SC: A lot more needs to be done to establish Malaysia as a startup hub

KUALA LUMPUR: The startup industry in Malaysia has seen positive developments but more needs to be done to establish the country as a startup hub, the Securities Commission (SC) Malaysia said.

Chairman Datuk Seri Awang Adek Hussin said deepening the pool of capital as well as encouraging Malaysia’s investor community to invest in the startup ecosystem are two critical areas moving forward to establish the country as a startup hub.

He said that small and medium enterprises (SMEs), as well as startups, play an important role in driving activities at the national and state levels as they contribute half of the country’s gross domestic product (GDP). .

“Given the importance of SMEs in the economy, it is very important to address the supply-demand gap for financing these businesses,” he said at the launch of the Dana Penjana Selangor in conjunction with the Corporate VentureCapital (CVC) program today.

He said capital market financing provided a practical solution by allowing SMEs to raise funds in a flexible and creative way.

“This will make it easier for them to grow and contribute more to the real economy as well as potentially go for listing on the stock exchange,” he said.

On the financing supply side, Awang Adek said that SMEs have difficulty accessing sustainable funding for their business where traditional bank loans may also have limitations in meeting their needs. in financing.

“On the demand side (of financing), SMEs, especially startups, often face higher risks and lower survival rates than larger companies.

“This leads to a pattern of high entry and exit rates in various sectors of the economy, causing financial institutions to view them as riskier loan prospects,” he said, adding that the this dynamic has further hindered SMEs’ access to financing.

He said the capital market can foster investor confidence and attract more capital to stimulate SME growth by emphasizing governance, transparency, disclosure and investor interest.

“The government should be credited for its commitment to build the Malaysian startup ecosystem,” he said.

He said the revised Budget 2023 featured several initiatives aimed at supporting businesses, particularly micro, small and medium enterprises (MSME).

“Among others, RM40 billion is allocated to MSMEs for financing as well as guarantees by government agencies,” he said.

However, he said that funding gaps in terms of fundraising still exist where startups struggle, especially in the later stages of funding, a situation referred to as “Death Valley” in the industry. venture capital (VC) due to lack of funds.

“This is where matching fund programs have proven effective in attracting private investors to Malaysia,” he said.

He said this approach struck the right balance between optimizing public spending and squeezing private capital into the ecosystem.

“Furthermore, these programs serve as community builders as well as a bridge between Malaysian startups and the global investor community,” he said.

He said Dana Penjana Nasional, managed by Penjana Kapital Sdn Bhd (PKSB), is a notable example that used the expertise and networks of both local and global VC managers to effectively identify and support promising startups. .

“I am happy to see that this model is being replicated at the state level. The launch of Dana Penjana Selangor shows the state government’s commitment to fostering a thriving startup ecosystem,” he said.

He said this should complement existing programs to support and nurture tech startups, paving the way for both Selangor and Malaysia’s economy to become centers of innovation and entrepreneurship.

Awang Adek said there is also increasing interest from various states such as Selangor, Penang and Sarawak to help startups and SMEs through capital market financing.

He said the SC is also committed to overseeing a comprehensive “funding escalator” to give startups more funding options throughout their growth lifecycle.

ÔÇťOther SC measures include opening registration for new equity crowdfunding (ECF) and peer-to-peer (P2P) market operators, including for those offering Shariah-compliant solutions.

“The SC also introduced the DIGID fund with the aim of jointly funding innovative projects that use technology, advancing the digital agenda for the Malaysian capital market,” he added. –Named

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