Published on and written by Cyril Jarnias
Malaysia, a dynamic crossroads between Southeast Asia and the rest of the world, has established itself as a prime destination for bold entrepreneurs seeking opportunities. With its rapidly growing economy, political stability, and business-friendly environment, this tropical country offers fertile ground for creating and developing innovative startups. Let’s dive into Malaysia’s strengths and discover how to successfully launch your entrepreneurial project there.
A Thriving Ecosystem for Startups
Malaysia continuously reinvents itself to attract talent and investors from around the world. The Malaysian government has implemented a series of initiatives aimed at transforming the country into a leading technological and entrepreneurial hub in Southeast Asia.
An Expanding Economy
With robust and stable economic growth, Malaysia provides an environment conducive to innovation and entrepreneurship. The country has recorded an average GDP growth of 4.5% per year over the past five years, demonstrating its economic resilience and development potential.
State-of-the-Art Infrastructure
Malaysia boasts modern and well-developed infrastructure, essential for the success of tech startups. The country benefits from fast and reliable internet connectivity, with extensive 4G coverage and the gradual deployment of 5G. The ultramodern business centers in Kuala Lumpur and Cyberjaya offer workspaces tailored to the needs of innovative young companies.
A Pool of Skilled Talent
The Malaysian education system produces thousands of highly qualified graduates each year in technology, engineering, and business fields. Additionally, the immigration policy favorable to skilled workers allows startups to recruit international talent to complement their local teams.
Strong Government Support
The Malaysian government has established several programs and initiatives to support the startup ecosystem:
- Malaysia Digital Economy Corporation (MDEC): This government agency offers grants, mentorship programs, and networking opportunities for tech startups.
- Cradle Fund: This government investment fund provides startup funding and support services to promising Malaysian startups.
- Malaysia Tech Entrepreneur Programme (MTEP): This program facilitates visa acquisition for foreign entrepreneurs looking to establish their startups in Malaysia.
Good to Know:
Malaysia ranks 12th globally in the World Bank’s Doing Business 2020 report, reflecting the ease of doing business and the country’s attractiveness to entrepreneurs.
Legal Structures Suitable for Startups in Malaysia
Choosing the appropriate legal structure is a crucial step in creating your startup in Malaysia. The country offers several options, each with its advantages and specificities. Here are the main structures to consider:
Private Limited Company (Sdn Bhd)
This is the most common and recommended legal form for startups in Malaysia. The Sdn Bhd offers personal liability protection for shareholders and benefits from increased credibility with investors and business partners.
- Limited liability for shareholders
- Ease of share transfer
- Ability to secure larger funding
- Eligibility for various tax benefits and government grants
- At least one shareholder and one director
- Minimum capital of 1 MYR (Malaysian Ringgit)
- A local company secretary
- A registered address in Malaysia
Company Limited by Guarantee (CLG)
This structure is particularly suitable for social startups or non-profit organizations. It offers increased flexibility in terms of governance and profit distribution.
- Suitable for social enterprises and NGOs
- No share capital
- Ability to receive donations and grants
- At least one member
- A board of directors
- A local company secretary
- A registered address in Malaysia
Sole Proprietorship
This structure is suitable for individual entrepreneurs who want to test their concept before moving to a more formal structure. However, it does not offer personal liability protection.
- Simplicity in creation and management
- Low startup costs
- Full control over the business
- Unlimited personal liability
- Difficulty in obtaining significant funding
- Limited credibility with business partners
Limited Liability Partnership (LLP)
This hybrid structure combines the advantages of a limited liability company and a traditional partnership. It is particularly suitable for startups in professional services sectors.
- Limited liability for partners
- Flexibility in management and profit distribution
- Less administrative formalities than Sdn Bhd
- At least two partners
- A designated manager
- A registered address in Malaysia
Good to Know:
The Sdn Bhd structure is generally the most recommended for startups in Malaysia, as it offers the best balance between legal protection, credibility, and access to funding.
Funding Your Startup in Malaysia: Keys to Success
Funding is often the lifeblood for startups. Fortunately, Malaysia offers a diverse and dynamic funding ecosystem, enabling entrepreneurs to find the necessary resources to develop their innovative projects.
Government Grants
The Malaysian government offers several grant programs to support local and foreign startups:
- Cradle Investment Programme (CIP): Offers grants up to 500,000 MYR for tech startups in the early stages.
- Malaysia Digital Economy Corporation (MDEC) Global Acceleration and Innovation Network (GAIN): Provides grants and support to Malaysian startups seeking international expansion.
- Research and Development (R&D) funding program by the Ministry of Science, Technology and Innovation: Offers grants for innovative R&D projects.
Incubators and Accelerators
Malaysia has numerous incubators and accelerators that offer not only initial funding but also mentorship, workspace, and networking opportunities:
- MaGIC (Malaysian Global Innovation & Creativity Centre): A government accelerator offering funding and mentorship programs for high-potential startups.
- 1337 Ventures: A private accelerator that invests in early-stage tech startups and provides an intensive acceleration program.
- Cyberview Living Lab Accelerator: An acceleration program based in Cyberjaya, Malaysia’s Silicon Valley, focusing on startups in IoT, fintech, and robotics.
Venture Capital and Angel Investors
The venture capital ecosystem in Malaysia is rapidly expanding, with numerous local and international funds seeking investment opportunities:
- 500 Startups: An international venture capital fund that launched a dedicated Southeast Asia fund, with particular interest in Malaysia.
- Gobi Partners: A pan-Asian venture capital fund with a strong presence in Malaysia.
- Malaysian Business Angel Network (MBAN): A network of angel investors connecting individual investors with promising startups.
Crowdfunding
Malaysia was one of the first Southeast Asian countries to regulate equity crowdfunding, providing a new funding avenue for startups:
- Ata Plus: An equity crowdfunding platform regulated by the Securities Commission Malaysia.
- PitchIN: A crowdfunding platform that allows startups to raise funds from a wide range of investors.
Bank Loans and Islamic Financing
Malaysian banks also offer financing products suitable for startups:
- SME Bank Malaysia: Offers specific loans for small and medium enterprises, including startups.
- Islamic financing: As a global leader in Islamic finance, Malaysia offers many Sharia-compliant financing options for startups.
Good to Know:
Malaysia has established a favorable regulatory framework for startup funding, including authorizing equity crowdfunding and encouraging foreign investment in local tech companies.
Conclusion: Malaysia, a Launchpad for Your Startup
Malaysia provides a conducive environment for creating and developing innovative startups. With its dynamic economy, expanding entrepreneurial ecosystem, and strong government support, the country positions itself as a prime destination for entrepreneurs worldwide.
Flexible legal structures, particularly the Sdn Bhd, allow startups to benefit from legal protection while maintaining the necessary flexibility to grow rapidly. Moreover, access to a wide range of funding options, from government grants to venture capital and crowdfunding, provides entrepreneurs with the resources needed to realize their ambitions.
By choosing Malaysia as your startup base, you will benefit not only from a dynamic local market but also from a strategic gateway to the rapidly growing Southeast Asian market. With a skilled workforce, modern infrastructure, and a relatively affordable cost of living, Malaysia offers all the necessary ingredients to transform your innovative idea into a globally successful business.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
