In recent weeks, I have observed an ongoing debate about Malaysia’s startup ecosystem, particularly among tech venture capitalists (VCs). The common feedback includes concerns over a lack of high-quality deals, weak technological intellectual property (IP), a small consumer market, and an underdeveloped growth ecosystem. These factors have led many VCs and investors to focus on larger markets such as Thailand, Indonesia, the Philippines, and Vietnam.
As someone who started my first startup in Malaysia in 2004, I have had the privilege of witnessing the evolution of Malaysia’s business ecosystem over the past two decades. Ironically, while some may argue that Malaysia has not changed much, its entrepreneurial resilience and strengths have remained constant.
In this article, I aim to present an evergreen perspective on Malaysia’s business ecosystem and why it deserves a closer look.
Malaysia’s macro advantage: Cost-effective outsourcing and talent
Malaysia’s unique advantages lie in its diversity. With a multicultural population proficient in multiple languages, including English, Malaysia serves as an excellent partner for regional and international businesses. I have noticed an increasing willingness among younger Malaysians to engage in English in the past five years, whether in hospitality or business, making communication seamless for foreign investors and partners.
Malaysia also complements Singapore, as evidenced by the Johor-Singapore Economic Zone initiative recently endorsed by the two countries’ leaders. Malaysia benefits from Singapore’s economic spillover due to its larger workforce and natural resources. For example, a co-working space operator in Kuala Lumpur shared with me that many tenants are Singaporean companies expanding their operations into Malaysia.
Heightened geopolitical tensions have further amplified Malaysia’s appeal. As businesses diversify their manufacturing operations beyond China, Malaysia is becoming a preferred destination for business process outsourcing and manufacturing activities. These trends are likely to drive growth in the coming years.
Embedded multi-generational family businesses: A hidden strength
Small and medium enterprises (SMEs) form nearly 97 per cent of Malaysia’s 1.1 million corporations and contributed 39.1 per cent to GDP in 2023. This signifies an abundance of entrepreneurial activity in the country.
At TRIVE, we’ve delved into the ecosystem over the past two years and discovered a wealth of successful, cash-generating family legacy businesses led by first- and second-generation entrepreneurs. These families have spent decades building their industries and expanding their footprints across the nation.
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On average, these family-run businesses generate revenues ranging from RM30 million (US$6.7m) to RM200 million (US$44.4m), often with robust margins and significant cash flow. Many of them operate in traditional sectors tied to Malaysia’s core commodities, such as palm oil, rubber, timber, and agricultural products. Others are capitalising on the business processing outsourcing boom, leveraging Malaysia’s cost-effectiveness and skilled workforce.
Despite their proven track records, these traditional businesses are often overlooked by VCs. The perception is that they lack scalability and, consequently, the potential for high returns. Ironically, some of these same companies have gone public on Bursa Malaysia, achieving significant growth and recognition.
Bursa Malaysia: A thriving stock exchange
The resilience of Malaysia’s entrepreneurial ecosystem is perhaps best reflected in the performance of Bursa Malaysia. In 2024, the stock exchange recorded 55 IPOs, raising RM7.42 billion (US$1.65b) in proceeds—its best performance in 19 years. By comparison, Singapore’s stock exchange had only four IPOs during the same period.
An IPO advisor I spoke with explained that nine government and quasi-government funds actively support the local stock market, driving liquidity and enthusiasm among participants. This support, combined with strong retail investor participation, has bolstered the IPO market.
Among the notable IPOs in 2024 was 99 Speed Mart, a household name in Malaysia with thousands of retail outlets nationwide. The company debuted with a market capitalisation of RM13.86 billion (US$3.17 billion), underscoring the potential of Malaysia’s consumer-driven businesses to attract investor interest.
Growing M&A interest in legacy businesses
In addition to IPO activity, there is growing interest in mergers and acquisitions (M&A) involving established Malaysian legacy businesses, particularly from international investors in China, Singapore, and North Asia. This trend is driven by geopolitical factors, as companies seek to diversify their supply chains and manufacturing bases into Southeast Asia.
Another factor contributing to M&A activity is the perceived reduction in political risk under the two-year-old Anwar Ibrahim-led government. The administration’s relative stability has increased investor confidence in Malaysia.
Although the M&A deals are not yet at large-ticket sizes, transactions in the range of US$5 million to US$20 million are becoming more common, as shared by a friend in the M&A space. This demonstrates a steady appetite for established, profitable businesses in traditional industries.
Navigating Malaysia’s investment landscape
Investing in Malaysia requires a different approach than in other markets. While many fund managers rely on transactional methods—evaluating pitches, conducting analyses, and seeking investment committee approvals—this method alone often fails to capture the nuances of Malaysia’s business culture.
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Malaysia operates on relationships, not transactions. Building trust takes time, often months, and investors must be prepared to engage deeply with local entrepreneurs. At TRIVE, our approach involves engaging with the next generation of family business leaders before meeting the patriarch. Understanding family dynamics is crucial to unlocking investment opportunities. And these takes a few months to years, something which international VCs are unwilling to spend time on.
It’s also important to note that the best deals in Malaysia are rarely found at conferences or public forums. Instead, they emerge through trusted networks of next-generation business owners. Malaysians place immense value on personal introductions and relationships, and being introduced through a mutual connection can open doors that would otherwise remain closed.
Investors must also operate locally. This means having a well-networked Malaysian team and consistently demonstrating a helpful, value-driven approach rather than focusing solely on financial returns. Establishing a reputation for reliability and partnership is key to accessing Malaysia’s best investment opportunities.
A market worth revisiting
Malaysia’s startup ecosystem may not have the scale or technological edge of some of its neighbours, but its strengths lie in its resilience, diversity, and deeply rooted entrepreneurial culture. From its multilingual talent pool and cost-effective outsourcing opportunities to its thriving family businesses and vibrant stock exchange, Malaysia offers unique opportunities for investors willing to adapt their approach.
As the world continues to navigate geopolitical shifts and supply chain diversification, Malaysia is well-positioned to benefit from these trends. For those who take the time to understand its market dynamics, Malaysia remains a steadfast and rewarding place for entrepreneurial success.
Reach out to me if you are keen to invest into TRIVE’s Private Equity fund that focuses on Malaysian family businesses.
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Image credit: Esmonde Yong
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