Entrepreneurship, and when academia loses the plot
By Gabey Goh January 7, 2014
- UTAR's entrepreneurship scheme is emblematic of the disconnect between academia and industry
- More practical partnerships need to be formed with private sector startup organisations and institutions of learning
I MUST first confess that this is a comment piece that I had wanted to write months ago, but never got around to it due to other demands on my time.
However, since we’re in the early throes of a brand new year, it seemed fitting to dust the cobwebs off this issue, and hopefully get some discussions going.
Sometime in mid-2013, a friend clued me in to the existence of something called the UTAR Young Entrepreneur Startup Scheme, with the unwieldy acronym UTARYESS.
In a nutshell, it is a scheme created by Universiti Tunku Abdul Rahman (UTAR) intended for students and would-be entrepreneurs to receive some money to get their ideas off the ground.
“That’s fantastic!” I exclaimed upon hearing about it. Alas, it turned out to be one of those situations where things only look good at first glance.
The UTARYESS (unfortunate acronym notwithstanding) is administered by the university’s Department of Consultancy and Commercialisation. On the department’s website outlining the details of the scheme, its objectives read as follows:
- To provide seed funds for UTAR students to start or expand business projects based on innovative and practical ideas while still studying at the University.
- To promote and enhance innovative and enterprising culture among UTAR students such that new innovative ways of wealth generation can be created by students utilising the experience, education and training received at the University.
- To enhance business skills and good practices among UTAR students through actual experience of setting up and running businesses.
That’s a great and noble list of objectives for a scheme, to be perfectly honest.
“Oh wow, wish my university offered something like this,” a still-studying entrepreneurial friend of mine replied when I asked if he had access to similar schemes.
But then I started digging into the details and things got a little weird, and not just because the maximum amount offered by the scheme is a mere RM10,000 (about US$3,000).
Firstly, to apply for scheme, students must provide a comprehensive business plan that rivals what a bank or venture firm would expect.
Most notable out of the entire to-do list, is a payback plan students must provide, which must outline how applicants intend to pay the university back for the money and when, inclusive of a yearly administrative fee of RM100. [Click here to view the guidelines PDF document]
Not to mention that successful applicants must give UTAR Education Foundation a 3% share of the company formed to run the business.
If your brow is furrowed right now thinking about the details of the scheme I’ve just shared, trust me, you are not alone.
To make sure I wasn’t being unrealistic or crazy, I asked Dhakshinamoorthy Balakrishnan, president of the Technopreneurs Association of Malaysia (TeAM), to take a look at what UTAR was offering and share his thoughts.
Dhakshinamoorthy, better known as ‘Dash’, noted that at the outset UTARYESS appears to be “the catalyst of entrepreneurship and venture creation” at a university level.
“It is an innovative idea by itself – making seed funding available to students for their projects that are ‘practical and innovative’. But as I read the application forms and the requirements, I was only getting more and more disappointed,” he said.
The first bit of confusion lies in what exactly UTARYESS is. Is it a grant? A loan?
If it’s a grant or seed fund, then why the need to pay it back in its entirety, plus fees? If it is a loan, then RM10,000 is a paltry sum for the amount of paperwork and hoops the applicants would need to jump through to be granted the money – students would be better off heading directly to the banks.
The second bit of confusion is how this could be seen, in any way, as an attractive package for interested and enterprising students.
Dash pointed out that universities need not urge students to incorporate companies, as required by the guidelines stated in UTARYESS.
As he explained, incorporating a 'Sdn Bhd' or private limited company may cost up to RM2,000, and the student would need to find another person to be a director of the company. The Companies Act requires one to understand the duties of directors and other compliance procedures, such as filing annual returns, etc.
“They need to appoint a company secretary and an auditor to maintain the company. Even a dormant Sdn Bhd costs about RM500 at the minimum to maintain annually.
"Assuming the student incorporates a sole-proprietorship, it costs around RM55 or so. But eventually the sole proprietorship needs to be converted into a Sdn Bhd if the student is keen on getting further funding,” he added.
Indeed, when I was first told about the scheme, I asked my UTAR friend and he shared that no-one had applied for it since its launch in early 2013. Actually, that’s a fact that gives me some hope with the general savvy-ness of our future graduates in facing the real world.
“Where is the risk for the university? How will this spur the enterprise culture? If you want the students to launch ventures, you take 3% and then expect to get all the money back, and then the students are further burdened to worry about paying back. How will they take risks?” said Dash.
These are some very good questions to ask and I reached out to UTAR to get more information and clarification on UTARYESS. However, despite repeated emails, answers were not forthcoming, so the views expressed in this article are based purely on the information that UTAR has shared publically.
Now, I don’t bring up UTARYESS just to play the 'name and shame' game. I bring this up because to me, this scheme symbolises and exemplifies the disconnect between academia and industry that has long plagued the country.
DNA has highlighted this topic in past articles, with distrust between parties being cited as one of the main reasons behind this disconnect.
It says it all when asked about the poor returns from the country’s efforts to get its public universities to commercialise their research and development (R&D), Dr Mohd Irwan Serigar Abdullah, Secretary-General of the Ministry of Finance, said only this: “I could cry.”
Maybe we really should be taking some lessons from our neighbours down south. I spent some time at TechVentures in Singapore last year, checking out the various booths, and over half the exhibitors present were active startups initially formed as a commercial spin-off from tertiary research programmes.
For education institutions seeking to start building these bridges between theory and commerce, a question of role must first be asked.
On one hand, a formal education is meant to prepare young people for facing the realities of the working world as we know it, and the replication of the multitude of hoops and paperwork required to grab the slightest amount of funding could perhaps be construed as a test-run for this.
On the other hand, institutions of learning have a responsibility to not just educate and inspire, but to also enable. How are you enabling your students to take risks and aim for the stars when an internal programme offers potentially more headaches than an external bank loan?
Dash said that he would urge universities to move away from ‘number of companies incorporated’ as their KPI (key performance indicator) to show how venturesome their students are; and instead to the number of creative, innovative and sustainable projects launched.
In his view, projects have a short time frame, are designed for students to learn about venture creation, about solving real problems, and also all about customer validation. Universities can easily fund such projects (up to RM5,000 or even RM10,000) to see them through with minimal strings attached.
“To get this funding, students can be put through a rigorous process of pitching, providing a solid business case, not business plan, customer validation, etc. This, in my view, will inspire more university entrepreneurs," said Dash.
“The university can play the role of a middle-man: getting rich patrons from the community to invest small sums of money in their ‘foundations for entrepreneur creation,’ and then inviting these patrons to come in to adopt some projects and play mentor or connector,” he added.
To Dash, this is how universities can become true catalysts for enterprise creation. And I have to agree with him.
If colleges and universities truly want to be able to offer their students solid options within the realm of entrepreneurship, I urge them to reach out, not just to engage but also to actively form deep private sector partnerships -- not just to gain from the insight and experience these entities have in the startup world, but also to offer students a connecting pathway after graduation to embark on realising their own entreprenuerial dreams.
Malaysia’s landscape is already populated with many startup organisations, associations, incubators and accelerators seeking higher participation from the ranks of tertiary institutions nationwide.
And I know for a fact they would love to sit down and have a talk with you.
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