For Startups (high growth businesses), there are a few types of Startup funds in Malaysia that we can consider. These are funds that are taking a high risk to fund Startups that can give high returns to investors.
Generally, the higher the amount of funding, the less support you need from Investors.
Typically, these Startups are also IT based Startups because they tend to grow & scale faster than traditional businesses. Below are some Startup Funds we can find in Malaysia in the order of small to large:
Accelerators in Malaysia have a small Startup fund available (usually RM 50k to RM 100k per Startup), but they give much more value via the support and mentoring for Startups. We run an accelerator in Malaysia that focuses on providing huge value through the experience of successful entrepreneurs that have run or sold their businesses that are either listed or acquired. We also focus on a full validation methodology as well as some IT support with our partners from Amazon AWS Activate and Microsoft Azure Bizspark. You can also check out the top Accelerators in Malaysia below:
Investors Experience:
These funds are good for Startups with some early results, and it is usually best to wait until you are ready to scale your team when you have found the right product that people want.
Otherwise, from our experience with hundreds of Startups, the grant money is usually wasted. Many Startups get the money and spend it on marketing and on growing their team size too early on when their product is not ready. The common effect is that revenues do not come in and the costs of running the businesses go up, and once the grant money is used up, Startups are left with an even larger negative cash flow compared to before they got the grant. That is completely avoidable if Startups have undergone some sort of preparation, like an accelerator program (explained above), or if they have planned carefully with their mentors.
Do note that getting grants can take some time and your focus should always be on growing the business and not to secure grants.
These Startup funds in Malaysia are run by wealthy individuals or Angel Investors that aim to provide more money (usually RM200k to RM1,000,000). Angel Investors support you a little less than via an Accelerator program (that has dedicated mentors like ours) but provide a lot more in terms of financial support. Here, their network, knowledge, and experience usually help you as a Startup Founder the most.
Venture Capitalists in Malaysia usually provide anywhere from RM1m & above. They usually do not provide much help apart from funding, but some good VCs do support their Startups. In larger rounds of funding, it can be that VCs are not as involved.
Usually, Startups Raise VC funding when they are well-tested and ready to scale their team and expand.
Otherwise, it could be just a matter of survival and/or raising money without a clear purpose and without proper goals in place. There are Startups out there that are well funded but have not clearly defined their market, product, or monetisation strategies. Of course, these lead to lack of traction. To make matters worse, the clock starts ticking the moment you get funding - and if revenues do not increase in time, then a lot of money and effort go to waste.
Alternative Funding
There are alternative funding for Startups, but there are costs to these methods of funding that are not optimal for Startups. For example, ECF involves fees of 1-10% of the funds raised and P2P involves high interest (usually 10-20%) as loans to Startups are considered highly risky. Equity-based funding by Accelerators, Angel Investors, and VCs, however, do not involve these costs. There are other pros & cons to ECF, like you get publicity, but you need to manage dozens of investors, and so on.
Usually, Startups would go for Equity-based financing rather than loan-based, as the interest costs are quite high and most Startups are not even profitable (and should not be in the early growth stages). Startups should re-invest into growth instead of making a profit early, and that is why most of the time, P2P may not be ideal. It is however ideal for traditional businesses that have temporary cash flow issues.
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