Lessons for young startup entrepreneur

I had the fortune to be invited to a number of entrepreneurship events happening around the Ministry of Finance’s Global Entrepreneurship Summit (GES) recently. Ranging from a CRADLE sponsored Ideas 2 Invest hackathon (i2i), to Startup Malaysia’s Global Startup Youth (GSY), to MSC’s premier pitching event, InnoTech, to gather the regions top investors around Malaysia’s top startups. The inspiring energy across the whole week with attendees from 105 countries was unlike anything I’ve seen before in the region.

I’ve been in the region since 2010, when my wife and I set out to explore Asia by backpack. Instead of just touring the region’s amazing sights, we also set out to meet Asia’s tech scene. I met over 80 startups, including over a dozen teams in Kuala Lumpur, and they all iterated the same problem, they couldn’t raise money.

I saw that as an opportunity.

In the past three years I co-founded a micro VC fund, managing a portfolio of over USD$10M, all of it focused on early stage startups in Southeast Asia. The startup ecosystem in this region is rapidly changing, but more needs to be done in order to encourage entrepreneurship and build an environment of sharing. Openness, transparency, and community support have been the pillars supporting innovation in Silicon Valley.

Even at a international renown event like GES where forward thinking young entrepreneurs from all over the world came together to inspire the next generation of risk takers in the region, I continually heard: “How do I prevent someone (or some company) from copying my idea?”

This is a clear signal that not enough young people in Malaysia are taking risks. If entrepreneurs are continually focused on competitors rather than the product or the market, they are headed in the wrong direction. A successful entrepreneur needs to push forward in into a market, uninhibited by fears of competition and all that can hold them back. It’s all about execution. Investors don’t invest in ideas, we invest in people. Rarely, do I come across an idea that is truly novel and new. They are iterations of features, customer segments, marketing channels, business models, etc. Competition is generally a good thing, as it validates the market need for investors.

The topic of failure also came up often. On the panel “The Emerging Market Startup Scene”, Rebeca Hwang of YouNoodle commented "In Silicon Valley, it's not so much about loving failing, failing sucks, it's about moving on to next steps." She’s correct.

‘Failure’ has a negative connotation anywhere in the world, but it’s an inevitable part of entrepreneurship. Changing the vocabulary in which we speak about failure can make it appear less threatening. The dialogue in Asia should be to encourage serial entrepreneurship and risk taking. Silicon Valley is driven by entrepreneurs motivated by the thrill of risk, they jump head first into tackling what seem like insurmountable problems — one reason that the valley skews towards young entrepreneurs. Young people are less averse to risk and generally more optimistic about outcomes.

It’s not just entrepreneurs in Malaysia that need to take more risks, it’s the investors as well.

A seed or early-stage technology investor (angels or venture capitalists) should not look to take majority control of a company. If they do, they are removing the ability for the founders to take large risks. And without the ability to take risks, a venture backed company is set for failure. Venture investment is not about reducing risks through taking control, it’s about investing in high risk, knowing very well that a small portion of their portfolio will fail to make a return.

Malaysia has a fabulous example of this entrepreneurial behavior in Tony Fernandez. Revealing the story of how he put it all on the line to get AirAsia started, using up his personal savings and mortgaging his house. A risk taker, that put it all on the line, he went on to say that “Passion takes you a long, long, way!” And he also attributes AirAsia’s success to timing in the market. Timing is a critical factor for entrepreneurs and is what separates a success from a failure - either too early to the market as INSEAD Professor W. Chan Kim pointed out in his GES keynote with Napster’s inability to commercialize. Or too late to catch up to the first movers, like Sega’s Dreamcast launch in the shadows of Sony’s PS2.

There are some young teams in Malaysia who are following Tony’s lead. I had the chance to meet a few of them at MSC’s InnoTech event. Like Piktochart, who is bucking the trend of local startups having difficulty competing globally. They are killing it with global customer growth. Other examples of Malaysian entrepreneurs that are dreaming big and tackling large business problems in very competitive markets include Flexiroam (taking on big telcos) and SRI (recycling rubber to global customers).

The government, through CRADLE and MAVCAP, have announced a number of financial programs to help mature the ecosystem. This is great and sets Malaysia apart from many of its neighbors, but more bottom-up support is required. To further encourage entrepreneurship, the community and private investors must come together to support the ecosystem. Community driven co-working spaces are a great way to bring young entrepreneurs together and encourage sharing. Government programs should support greater openness to multicultural founders that bring different perspectives and access to new markets. And entrepreneurs should embrace global accelerators networks, like the Founder Institute, JFDI.asia, and 500 Startups (aka 500 Durians).

Private investors can do their part, by taking more risks with smaller investments (and less equity). While there are great tax incentives for being an angel investor in Malaysia, angel investment should not be solely driven by financial interest. Ecosystem building is important for all of our successes. A great way for an Angel investor to invest in the ecosystem, is to donate their time and start mentoring and advising the next generations of entrepreneurs.

I believe in the generation of entrepreneurs bubbling up in the Malaysian ecosystem and I’m driven on helping this grow. In order to support a multi-million dollar exit, and encourage more international investment, we need to keep this entrepreneurial momentum going by taking more risks. Sometimes you just have to jump for the net to appear.