In the recent report on Southeast Asia Tech Investment that we collaborated with Cento Ventures on, Malaysia is again highlighted as the country which has hitherto delivered the best return on investment for tech investors. 

Of course, part of the reason is that the tech ecosystem there really started early, while most of the investments into Indonesia and Vietnam are still relatively recent. However, there are some merits with Malaysia which are worth a more detailed look. 

As you may have seen in Momentum Works’ latest Industry Enablers in Southeast Asia report, over the years Malaysia has done a good job of improving the internal economy:

Malaysia’s GDP per capita ranks 2nd within the SEA region.

Another remarkable fact is that Malaysia has the highest percentage of households with possession of digital devices, even higher than Singapore. While generally that’s a good indicator of tech penetration in a country, it also points to a society that spends a bulk of their disposable income on gadgets – which can be a good/bad thing (the newest iPhone costs around 2 months of an average Malaysian monthly salary). However, having access to these devices and skills/education should translate into an increase in disposable income per household over time. 

The combination of these factors make Malaysia a bridge between Singapore (which is far ahead in terms of development; not food) and the rest of Southeast Asia, making it a good country to test business models for the region. 

Laptop possession vs Apps developed per person index in 2018

Additionally, in the uncertain geopolitical context of 2020, Malaysia has improved its regulatory component related to property rights, generating clear rules and laws that provide protection to owners. 

This implies that investors should have clearer incentives to participate in economic activities in the country and feel safer from potential expropriations that may occur by a lack of clear rules. 

Percentage of tariff rates on goods from 2002 to 2019 (simple average)

Regulations affecting infrastructure, connectivity, and human capital

Being Singapore´s bridge to the rest of Southeast Asia, Malaysia´s trade boundaries have been important to generate new channels of information and monetary flow across the countries. In other words, it has allowed different sectors to merge and cope with the new wave of businesses and opportunities ahead. 

Startups thriving in Malaysia

Albeit Malaysia has been encouraging startups, it is still somewhat far from the industry grands of Singapore, Indonesia, and Vietnam in the vibrancy and investments of the startup scene. 

All three countries have attracted a lot of foreign venture capital – with many companies growing their valuations in leaps and bounds. Malaysia is in a similar position as Thailand, where domestic capital and conglomerates power much of the early stage tech investment. 

While in the first wave of internet (PC-based), a number of good companies came out of Malaysia, in the mobile/smartphone age, it seems foreign investors place more focus on the demographics. Ultimately, with a population of 30+ million, Malaysia is as big as Jakarta Metropolitan area in Indonesia. 

However, the entrepreneurial spirit has not diminished. Neither has the talent/human capital nor infrastructure readiness. Malaysian entrepreneurs tend to be quieter and more hands on compared to their Indonesian or Singaporean counterparts. Many entrepreneurs in Malaysia are fluent in English, Chinese and Malay/Indonesian languages, putting them in a very nice place to tap into capital, market and expertise. 

iPrice: Saving us dollars and cents where it matters

Kuala Lumpur based eCommerce aggregator iPrice is no stranger in the region. Starting out as a voucher and coupon site in 2014, iPrice has grown to be one of the more prominent names in the eCommerce space by ultimately pivoting its business model to help consumers compare online product prices on their platform. 

In a country with a huge adoption of online shopping with the likes of eCommerce giants like Lazada and Shopee, iPrice appeals to the kiasu spirit in all of us by not only helping consumers save money by getting the best deals but also ensure that the listings are genuine and credible (the last thing you want is a dirt cheap Rolex delivered from Petaling Street). iPrice raised $10 million in their Series B earlier this year, always a healthy sign of growth. 

Dropee: Innovating the B2B scene

We wrote a piece on Dropee not too long ago on how they are slowly disrupting the age-old retail wholesale environment (especially in a country like Malaysia where processes are still very much offline and traditional). Co-founder and CEO Lennise Ng started the platform when she was trying to start her own F&B business but found it extremely difficult to get visibility on the best prices of wholesale goods. 

Dropee is now a SaaS tool that not only helps connect suppliers and retail buyers; but also aids and digitizes B2B businesses. 


Carsome: Making used-car trading easier

Carsome brings car owners and used-car dealers together on one platform. It is an online marketplace that allows users to bid and sell pre-owned cars. As supposed to approaching the car selling experience as usual (getting their car evaluated, visiting local dealers individually, and negotiating selling price), Carsome is the one-stop-shop for all those processes. An inspection happens in-house and bids occur through the platform as well as the paperwork.

Amidst the Covid-19 pandemic, the platform has been reshaping and elevating the used car buying experience by introducing a transparent, digitized process. They recently released a Consumer Survey Report, which shows that there is an increase in demand for online transactions for automotive-related services across three countries (Malaysia, Thailand, and Indonesia).

Also, we have a complimentary report on Southeast Asia’s Used Car Platforms where we take a deeper dive into the scene. 

Amazin’graze: A solution to a Malaysian’s favourite pastime, snacking

Known for its range of granola and nut mixes and featuring local ingredients, Amazin´graze was founded back in 2015. This idea emerged from the lack of healthy food options, where Amy, Ching, and Sabrina built it to provide healthier food. Their focus aims to tackle obesity/health problems in Malaysia.

Their products can be found at more than 200 retailers located in Malaysia, Singapore, and Hong Kong. Not content to rest on their laurels, Amazin’graze aims to become an Asian healthy snack with a global reach.

Fashion valet: Malaysian e-commerce pioneers

On the e-commerce side, FashionValet is catering to the growth of fashion trends in SEA. Passionate for online fashion, the founders realized e-commerce was pretty much non-existent within the fashion industry back in 2010. Vivy Yusof (Malaysian blogger) and her husband had the idea to create what has grown to become Southeast Asia’s premier online destination for Asian brands selling fashion apparel, shoes, and accessories.

Through meeting several venture capitalists (VC’s) and financial institutions, they managed to raise capital and grow. Despite conservative attitudes initially  (towards e-commerce) they managed to find one VC that Vivy claims were a perfect match to their vision.

Malaysia’s landscape for VC

As mentioned earlier, we believe Malaysia is a very good testing ground for regional startups. Grab, now headquartered in Singapore, initially started in Malaysia; many of the first generation web companies (iCarAsia, Mudah, etc.) were created in Malaysia too. 

The are challenges here though: VC activities in Malaysia (especially foreign VCs) are not as vibrant as in Singapore or Indonesia; many naturally bypass Malaysia because of its relatively small population; and a lot of young Malaysians would rather work in Australia than venture into Indonesia. 

Moving forwards, foreign VCs might also have a role, so there should be a synergy between the regional and foreign VCs for a more unified approach. The growth potential within several good companies is huge, and there is no reason to believe they won’t become the next regional leaders.

Numerous good companies in Malaysia have tremendous growth potential. They can easily become regional leaders by starting well in the country and capturing the markets of Singapore, Indonesia, Thailand, and other countries in Southeast Asia.

This will not be an easy journey, and the founders need to prove they are up to the task. Nonetheless, they have many good advantages, as described above, to make it happen.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].