The journey of a tech startup in Malaysia is fraught with challenges. Lack of participation or investment from the private sector. Low commercialisation rate post-R&D stage. Regulatory red tape. A high dependency on foreign talent for high-tech solutions.
These are common challenges that have been made even more pronounced at the wake of the Covid-19 pandemic and the resulting movement control order (MCO). It’s a hurdle that has already caused some to stumble. According to a survey by the Malaysian Global Innovation & Creativity Centre (MaGIC), 17 out of 168 startups in the country have ceased operation. These are startups in consulting, services, lifestyle, fashion, events, marketing and advertising industries.
To top it off, the survey found that 61% of startups faced more than 50% decline in revenue due to the MCO. However, 74% of startups have benefited from various government incentives, with aids like wage subsidies and grants having a direct impact on the cash flow of startups.
It’s no surprise, then, that 56.1% of startups want more grants, while 14.2% wish for more loans and 13.2% would prefer wage subsidies.
With this as the background, MaGIC CEO Dzuleira Abu Bakar (pic), cites two critical factors to survival and recovery for startups. The first is the ability to manage working capital (things like cash flow and reserves) as well as access to loans, grants and subsidies. Following that will be the ability to pivot business models quickly – to adapt to new challenges and converting them to opportunities.
It’s not something startups will be able to handle alone. “Jumpstarting this requires a concerted effort from all stakeholders: government, agencies, the private sector, and even the community-at-large, where problems can be connected to the solutions,” says Dzuileira.
“We need to build relationships and connect with other ecosystem players to make this work.”
Encouraging public-private partnerships
The nexus of this ecosystem connection can be found in the National Technology and Innovation Sandbox (NTIS), which has been introduced by the Malaysian government as part of the PENJANA short-term economy recovery plan.
The NTIS has US$24.1 milllion (RM100 million) in funding to fast track the commercialisation of projects – an important boost, considering the lack of investors and the challenges that lie ahead post-Covid.
But the NTIS isn’t merely a shot in the arm to help startups overcome the Covid-19 hurdle. While it does have funding schemes that include a maximum of RM250,000 (in full grant) for single-site sandbox solutions; a max RM500,000 for multiple site sandbox solutions (in 70% partial grant); and RM4 million in the form of a hybrid fund, a standout feature of the NTIS is the fact that it also includes a max allocation of RM15 million as a matching fund with investors and corporate companies.
[RM1 = US$0.24]
Essentially, the NTIS is powered by public-private sector partnerships, with the aim to foster more collaboration that mutually benefits one another within the ecosystem. Collaboration sits at the core of the Sandbox, as it is an effort by multiple entities spearheaded by the Ministry of Science, Technology and Innovation (Mosti).
MaGIC serves as the lead secretariat alongside Mimos and TPM (Technology Park Malaysia) serving to identify new solutions, with Futurise handling the regulatory components of the Sandbox and the Malaysian Technology Development Corporation (MTDC) being the main funding partner.
It’s important to note that the NTIS doesn’t just benefit SMEs and startups, but corporations as well. “As NTIS’ funding partner, MTDC will fund any eligible company that is accepted into the sandbox be it startups, SMEs or university spin-off companies,” elaborates MTDC CEO Norhalim Yunus.
“In addition, via the corporate sandbox scheme, large corporate companies will also benefit from being able to sandbox technologies which address their specific needs or problems.”
The only key requirement, Norhalim says, is that companies (at any stage) have to have their technology sandboxed at Technology Readiness Level (TRL) 6 and above, and that their sandbox proposal must focus on a specific innovation problem or regulatory issue that the sandbox is striving to address.
In good hands
MTDC is on familiar grounds – they have implemented a sandbox approach in their previous programmes such as the Commercialisation of Research & Development Fund (CRDF) and their Symbiosis programme. NTIS, Norhalim says, is a continuation of this approach.
“As the NTIS offers a more structured approach to sandboxing new technologies coupled with strong funding support from MTDC, we are expecting to see more local technology-based companies given assistance and facilitation to overcome any regulatory or market hurdles to achieve successful commercialisation,” he adds.
MTDC has also worked on clinical trial projects before, which is similar to sandboxing in that tests were done in a safe, controlled environment. “Also, we have had many projects which were conducted with the intention of validating an innovation or technology.” In short, startups are in good hands here.
Permodalan Nasional Berhad (PNB), one of the largest fund management companies in Malaysia, is another NTIS collaborator, and notes the positive impact the sandbox has had.
“PNB supports major initiatives that have the ‘Rakyat’ in mind. Innovations coming out from NTIS are expected to touch every Malaysian in general and will give a positive impact given the support from the Government,” says PNB chief technology officer Muzzaffar Othman.
“PNB is also open for home-bred innovation that can be adopted at our investee companies. Innovation leads to value creation for any organisation if adopted and implemented right.”
Working with NTIS fits PNB’s mandate, which is of wealth creation and wealth distribution for Malaysians in general. The sandbox, Muzzaffar says, is to act as a catalyst to recover and resuscitate our economy and to accelerate innovation. “The end game is very much aligned to our overall mission.”
Collaboration and innovation
Muzzaffar acknowledges that there may be challenges in this collaboration. “First, innovation adoption rate may be slower than expected due to the state of readiness of an organisation. Depending on the target organisation maturity level, results may vary,” he points out.
“It is therefore important for the innovation to be matched to an appropriate organisation that has the right policies, processes and competency in place. Talent is scarce, especially in the fintech space. More work needs to be done to increase the talent pool for the country to move the agenda forward.”
Norhalim opines that the regulatory sandbox will require more effort to ensure that all stakeholders are in sync. “However this is one of the objectives of NTIS and we are confident that as we proceed together the process will be smoother.”
And things have been proceeding with results. There are already some NTIS pilot projects such as FARMO (Farm Assist Robot for Multi Operation), which are multi-terrain robots meant to automate the deployment of pesticides and fertilisers. FARMO has managed to reduce pesticide volume by 20%, while reducing turnaround time 50%.
NTIS also saw the creation of MCK19 (Mak Cik Kiah 19), food delivery and disinfectant robots deployed to help the country battle the pandemic. MCK19 was able to reduce up to 3 hospital workers per robot, helping lower risks of frontliners and allowing resources to be deployed at more vital areas.
It’s a sign that collaboration between ecosystem players and agencies can produce innovative and impactful solutions. There are other channels for more meaningful relationships to form – from 20 to 23 October, MaGIC will be hosting its flagship E-Nation annual conference, to connect tech startups, social enterprises and innovators with investors, corporate innovators and technology partners. This year’s theme will be “Propelling a Resilient Economy”, owing to current times.
But startups can begin with looking into the NTIS as a means to get back on track. In times like these, innovation is more crucial than ever.
“Covid-19 has accelerated the need for innovation and created game-changing opportunities for the nation to bounce back and establish economic resilience via innovation and creativity,” concludes Dzuleira.