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Playing catalyst to SMEs [15-07-2013]  
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EVERY large and successful company starts off as a small outfit.

And while, decades ago, aid was not always at hand to boost businesses, there are numerous programmes and policies in place today to nurture small companies and help them grow to be regional champions.

These days, it is not uncommon for small and medium enterprises (SMEs) and start-ups to get a leg up from what are known as incubators.

In Malaysia today, there are a number of accelerators and incubators that have been set up through private and government initiatives.

One of the larger ones is Technology Park Malaysia (TPM), which was established by the government in 1996 to develop and nurture technology-based companies in Malaysia. The facility spans some 650 acres of land in Bukit Jalil with total lettable business and incubation space of 725,000sq ft.

TPM’s president and chief executive officer Datuk Mohd Azman Shahidin says the number of companies at TPM has grown to more than 200 from about 20 in the 1990s.

About 80% of the companies at TPM today are SMEs.

“Our main role is to accelerate the growth of SMEs. We are here to grow and be the catalyst for these companies. And we have seen some companies here that have grown on to become listed companies,” Azman said.

Reports note that half of all start-ups are dead within two to five years, which explains the appeal of incubators as they aim to leverage high-quality mentorship and access to funders to produce dramatically different results.

Notably, SMEs face a myriad of challenges to grow and thrive in today’s competitive markets.

Some of the main challenges are lack of access to infrastructure, sophisticated technology and funding.

This, said Azman, is where TPM steps in. TPM has some of the most sophisticated infrastructure in Malaysia. Azman is particularly pleased with its high-speed Metro-E network Internet infrastructure, said to be the only one of its kind in the country. The park also has advanced engineering facilities, laboratories and a 5,000sq ft data centre among other things.

It’s worth noting that the park also has a fourth-generation incubation model which not only provides incubation space and facilities, but also provision of specialised advisory.

Companies that have been selected to be a part of TPM’s incubation programme will be guided through a hand-holding and business-coaching programme over a duration of six to 18 months. Here, they will be equipped with knowledge on product development, marketing techniques, R&D and networking.

“We support them in all these areas. For most companies, a major challenge is funding. So we also provide them with the links to funding, relevant departments and even investors. We try to get participation in terms of private equity,” Azman added.

To-date, TPM has assisted more than 3,000 companies raise funds with investments of over RM1bil. For this year, TPM is looking at pulling in at least RM1mil in capital investment via angel investors.

Last month, Azman said 20% of its 100 incubatees were ready to be invested in.

There have been a number of success stories from TPM including the now-listed Green Packet Bhd and Ingenuity Solutions Bhd.

Since the establishment of TMP its efforts in the SME field appear to be paying off as some 1,000 new start-ups have graduated to become full-fledged businesses.

As of 2011, the total cumulative income generated by SMEs in TPM reached RM8.21bil while total exports reached RM574.5mil.

However, Azman notes that not every company that has graduated from TPM is highly successful.

“Some become too diversified and lose focus of their core business. And so they lose the formula that they have been trained in. But once they have graduated from our programme and launched out on their own, we no longer interfere with their businesses,” he said.

TPM currently focuses on three main areas or clusters — ICT, advanced engineering and herbal biotechnology.

The park has been running a self-sustaining operation since its early days as is independent of government funding.

TPM generated revenue of RM116.4mil in 2011 with pre-tax profit of RM12.2mil. Last year, turnover was at RM139mil.

“We still get seed money from the government when we start investing in a new technology, but otherwise, our marketing team has been working very hard with relevant departments to help us grow,” Azman said.

TPM is currently seeking relevant partners to further develop the park. There is still ample growth opportunity for TPM as the park is only currently half developed. Another 300 acres have yet to be utilised as TPM is scouting for opportunities to tie up with major technology companies to add value to the area.

“We are not playing with real estate anymore. It is not about the increasing value of the land, but what value can we add to the park for our tenants.

“We want to collaborate with more technology giants where we build the buildings for them here and they come in with their technology,” he said.

TPM recently signed an agreement with Texas-based National Instruments Corporation to set up a National Instruments Academy and Innovation Nucleus laboratory.

Currently, TPM is nearly fully occupied with an occupancy rate of 95%. But with investments coming in, a wider area of the park will be developed to accommodate more start-ups.

Azman added the importance of bringing in foreign partners is that it creates opportunities for local businesses to support the foreign giant on top of providing technology transfer.

TPM has been recognised as the country’s leading incubation operator and was appointed the National Incubation Development Secretariat to spearhead the development of incubators in Malaysia.

“Our role needs to fit in with the science and technology policy of Malaysia because that was the reason TPM was established. We are always looking out for more specialised type of technology that we can bring in and we are studying the role of other technology parks around the world to see what holes we can plug so that we can support technology-based SMEs better,” Azman said.

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