
Malaysian government plans to promote startups by becoming a venture capitalist - gshakir
https://www.scmp.com/week-asia/economics/article/3031630/malaysias-cunning-plan-start-dominance-if-you-cant-beat-them
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archibaldJ
My start-up (now dead) attended the first batch of the MaGIC's Global
Accelerator program (GAP) by the Malaysian government in 2017. The talks were
bad, the "mentors" were useless and everything was extremely inefficient. Most
of the founders who came only stayed for the first few days, realised the
situation and dropped their interns for the free co-working space, and left.
The whole program smelled like money laundering or nepotism at best. I thought
it was satire when I read this headline.

Also, at least >70% of the start-ups in my cohort have died by now. Maybe one
or two good ones exited (who were already doing really well before joining).

~~~
morningseagulls
I'm sorry to hear that. However, Malaysia isn't alone in doing this. A lot of
governments are pumping money into developing their own startup scenes, and
the article's mentioned the other ASEAN countries that have been doing that,
Singapore being the most successful one so far.

And Malaysia will have to do this eventually: they're just fashionably late
and playing catch up. You can see with Grab how they lost what was supposed to
be a home-grown business to Singapore. Governments everywhere are also seeing
how a startup scene can create jobs and absorb the surplus of highly-educated
people that universities everywhere are churning out.

~~~
hitekker
Are you a Malaysian perchance?

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cameronbrown
The startup scene is just a side-effect of all the correct economic, political
and social conditions being in the same place. A healthy startup scene is good
evidence that your country is strong enough to take risks, but imo not
something you can likely just launch into having.

~~~
bsaul
This is such a true statement, and that’s why i’m mad everytime i hear about
governments financing start up scene more or less directly. it makes them feel
good, because they’re spending huge amount of money, and the poor results are
only seen five years later.

They clearly have no clue what an ecosystem is.

~~~
afarrell
What about the US government funding of Fairchild Semiconductor by purchasing
chips from it?

What about the US government funding of Palantir via In-Q-Tel?

~~~
bsaul
At least in those cases they’re eating their own dog food. They’ll have
customer expectation on the startup they’re financing, and they know there’s a
market, and the company will be able to deliver ( not to mention the fact that
those are fields on the border of national security, which means you can’t
just rely on private companies on the market)

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paulsutter
Exits are the number one ingredient for a startup ecosystem. If there’s no
market for exits, there’s no investment.

Silicon Valley has the best environment in the world-outside-of-China for
exits. Large tech companies are frequent acquirers. Large companies in
Malaysia, or Japan, or almost anywhere else, acquire rarely.

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empath75
This seems like a nice embezzlement scheme to me. It’s just going to be a way
for bankers and con artists to steal money from the government.

~~~
lazyjones
The government isn't stupid, they are perfectly able to divert the money into
their own pockets.

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Gys
Ah yes, governements like to think they can create a startup eco system by
throwing money at it.

The EU thinks the same way: [https://www.neweurope.eu/article/eu-plans-
digital-startup-in...](https://www.neweurope.eu/article/eu-plans-digital-
startup-investment-fund/)

But in the end many other factors are also (maybe even more) important. In the
case of the EU having different languages, different cultures, different tax
systems, different and strong regulations in many areas really does not help.

~~~
panpanna
I feel you are making this up without ever having visited a startup in EU.

All EU startup hubs are local (eg the Paris startup scene). The main
difference to SF is scale and crazy money.

~~~
Gys
I am from the EU and lived in several countries. Had my own company and did a
good exit. Now working on another one, operating (tiny scale) in several EU
cities.

Edit: never been to SF, so no idea how that is like.

~~~
panpanna
Then you have seen the common market and harmonization of regulations with
your own eyes. It's not perfect, but it's getting better by the day.

I have seen many people directly benefiting from EU criticizing it to no end.
Very common in East and often due to some other issues (nationalism,
immigration etc) and I don't think they will ever be satisfied with anything
EU does.

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gojomo
Malaysia was scammed out of $4.5B, via a prior "1MDB" state-funded investment
initiative targeted at "real estate, Middle East oil and other sectors":

[https://www.latimes.com/world/la-fg-malaysia-1mdb-
hollywood-...](https://www.latimes.com/world/la-fg-malaysia-1mdb-
hollywood-20190710-story.html)

Venture investing is probably even harder to properly police against self-
dealing that happens under cover of "a big contrarian vision".

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ccvannorman
Chile tried something similar, with StartupChile which I participated in circa
2011. My impression was that there were some very productive and interesting
startups formed, while a _lot_ of money was wasted.

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bravura
"If Malaysia-based capital becomes more involved in the scene, there could be
dividends at home, giving the country more leverage to persuade these
companies to set up operations within its shores and employ and train locals –
a multiplier effect for both capital and jobs, say industry players."

If Malaysian ops is a poor decision if your VC isn't Malaysia, it wouldn't
magically become a good decision if your VC is Malaysia. Which suggests that
this strings-attached money might not be in the fiduciary interests of the
company.

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motohagiography
My impression is these people aren't hypothesis driven. The smart money seems
to look at things and say, "I think the world is going to need
disintermediation, curation and retribalization, and leapfrog technologies for
emerging markets. You either sustain an existing customers business model or
you disrupt it, and our business is providing air cover to the latter, and
using the former as a hedging instrument." It's a technology macro view. Dumb
money says, "we provide growth capital for key technologies that support
national sector x, y, z." Straight micro mandate.

From my armchair, I'd assert the difference is smart and dumb money can
practically be defined by those with a hypothesis vs. those with a mandate.

A state fund could be smart money, but they would need a lot of freedom to do
it - or find funds/funds-of-funds that had the freedom for them, which is what
pensions do today. I wonder whether most governments could handle the
political risk of the losses from a real VC fund, because the losses just look
like slush funds for connected managers.

Not to dump on them, I think some sovereign wealth funds and even treasuries
could benefit from being run more like aggressive pension funds, but the
trouble with government is there is no way to clear off the project barnacles
that attach to anything with momentum. Maybe they will do it differently.

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vdas
Bursa Malaysia (the local stock exchange) classifies public listed companies
into the following sectors: 1\. Basic materials; 2\. Consumer cyclicals; 3\.
Consumer non-cyclicals; 4\. Energy; 5\. Financials; 6\. Healthcare; 7\.
Industrials; 8\. Technology; 9\. Telecommunications Services; and 10\.
Utilities

So, Bursa is largely composed of commodity businesses. It works but shouldn't
there be some progress? Is it okay to stick with the status quo?

It's true that there's a potential in these VC schemes for leakage due to
self-dealing. But let not the perfect be the enemy of the good. The article
mentions several government funds that have been disbursing funding to tech
startups for decades, so this is not a totally new thing run by idealists
rather than realists.

I understand the skepticism when I read the responses attached. But I've
always been confident about Malaysia. Maybe it's just that I'm a patriot.

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hinkley
I’m an old, cynical bastard who hasn’t had his morning coffee.

My second thought on reading this headline was “regulatory capture”. Who put
it in their head to invest in R&D this way?

I mean, I’ll take this _any_ day over pandering to real estate developers, and
especially in a country with such an amazing natural heritage.

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robocat
How can I short this?

Matt Levine suggested WeWork was a kind of short on the VC bubble. I guess
that if there was a way to short it directly, I wouldn't be the only contra-
investor.

Disclaimer: I've been on the sidelines of a government funded VC failure in
Christchurch, NZ. Lots of puff, little output.

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duxup
Considering the hit and miss (lots of miss) nature of startups this seems like
it is ripe for corruption. I'd be really worried about direct government
involvement in such things.

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pytester
This sounds less like a cunning plan for economic growth and more like a
cunning plan to funnel money into the pockets of the 20-something children of
well connected people.

~~~
umeshunni
I'm surprised at the timing of the announcement, given that Mahathir's
corruption/embezzlement scandal is still fresh in many people's memory:
[https://www.independent.co.uk/news/world/asia/malaysia-
najib...](https://www.independent.co.uk/news/world/asia/malaysia-najib-razak-
arrest-corruption-1mdb-scandal-rosmah-mansor-a8428981.html)

~~~
klingonopera
...that's Najib's scandal, not Mahathir's, for him, it's the opposite (in
fact, it won him the election).

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baybal2
Statesmen should not concern themselves with the "startup scene"

