This paper places Penang within the larger context of the Indian Ocean world, considering its geographical position and composition, as well as economic and political interest in the island from a macro-perspective. George Town established in 1786 was a crucial settlement of the British East India Company (EIC) that connected the company’s commercial interests in India with those in China. As the port city was strategically located on the island of Penang at the northern end of the Straits of Malacca, it was the first British settlement in Southeast Asia with the aim of breaking Dutch mercantile dominance in the Straits of Malacca and of pre-empting French imperial interests in the region. In a second step, this paper adds a micro-perspective in order to deepen the understanding of the complexly entangled reasons and factors that led to the founding of George Town. The emphasis within the micro-perspective lies on key figures foremost Francis Light and his pivotal role as a middleman between the Sultan of Kedah and the East India Company, as well as the Sultan himself, thus demonstrating how Light’s dexterous mediation and the Sultan’s personal circumstances contributed significantly to the founding of George Town.