Funding is often the biggest constituent of a startup. Having a brilliant idea alone is insufficient unless you are well-equipped financially too. Startups inevitably need a source of fund to extend the business, but where can you get these funds? In this article, we will be introducing to you the funding channels from both the private and government sectors so that you get a clearer picture on how each of them can support you- financially and maybe even non-financially too.

In the previous article, we focus on how to make your startup more fundable. If you have not read so, please do so at, Funding Your Startup 101 – Part 1!

Private Funding Channels

Instead of going through traditional channels, such as a bank-issued business loan or government grants, many entrepreneurs are turning to private lenders to fund their business or idea due to the lesser bureaucracy involved and hence lesser time lag in getting the approval.

The possible alternative of private funding includes friends and family (F&F), Angel Investors, Equity Crowdfunding (ECF), Corporate Funding and Venture Capitalist. Without further ado, let us begin!

Equity Crowdfunding
Equity crowdfunding is, in status quo, one of the most famous routes to fund your ideas. It is a process for startups and Small & Medium Enterprises (SMEs) or Businesses to raise funds from the “crowd” (general public), a.k.a retail investors (MCSB, 2017). Since it is unlikely that your startup is able to attract angels investors or venture capitalists at the ideation stage, equity crowdfunding will be a better alternative for your startup to obtain capital. I bet you have heard about Indiegogo and Kickstarter before, but we will expose you to more in-depth and localised scene!

The Securities Commission Malaysia (SC) approved 6 main equity crowdfunding operators, local and foreign platforms, in Malaysia that are eligible as an alternative funding platform for young businesses and entrepreneurs namely Alix Global, Ata Plus, Crowdonomic, Eureeca, PitchIN and Propellar Crowd+ (Lee, 2015).


1. ECF can easily gain media attention which benefits your business’s media strategy.
2. ECF platforms essentially act as your business’s investment advisor.
3. ECF platforms provide your business with a greater reach to the potential investors.
4. ECF does not require you to give up a substantial amount of your company’s equity.


1.Intermediary platforms have a high risk of being hacked, causing a loss of data potential investment losses for crowdfunding investors.
2. Crowdfunding investors might face difficulty in selling their shares in your company as these type of securities often have no secondary market (Abiolu, 2016).
3. Equity Crowdfunding might make your project less flexible as there should not be significant changes to the offerings made after your project receive the funding required (
The Pros and Cons Of Crowdfunding Your New Business, n.d.).

Angel Investors
By the definition of Malaysian Business Angel Network (MBAN), angel investors are often High Net Worth Individuals (HNWI) or High-Income Earners (HIE) who invest their personal disposable income in start-ups or early stage businesses, usually in exchange for equity. Angel Investors can either choose to provide a one-time investment, focusing on helping your startup take your first step or to provide an ongoing injection of money to your business, focusing on growing and bringing your company through its difficult early stages.

While angel investors do not baulk at making a bigger investment if they see potential in your startup, it usually comes with higher expectations as they are looking to invest in a business that will profit them.

Friends and Family
Friends and family financing are the easiest to complete. The whole funding process takes less than 2 months and it does not involve lengthy and complicated processes. National Entrepreneurship Center (NEC) endorses the idea of F&F financing but advises companies that utilize this funding channel to do it carefully because if it is done improperly, it will not only cost you your business but also risk destroying or losing those relationships (Kirksanderslaw, 2013). It is crucial for you to document every transaction and agreement made when using this funding channel to eliminate the possibility of a conflict arising in the future. As the business owner, you need to be absolutely transparent with the person loaning or investing in your business, informing them the exact plan of utilizing the money and plan to repay.

Venture Capitalists

The difference between angel investors and venture capitalists is that angel investors usually use their own money as capital while venture capitals typically take care of pooled money from other investors and place them in a strategically managed fund.

Venture capitalists are investors who either provide capital to startup ventures or supports existing small companies that wish to expand but does not have access to the equities market. The main reason for VC to make an investment in your business is because they are able to earn a massive return on their investment should your company succeed in the future. They might also experience great losses when their pick fails, however, these investors are usually wealthy enough and can afford to accept the risks associated with funding new, young and unproven companies that appear to have innovative and creative ideas and have a management team that is passionate (Venture Capitalist, n.d.).

Venture Capitalists can provide a valuable source of guidance and consultation as well as support in critical areas of your business, but they are likely expecting to be involved in decision making and day-to-day operation.

Public Funding Channels

Bank Loans
Other than the options stated above, let’s not neglect the most common pathway to your funding– bank loans. Banking institutions are indeed one of the major sources of financing for startups. However, to much disappointment, we are here to realise that most commercial banks are reluctant to provide startups loans especially when your business is still on ideation period or is yet to break-even, which most likely you are in one of these circumstances too!

Not to feel despair, SME Bank which is wholly owned by the Malaysian government, is here for you! It has cumulatively approved 84.3% of all the applications received. Does the probability of being one of the beneficiaries sound attractive to you?

One of the finance opportunities available under SME Bank is Young Entrepreneur Fund (YEF) which targets youths ageing 18-30. They are here to help you with the first step of starting a business by providing you with working capital and purchasing assets necessary for business operations, up to a maximum of RM100, 000.

However, here are the pros and cons of getting a bank loan in financing your business.

1. The public is usually familiar with their banks after dealing with them for a number of years.
2. Banks generally do not take part in the business operations, neither do they take shares in the company. Their sole concern is about repayment of loan principal together with the interest.
3. Getting a bank loan for business financing includes a much lower interest rate than credit cards and some finance companies.
4. You may enjoy tax benefits on business loan interests!

1. Application for bank loans is cumbersome. It involves all kinds of documents and verifications which makes it somehow frustrating.
2. Lengthy process – Some banks may take weeks to months in reviewing your application and evaluating your credit rating (do you pay back loans on time?), before making a decision on whether to approve the loan or not.

Government Grants and Initiatives

Malaysia Digital Hub

Malaysia Digital Economy Corporation (MDEC) drives the digital economy sector in Malaysia. Last year, Malaysia Digital Hub (MDH) was launched under MDEC, incubating and connecting local startups to the ASEAN and global digital ecosystem. If you are wondering where these hubs are, they are very near to you, in fact, they are right here in the Klang Valley. The first four MDH are Co., APW in Bangsar, and Common Ground and Work in Damansara. After these four, Sunway iLabs is the most recent add-ons to the list.

This is where all the growing startups, global tech companies, accelerators and talent builders and investors gather. Hence, this is where you can be connected with potential partners, be funded and subsequently achieve your dream. Being a startup, you will also be provided with some other supports in MDH, such as:

  • High-speed broadband and fibre optic connectivity
  • Intellectual Property (IP) Protection
  • Access to a Founder Network, with founders of over 20 nationalities

Cradle Fund

Cradle Fund Sdn Bhd, incorporated under Ministry of Finance with their credo – Creating Leading Startups has provided assistance to over 700 Malaysian tech start-ups in the past decade. For all businesses from pre-seed, seed to start-up and scale-up stages, Cradle has its product which suits you. Other than financial aid, it does also offer various value-added assistance to cater to the entrepreneur’s needs in the competitive world.

Other than these, Malaysia Venture Capital Management Bhd (MAVCAP), Malaysian Industrial Development Finance Berhad (MIDF) and Malaysian Global Innovation and Creativity Centre (MAGIC) are also there for you and your startup.


There are a thousand and one channels out there where you can get your startup funded, regardless of private or government sector. All you need is to find the correct channel and of course bring them an impressive idea. However, before that, do ask yourself, how “fundable” your business idea is? If you are not well prepared, it’s definitely a “NO” to approach for funding, but it’s never too late to get started.