KL20 Summit Recap: Insights and Implications for Local Startup Ecosystem

Our team recently had the privilege to participate in the highly anticipated KL20 Summit, an event that brought together visionaries, innovators, and industry leaders from around the globe. Hosted in the vibrant city of Kuala Lumpur, Malaysia, the summit provided a platform for sharing groundbreaking ideas, forging meaningful connections, and exploring avenues for collaboration in the evolving landscape of technology and innovation.

(Source: https://www.airmeet.com/e/8f75a150-f12c-11ee-8d86-731d697892f6)

Key Takeaways

Strategic Reforms: While initiatives outlined in the KL20 Action Paper aimed to attract startups and VCs, feedback from local founders raised concerns about the accessibility of benefits to local startups.

Global Unicorn Focus: Malaysia's ambition to attract global unicorns prompted questions about the immediate benefits for local startups and entrepreneurs.

Feedback-driven Adaptation: The government's shift towards global and regional startups reflects a response to feedback, aiming to enhance Malaysia's competitiveness in the technology sector.

Investment Realignment: Realignment of incentives is crucial to ensure local startups receive adequate support from initiatives targeting foreign investors and unicorns.

Competitive Landscape Awareness: Acknowledgment of missed opportunities underscores the importance of feedback-driven strategies to maintain competitiveness against neighbouring countries.

Local Talent Support: Calls for more support for local entrepreneurs highlight the necessity of balancing initiatives to attract foreign investment with nurturing the local ecosystem.

(Source: https://www.airmeet.com/e/8f75a150-f12c-11ee-8d86-731d697892f6)

Global VC and Startup Partners

While some local startups may prefer independent pursuit of their visions, recognising the benefits of collaboration with international VCs and founders is crucial. Partnerships offer access to resources, expertise, and global networks, enabling startups to scale and diversify. However, like many other forms of collaboration, effective collaboration requires well-defined terms and a clear plan aside from choosing the right partner. Balancing independence with collaboration can enhance long-term success and sustainability.

The participation of international startups in a local market is necessary to drive the local startup ecosystem for several reasons below:

Diversification and Innovation

International startups bring diverse perspectives, expertise, and innovative solutions to the local market. Their presence encourages competition and spurs innovation among local startups, driving overall growth and development within the ecosystem.

Access to Capital and Resources

International startups often have access to greater financial resources, including funding from international venture capital firms. This influx of capital into the local market provides opportunities for local startups to secure investment and scale their operations more rapidly and with strategic guidance, it could also act as potential avenues for additional funding.

Knowledge Transfer and Skills Development

Collaboration with international startups allows local entrepreneurs to learn from their experiences, acquire new skills, and gain exposure to global best practices. This knowledge transfer enhances the capabilities of local startups and fosters a culture of continuous learning and improvement. Local startups could also leverage on the existing infrastructure, resources, licenses, and market presence of such global startups to gain a foothold in the new market more efficiently.

Market Expansion and Global Reach

Partnering with international startups can facilitate market expansion opportunities for local startups, enabling them to access new customer segments and international markets. This expansion enhances the scalability and sustainability of local startups over the long term.

The mix of local and international players in the market will create a challenging but balanced and diverse environment for startups. However, if introduced too early, they may overshadow local startups and hinder their development. Conversely, if introduced at the right stage, they can provide invaluable support and opportunities for collaboration, propelling the entire ecosystem forward. Thus, for the government, striking a balance in timing is essential to ensure the sustainable growth and success of both local and international players within the startup ecosystem.

Implication on Local Startups

Despite the advantages, the emergence of major multinational startups and venture capitalists in the local market will undoubtedly pose challenges for local startups. This sentiment resonated among founders who participated in the KL20 summit, expressing concerns about the implications for local startups in light of the event's outcomes:

Increased Competition

The presence of well-funded international startups may intensify competition within the local market, making it more difficult for local startups to gain market share and differentiate themselves.

Resource Imbalance

International startups may have access to greater financial resources, talent pools, and technology infrastructure, creating an uneven playing field for local startups that may struggle to compete on these fronts.

Risk of Acquisition or Displacement

Local startups may face the risk of acquisition or displacement by larger international players, especially if they are unable to scale quickly or establish a strong competitive position within the market.

Often times, local startup founders seek more than just funding. They prioritise protection for their startups during the incubation and early stages, allowing them the necessary time to develop their products, conduct R&D, patent their intellectual properties, and introduce them to the local market. However, the entry of international VCs and startups with competitive products, either in the process of development in a different market or portfolio, or to be developed within the Malaysian market, poses a significant challenge. Local startups risk being overtaken by larger foreign competitors, potentially losing value and investors as their product's value declines.

Thus, the government must balance the entry of international VCs and startups with creating a secure environment for local startups to develop and succeed within the local market, ensuring innovation and entrepreneurship flourish while protecting the interests of local startups.

To ensure that local startups benefit from the presence of major multinational startups and venture capitalists and initiatives such as KL20 Summit, it is important to consider the following questions and explore potential solutions:

Access to Funding

How can local startups improve their access to funding, either through strategic partnerships with international investors or by leveraging alternative sources of capital such as government grants or crowdfunding platforms?

Capacity Building and Support Services

What initiatives can be implemented to provide local startups with access to mentorship, networking opportunities, and support services to enhance their capabilities and competitiveness? There are currently initiatives such as MYSTARTUP, a national initiative and one-stop platform for local startups established in 2021 by the Ministry of Science, Technology and Innovation (MOSTI), powered by Cradle.

Collaboration and Partnerships

How can local startups leverage partnerships with international startups to access new markets, technologies, and resources, while also preserving their unique value propositions and competitive advantages?

Regulatory Environment

Are there regulatory barriers or constraints that hinder the growth of local startups or create advantages for international players? How can regulatory frameworks be adapted to foster a level playing field and support the growth of local entrepreneurship?

Ecosystem Development

What role can government agencies, industry associations, and educational institutions play in fostering a vibrant startup ecosystem that supports the growth and success of local startups alongside international players?

By addressing these questions and implementing targeted strategies, local startups will be able to position themselves to not only survive but thrive in a competitive market environment shaped by the presence of major multinational startups and venture capitalists.

In essence, the KL20 Summit was more than just a gathering of minds, but a convergence of ideas, aspirations, and possibilities. It also provided us with valuable insights into how the initiatives and investments discussed during the summit could be leveraged to eventually benefit local startups as we continue to support local founders and innovators in this space.

Should you require assistance with the issues above, please reach out to our lawyer, Shamila Nair.