to undertake digitalisation efforts. BSN was appointed by the Ministry of Finance to provide RM500 million in matching grants to the first 100,000 small business applicants.

One of the agency’s more interesting initiatives is its Global Acceleration and Innovation Network (GAIN). The programme was launched in 2015 and designed as a way for Malaysian technology start-ups to gain access to international markets by leveraging MDEC’s network of international technology businesses and leaders.

In 2016, the agency announced that nearly 90% of MSC-status companies were still at the start-up stage despite having been in operation for 20 years. Most of them earned less than RM2 million a year and just 2% have gone on to achieve more than RM100 million in earnings.

Surina and her team have been working to revitalise the GAIN initiative. “We are building up our GAIN programme. Today, we have about 150 technology companies in our GAIN portfolio. We want to help them become regional and global champions by providing mentorship, market access, visibility and connections to fundraising,” she says

Thanks to the initiative, MDEC has arguably set itself apart from other start-up government agencies in that its efforts here are focused on larger technology companies. An initiative such as GAIN would certainly help young, homegrown tech companies looking to make an impact on regional and global markets.

To be sure, many of the companies listed on the agency’s GAIN website ( fit the bill. Many are relatively young, privately owned and operated technology players looking to break into international markets.

But some names may be a surprise. For example, Vitrox Corp Bhd is a Main Market-listed company that specialises in the manufacture of high-end machine vision components, among others.

The company was founded in 2000. At press time, its stock was trading at RM7.70, giving it a market capitalisation of RM3.34 billion as at April 8.  The counter has appreciated nearly 350% over five years. That number jumps to more than 4,000% if you calculate the appreciation from when the company debuted on Bursa Malaysia in 2006.

Other companies in the GAIN portfolio include Fusionex, a data analytics company that was once listed on the London Stock Exchange, and telecommunications technology company TIME dotCom Bhd (trading at RM9.30 on Bursa as at press time). In fact, there is a surprising number of publicly traded companies and highly mature, export-oriented private businesses in the portfolio.

For Surina, these efforts are aimed at building a particular, internationally recognised Malaysian technology brand. “The GAIN programme is really important because we want people to think about technology companies when they think about Malaysia,” she says.

Undoubtedly, these are highly successful companies in their own right, led by highly charismatic and intelligent founders. But do these types of companies still require the kind of support that MDEC provides through its GAIN initiative, or could the agency utilise its resources on other less mature, privately held, high-growth technology companies?

“It is not always just a question of funding [from the government]. We are also in a position to provide mentorship, greater visibility and market access. These companies may not necessarily be struggling for market access, revenue or talent, but they are looking for bigger and newer markets. Fusionex, for example, may be a big company here, but not necessarily in the wider region,” says Surina.


Slow and steady

The central coordinating agency known as SME Corp Malaysia is the country’s high-level, small business policymaking and government-agency funding source. It was led by Datuk Dr Hafsah Hashim for nearly 14 years before she retired in August 2018. Nearly a year later, the agency appointed Noor Azmi Mat Said as CEO.

Noor Azmi was a private sector hire. He ran a corporate consulting practice for many years, advising companies on digital strategies and migrating legacy operations to the cloud.

At this juncture, it is worth noting that Malaysia is now in the final year of the comprehensive SME Masterplan 2012 — 2020, which is not unlike a small business version of the ubiquitous New Economic Policy. The masterplan charts a broad, national destination for small businesses, along with various policy recommendations and proposed outcomes, including six High Impact Programmes (HIPs).

Between 2010 and 2019, the agency received RM2.9 billion in funding. Every year, funds would be committed to various small business and start-up government agencies while a portion of those funds would be used for SME Corp’s programmes and initiatives.

This being the final year of the masterplan, it would be reasonable to expect these HIPs to have been fully rolled out by now. Unfortunately, this has not been the case. In fact, HIP #3, also known as the SME Investment Partner initiative, was only launched last year. To their credit however, Noor Azmi and his team have been working quickly to make up for lost time.

“I think one reason the agency took some time to get the SME Investment Programme to market was that it was looking for private sector partners that could commit a minimum of RM20 million up front to the programme, or preferably more. As I understand it, we did appoint private sector partners some years back, but they were simply not able to raise the funds required,” he says.

“We took a different approach last year and relaxed the fundraising requirement. Instead of requiring the private sector partner to raise RM20 million immediately, they would only need to raise a small portion of that — something like RM1 million for example — when it came time to invest. Then, we would match that with RM1 million of our own funds.”

So far, the co-investment initiative has deployed RM20.35 million into eight investments, RM13.57 million of which was provided by SME Corp, thanks to the ringgit matching scheme. The rest was provided by one of the agency’s private sector co-investment partners, Warisan Quantum Management.

It was an admirable effort by Noor Azmi and his team to have brought HIP #3 online as quickly as they did. But a crucial question remains: what was the opportunity cost of not deploying those co-investment funds as early as possible?

Another key HIP — the integration of business registration processes — has also seen a delay in going to market. In fact, this particular HIP is arguably even more valuable to small businesses because it was meant to integrate licensing applications from a host of agencies into one online portal ( The portal only went live in 2017, five years after the launch of the master plan.

“Although it took a while to launch, this was because of the sheer amount of time it took for SME Corp to compile and adequately digitise the licensing processes to ensure a seamless application experience. To give an example, a user should be able to run a keyword search for ‘F&B’ and be directed to a full list of licences that may be required for the business. In fact, this can be refined even further to the specific local council requirements which, of course, may differ between localities,” says Noor Azmi.

“Also, given the scale of this project, we have had to launch these functionalities in phases. Although it was only launched a few years ago, I am proud to say that to date, we have managed to capture roughly 70% of all licensing requirements for SMEs. Of course, we will want to increase that number to 100% as quickly as possible.”

To date, nearly 3,000 licences from 508 licensing authorities have been uploaded onto the portal. Integration work is ongoing and is expected to be fully completed by end-2020.

However, SME Corp scored a big win over the years with the execution of the masterplan’s second key thrust — creating a national technology commercialisation platform. This took the form of an entity known as PlaTCOM Ventures — a collaboration between SME Corp and Agensi Inovasi Malaysia — which was tasked with significantly improving Malaysia’s technology commercialisation and innovation capabilities.

Helmed by former CEO Dr Viraj Perera between 2014 and mid-2019, PlaTCOM Ventures successfully developed and deployed a national intellectual property rights trading platform to facilitate technology transfer between academia and industry. Indeed, between 2014 and 2019, the agency successfully facilitated some 220 IP deals, significantly outperforming its yearly targets in this regard.


A little bit of MaGIC

The Malaysian Global Innovation & Creativity Centre (MaGIC) was unveiled in late 2013, with former prime minister Datuk Seri Najib Razak making the announcement at the Global Entrepreneurship Summit in Malaysia. Cheryl Yeoh, a Malaysian with significant Silicon Valley experience, was tapped to be the agency’s first CEO.

Despite Yeoh’s impressive credentials and pioneering work in setting up the MaGIC Accelerator Programme (MAP), her tenure was shortlived. She parted ways with the agency after less than two years at the helm.

In April 2016, MaGIC appointed Ashran Ghazi as head of the agency. Like Yeoh, he too was a private sector veteran turned government agency leader. And like her, his tenure was also rather shortlived. He chose to step down after 2½ years at the helm in late November 2018.

MaGIC’s third CEO, Dzuleira Abu Bakar, was appointed in April last year. When asked about the leadership turnover, she says the leadership changes merely reflected the evolving priorities of the agency. “Yeoh had significant experience from Silicon Valley and she brought a lot of great knowledge into the Malaysian ecosystem. However, there was a growing need to expand MaGIC to the ‘masses’, so to speak.

“There was a need to focus on the non-technology companies. So, she stepped down. Ashran also had a very good understanding of the Malaysian ecosystem, and so he was perhaps more suited at that point to bring MaGIC to the wider local ecosystem.”

Ashran started an active push to support social enterprises, a strategy that Dzuleira has been doubling down on. In fact, MaGIC’s support of the budding social enterprise ecosystem has become an almost defining feature of the agency in recent years. It plays nicely into the broader MaGIC push to support start-ups that are not necessarily technology-oriented while allowing the agency to remain relevant and tap into the burgeoning demand for responsible capitalism.

The non-tech bend clearly resonated with the start-up community because in the relatively short span of time that MaGIC had been in operation, it attracted nearly 100,000 entrepreneurs to its flagship accelerator and other programmes. This volume comes at a cost, however.

According to Dzuleira, roughly 1,500 registered businesses have passed through MaGIC’s doors. Based on a rough estimate, she contends that each of these businesses could have up to five founders. This means about 7,000 entrepreneurs have gone through its various programmes and have formed registered business entities.

This leaves roughly 93,000 entrepreneurs unaccounted for. This is to say MaGIC conducted a host of programmes for these entrepreneurs and there is little to no indication as to whether any of them went on to set up businesses.

To be fair, it would not be realistic for the agency to track all 93,000 of these participants. But it could have extrapolated a preliminary “rate of founding” of start-ups by relying on its active and growing alumni network for relevant data. Thus far, the agency has not been able to do so.

According to Dzuleira, it boils down to a question of resources. “We do touch base with former participants via our alumni, but we do not have the capacity to follow-up on each and every person,” she says.

Right now, she does not envision the agency expanding beyond its core mandate as a capacity-building institution. Over the longer term, however, she does not discount the possibility of getting involved in the start-up funding scene.

That particular move does make sense. After all, Dzuleira is an experienced investor herself. She was previously CEO of Cradle Seed Ventures, an investment subsidiary of Cradle Fund, and had worked in a number of notable institutional investment companies.

“It is a discussion that we have been having internally. Having said that, I would not go so far as to say MaGIC may become an investor yet. We may evolve into providing support in the form of additional cash or grants to facilitate start-up growth, although we would be focused on social enterprises here.”

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