Decoding 2023’s Funding Peaks: Most Funded Industries

By Business Intelligence & Insights Team, Cradle,

Data are taken from MYStartup.gov.my unless specified otherwise.

In our previous discussion, we explored the correlation between Venture Capital (VC) and government funding in Malaysia, highlighting their significant investments in fintech technology. Now, in this week’s analysis, we shift our focus to the top-funded industries in 2023 and evaluate their performance compared to 2022.

Understanding funding trends provides valuable insights into investor preferences and shifting market dynamics. The charts presented in this article depict the allocation of funds in Malaysia, contrasting deals from 2023 with those of 2022. By examining these industries closely, we aim to uncover connections and identify emerging trends within Malaysia’s startup ecosystem. This exploration promises to offer insights into the direction of the country’s entrepreneurship and shed light on sectors primed for growth.

2023’s Top Performers: Financial Services, Sustainability & Environment, and Retail & Marketplace

In comparison to 2022, where funding activities were exceptional and should be treated as somewhat of an anomaly, most industries in 2023 showed a negative growth trajectory. We’ve previously delved extensively into financial services funding, especially in fintech, from both the VC and government sides. Setting that aside, it’s evident that Sustainability & Environment and Retail & Marketplace are also focal points for funding in 2023.

Investment and Deal Count Trends Across Industries in Malaysia

2023 vs 2022

The Surging Trends in Sustainability Practices and Environmental Initiatives

In comparison to the other two industries, Sustainability & Environment (S&E) stands out as the only sector showing a positive trajectory in investment and deal count in 2023 compared to 2022. This indicates a significant shift in investor focus towards this industry, distinguishing it from others.

As discussed previously, both private and government funding play pivotal roles in driving Malaysia’s startup ecosystem. Particularly in the S&E industry, various government initiatives have catalysed growth in 2023. Among these initiatives highlighted in the National Budget 2023:

  • RM2 billion allocation for sustainable technology startups through Bank Negara Malaysia to support innovative startups focusing on sustainable technologies.
  • The extension of Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) continues to incentivise investment in green technologies.

On the VC front, numerous VC firms made substantial investments in Malaysian S&E startups in 2023. Notable examples include:

  • Bunge Ventures’ impressive investment of over $21 million in Nutrition Technologies.
  • 500 Global’s investment exceeding $300,000 in Boomgrow.

These investments underscore the growing confidence and interest from both government and private investors in the promising S&E sector, reflecting its potential for significant growth and innovation.

The Downturn in Retail & Marketplace

Retail & Marketplace (R&M)  exhibited the most significant decline in deals made between 2023 and 2022 (-69%) compared to any other industry. Interestingly, this trend isn’t unique to Malaysia but is mirrored in other regions of Southeast Asia and globally. It underscores a broader global trend in R&M startup funding. Despite 2022 being an exceptional year in terms of funding, it’s imperative to delve into the reasons behind the worrying year-over-year decline in funding trends.

Reasons for Decline:

  1. Maturation and saturation of the retail & marketplace landscape:
    • Malaysia’s eCommerce market is projected to reach US$ 10.19 billion and $16.98 billion by 2027, indicating a matured landscape dominated by established players like Shopee and Lazada.
    • Shopee, for instance, attracts approximately 55 million visitors per month, making it the most visited e-commerce platform in the country.
    • This saturation makes it challenging for new startups to break in and secure significant funding.
  2. Dominance of regional and global players:
    • The market is heavily influenced by major global players such as Alibaba and Amazon, as well as regional giants like Shopee.
    • These companies hold significant control over the market, reducing opportunities for local startups to succeed and limiting support for their growth.
  3. Shift in investor focus:
    • The data from 2023 indicates a noticeable shift in funding towards industries such as S&E and Logistics & Infrastructure (L&I), which exhibit positive growth compared to R&M
    • This suggests that investors perceive these industries as having higher growth potential compared to retail and marketplace ventures.

In 2023, these factors collectively contribute to the decrease in funding for retail and marketplace startups in Malaysia, showcasing evolving dynamics and investor preferences in the startup ecosystem.

To conclude our funding analysis series next week, we will explore emerging technologies within these industries. We aim to identify any shifts in investor preferences or areas of interest, along with assessing the performance of declining or stagnant industries compared to 2022. Stay tuned!

To explore the list of startups that have raised funds, you can check our MYStartup portal:

www.mystartup.gov.my

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Poovenraj Kanagarajhttp://disruptr.com.my
Founder & Editor of Disruptr MY, aspiring to build a community-building platform to connect founders and entrepreneurs to the latest news, interviews and insights from the ecosystem.

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