THERE is a surprising way of finding out whether the startup scene is thriving in an area: You walk through the cafes. If you keep hearing about different ideas being pitched over coffee and tea, then it is safe to say that the startup environment there is vibrant.

This is a long known secret in Silicon Valley, the global nerve of tech and innovation. Many websites online have lists of the top hangout spots of tech founders; travellers even go to cafes for venture  capitalist-spotting when they visit San Francisco, with one spacious Starbucks standing out more than the others.

At the heart of it, a vibrant and successful startup hub is one of high flow: High flow of people (connected community), high flow of ideas (talent and knowledge), and high flow of deals (funding). In Silicon Valley, flow is so high that it is part of the social fabric. It is no longer unusual or strange to create a startup; ideas are not immediately shut down because they have seen unassuming persons become millionaires overnight; while other places treat startup founders as unemployed anomalies, at startup hubs, they are fashionable.


Startup hubs thrive on the flow of people, ideas, and deals

When the flow of people, ideas, and deals are high, chance meetings and collaborations are more likely to
happen. And in a high-risk, high-reward venture like startups, that could be the difference between letting go of an idea and trying it; between building a startup and scaling up to a larger market.

That is the fundamental philosophy behind the upcoming launch of KL as a regional startup hub. The  positive correlation between startup hubs and economic growth has long been established: Higher
productivity, income, exports, skills, and well-paying jobs. In Malaysia, this is essential to address the
structural problems that have become trite. Not only will this spur a series of talent building and venture
creation, but it will also change the profile of our stock market that has been associated with traditional
businesses, reflecting more of our history than providing an exciting view of the future.

Though the share of high-performing Asian startup ecosystems have risen in the past few years, Malaysian cities are not within the top 40 in the world. That meant that, despite the record amounts of tech venture funding in Asia ($87.4 billion in 2021), we were not able to take a sizable share of them. Among others, we ranked low on market reach and talent and experience, besides registering below-average scores on early-stage funding. Even though other regional partners, such as Ho Chi Minh, Bangkok, and Jakarta may not rank significantly higher, venture capitalists rush to those exciting cities, often overlooking Malaysia. In particular, Silicon Valley talents and Vietnam’s overseas graduates are going to Ho Chi Minh in a big way.

There is no reason why we couldn’t compete as Kuala Lumpur has all the trappings for being an exciting
regional startup hub. Our strategic location at the heart of Southeast Asia allows seamless access to the
largest markets of China, India, and ASEAN, which are all predicted to accelerate in population and income. Kuala Lumpur offers more than location, it also derives its longstanding kinship and history with these large economic blocs, that make Kuala Lumpur a fertile product testing ground that carries cultural nuances. Our youth population at the ripe startup founding ages (typically mid 20s to 30s) is also high; digital connectedness with good infrastructure also makes it easy for others to plug and play.

The government’s role is to enable the ecosystem to exist—for the flows of people, ideas, and deals to
happen—so that startup founders and entrepreneurs can do what they do best of pacing ahead with  creation, commercialisation, and acceleration with high velocity.

Among others, the Ministry of Economy will focus on 3 areas as enablers. One, on ideas flow, to resolve
the ‘wrong door syndrome’ by consolidating startup assistance under a single window approach. A startup founder should not spend time figuring out which agency is responsible for which part of the startup lifecycle; these assistance should be user-friendly and seamless, without connections and government knowledge being the deciding factor of whether a good idea takes off.

Two, on people flow, to create a talent pipeline without strict consideration of background: Nationality,  pedigree or creed. That means making talent visas easier to obtain and providing ample incentives to upskill and reskill at scale. Three, on deals flow, to promote and market ourselves internationally as the  regional startup hub to investors looking to break into the ASEAN, China, and India blocs.


Meeting with venture capitalist and ex-PayPal, Jack Selby

During my recent trip to the Qatar Economic Forum, I met with Jack Selby, the Managing Director of Thiel Capital, who were among the founding employees of the wildly successful PayPal, that produced Silicon Valley giants such as Tesla, LinkedIn, SpaceX, YouTube, Yelp, and others. We talked about the promise of Kuala Lumpur, and how his expertise in PayPal, venture capital, and building Arizona into a startup hub would deeply benefit us. It was evident in our conversation that Kuala Lumpur stands a real chance to be a serious regional startup hub, with high flow, and high growth.

Where Malaysian startups suffer the most now is at the early stage between minimum viable product and
mass market adoption, sometimes called the ‘chasm’ or ‘valley of death’. Funding at the angel and seed
level is significantly lower than global averages, and this has resulted in a small pool problem, where not
enough ideas and startups are commercially tested to know which one will make it big.

More than money, a hub environment is essential in crossing the chasm. It takes chance meetings and
collaborations; running into a domain expert who did something similar, a well-connected raven who
knows the right investors, or a researcher who studies future trends and tells you where to redirect your
product. In other words, we need a higher flow of people, ideas, and deals.

A startup hub with high flow must have a tolerance for differences and strangeness, with an understanding that diversity is a strength. The acceptance of others and the ease of belonging in a peaceful setting has been a central character that defined Malaysia.

Creating a startup hub in the metropolis of Kuala Lumpur is, therefore, simply playing to our oldest strength. In the weeks to come, the government will announce a series of initiatives to invigorate the startup environment. So that Kuala Lumpur becomes, once again, a place of opportunity and optimism.


Rafizi Ramli is the Minister of Economy.

** The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the position of Astro AWANI.