Digital hubs, MTEP mark expansion of MDEC support to startup ecosystem

By Karamjit Singh September 28, 2017

Objective to enhance vibrancy, deepen connections between various players
Facilitating programmes around technology, training and market access

Norhizam Kadir, vice president, Growth Ecosystem Development, MDEC said some startups felt they were not getting enough support from MDEC as they were trying to grow from startups to scaleups.

THE seeds to the eventual twin launch in April of the Malaysia Digital Hub and Malaysia Tech Entrepreneur Programme (MTEP) were laid during a discussion last year at APW, a creative industrial space, in Kuala Lumpur.

Initiated by Malaysia Digital Economy Corporation (MDEC) the national ICT custodian of Malaysia, with a few startups, the intention was to listen and see what else MDEC could do to support the tech ecosystem.

The outcome was somewhat surprising. Despite all the activities going on in the startup ecosystem in Malaysia, especially in the Klang Valley, there was a gap. “The startups felt that those of them who were trying to grow from startups to scaleups were not getting enough support to make the step up,” says Norhizam Kadir, vice president, Growth Ecosystem Development, MDEC.

Enter the Malaysia Digital Hub, which is anchored around coworking spaces, aiming to build on their community spirit to create a stronger ecosystem for startups to thrive and grow. Three coworking spaces that demonstrated their community spirit, The Co, APW and Common Ground, were selected as digital hubs in the beginning with a fourth, WORQ, added recently. Discussions are ongoing with other coworking operators and ecosystem players, including in Penang and Johor to appoint more such digital hubs.

The decision to appoint coworking spaces as digital hubs instead of creating them from scratch was an easy one for MDEC. It revolved around a key want of startups – a vibrant ecosystem. MDEC is not just looking at coworking spaces to be certified as digital hubs but has started with them as they already have the community element.

“For MDEC, we want to further enrich the ecosystem at these coworking spaces, with startups supporting and learning from each other, interacting with VCs and collaborating with global tech companies, all with the steady buzz of ecosystem activities around them,” explains Norhizam. Enhancing that buzz, MDEC also creates programmes around technology, training and market access at the digital hubs.

Norhizam draws a parallel between the digital hubs and the cybercentres and cybercities that MDEC has been supporting over the past decade. “We have been promoting them but you know there are stringent infrastructure requirements, 24x7 reliability and other services that have to be delivered to qualify for the MSC Status for these locations which tend to cater for the needs of larger companies.”

But startups have different needs, with a vibrant supportive ecosystem being the “infrastructure” they need, notes Norhizam. Where, if the broadband in the office is not up to mark, they will just head to the nearest café/coffee place for the WiFi, or, with the generous data packages of today, just use their own mobile as a hotspot.

Working with global tech partners is also helpful and here Norhizam points out that it carries more heft when MDEC is the one initiating such opportunities, especially for longer term collaboration. For instance it has brought Alibaba together with WORQ, where the cloud computing arm of the e-commerce giant is launching its development and training programmes for its cloud services and generally working to deepen its reach into the market.

Meanwhile Common Ground is working with Amazon Web Services while APW, with its strong focus on creativity based activities and entrepreneurs has Microsoft’s Holo Lens Development Centre setting up there.

Describing MDEC’s role as being that of a facilitator for the digital hubs, the agency works with them to bring in activities that match the composition of each hub. One goal is to bring in more corporate partners to engage with the hubs.

Market access key part of facilitation role

A key part of its facilitation role, one that cuts across the composition of the digital hubs, is its market access role for the hungry startups. MDEC is using the partnership approach here to ensure startups have a better chance of breaking into new markets.

For Indonesia, it has partnered with a venture builder called, Kejora Capital, and has already run a successful pilot programme with three startups.

A one month programme, the startups spent the first two weeks in Malaysia with Kejora getting to know the companies much better in order to be able connect them to the right partners when they came over to Jakarta. This was done via video conferencing and phone calls. Each of the companies had a customized itinerary when they went over to Jakarta recently for two weeks, with Kejora connecting them to relevant VCs and suitable partners.

Norhizam takes pains to highlight that a lot of curation is involved in the process. After all, with MDEC focused here on helping startups scale up, it needs to ensure the startups are ready for market expansion so that the on ground partners in the various countries can make the right connections.

This meticulous approach leads to the startups having a higher chance of being successful in their market expansion. One of the startups on the inaugural Indonesian trip managed to land a partnership with a government body, a fact that Norhizam highlights with a certain amount of pride. “I think this extra bit of facilitation we do, works.”

Meanwhile, in terms of funding, despite the fair amount of activity already happening, MDEC is working to help scaleups reach investors especially at the Series A level. “It is actually not that easy for startups at this level to reach the VCs. Try going to a major conference and the VCs will be in back to back meetings and it will be hard for you engage with them meaningfully,” he says.

Again, as with market access, MDEC will assess the scaleups on their readiness and then connect them to relevant VCs. A team within Norhizam’s Growth Ecosystem Development division will do the assessment. “The challenge is, how do we bring these VCs to Malaysia to look at the deal flows here beyond attending demo days,” he said, believing there to be huge room for improvement in this space.

The feedback from VCs on MDEC’s efforts here has been positive, says Norhizam.

Over 100 applications for MTEP

Meanwhile, the feedback and response to the Malaysian Tech Entrepreneur Programme has also been positive with more than 100 applications received with around 20 approved. “Entrepreneurs are telling us that MTEP is a strong product to attract talent. To us, it is a message to startups around the world that Malaysia is opening up at a time when some countries are closing access to global talent,” says Norhizam.

This opening up includes welcoming entrepreneurs who have no degree, no funding not even a local sponsor but they have an idea they want to pursue. “We want those with ideas to come and try to bring them to fruitation in our ecosystem, and the one year professional pass is their entry into our ecosystem and this is why they have to be attached to a digital hub,” explains Norhizam. Issuing of this one year pass is dependent on the MTEP assessment committee believing that the applicants will enhance the startup ecosystem.

MDEC’s hope is that over the one year period, the entrepreneurs can flesh out their ideas and incorporate a company.

There is also a second visa type issued under MTEP, the five year pass which is targeted at established entrepreneurs from around the world. “It is meant for entrepreneurs that are looking to expand into Southeast Asia and beyond with Malaysia ideally positioned to be the launchpad for their growth ambitions,” says Norhizam who explains that this pass is not just for entrepreneurs who want to expand. “You could be an established entrepreneur who wants to start a new business and this five year pass will be ideal for you,” he says.

With applications done online, the decision process takes two working weeks once an application is accepted for vetting.

Looking at both the introduction of the digital hubs and MTEP, Norhizam chooses to borrow a word from the startup world to describe MDEC’s actions. “It is a pivot for us. We are extending the benefits we have traditionally given to tech companies to be more inclusive for the startup ecosystem. This dovetails with our goals to make the ecosystem more condusive, more vibrant.”