“It was never done before. We went in expecting a lot of challenges,” says Nio Liyanage looking back on the past 4 months. Originally, HatchX, an initiative by Hatch in partnership with the Lankan Angel Network and funded by the Ford Foundation, was only meant to be Sri Lanka’s first fintech accelerator. A tough undertaking in its own right. But then the world got turned upside down and came to an abrupt stop thanks to the coronavirus. Still, the programme stuck to its launch date and became the first virtual accelerator in South Asia.
Overnight, the complexity of the challenges multiplied tenfold. Behind the scenes were a group of dedicated people conquering these challenges of replicating a startup accelerator in a virtual environment. Their goal is to ensure 7 Sri Lankan fintech startups get the support they needed to grow and succeed. Against all odds, HatchX utilizing a combination of email, Zoom calls, and other digital platforms was able to adapt until the lockdown was eased allowing physical activities to be held. Here’s a look behind the curtain of Sri Lanka’s first virtual fintech startup accelerator.
The people behind HatchX
Nio Liyanage, the programme director of HatchX has a long history of building startups across South East Asia, Australia, and Africa. He began his career at Apple in 2004 where he was involved in the rollout strategy of Apple products into Australia and Asia during the ‘iPod boom’. Nio then went on to spend 7 years in management consulting, working with Fortune 500 companies on their business strategies for the Asian Pacific market. It was a sweet gig by any measure.
But in 2012, Nio began wanting to help create a better world. He realized the best way to do so was to support entrepreneurs tackling big problems. So he left his comfortable job in consulting, moving from Australia to Hong Kong, and started his own company called STARTUPRIGHT. Focusing on 3 areas, STARTUPRIGHT serves as an embodiment of Nio’s mission in life – helping startups secure funding, being hands-on in advising startups to grow, and offering education to help innovators succeed.
With this focus, Nio has worked with several venture capital firms in Asia and built pioneering startup accelerators in several countries including Hong Kong, Singapore, Thailand, Kenya and Ghana. Collectively through these efforts, Nio has supported over 200 startups in strategy, growth, and fundraising. In some cases going as far as being an investor or a cofounder. “Most of my time is spent being deeply involved with several companies as a hands-on advisor. I strongly believe for them to create a meaningful impact and truly solve problems, they need to not only scale but also be profitable,” says Nio.
Sanchitha Silva, the programme manager of HatchX, has experienced first hand the ups and downs of entrepreneurship. Fresh out of college in the US, Sanchitha ventured into the world of digital marketing. After returning to Sri Lanka, he chose to become a freelance marketer, assisting both local and international companies to grow and scale themselves. As he began working with local companies, Sanchitha made an observation, “Many of them needed help with how their business was structured and fine-tuning their processes if they were to survive and succeed.”
Recognizing this, he took it upon himself to develop new skills to help companies solve this challenge. Sanchitha then joined the GIZ SME Development programme, where he began working with startups and helping them get the fundamentals right for long-term success. From here he went on to join the Good Life accelerator programme, which works to create a better future for humanity by supporting impact-driven startups and SMEs. Continuously learning new skills to support startups throughout this journey, Sanchitha recently joined HatchX.
The blueprint for Sri Lanka’s first fintech accelerator
For both Nio and Sanchitha, the HatchX programme was a ship boldly sailing into uncharted waters. “We had our assumptions at the beginning about the support early-stage companies needed. So we had a rigorous process to understand the companies, learning about their strengths, weaknesses to identify where they needed help to fill the gaps,” said Nio recalling the early days of the HatchX programme.
Based on these discussions, the HatchX programme is structured on three key pillars. The first is to ensure that every startup accepted into the programme had its fundamentals right. Founders needed to have a clear understanding of finances, monetisation, legal aspects, finding a product-market fit, and several other areas. Irrespective of the industry, getting any one of these elements wrong can mean the death of a startup.
The second pillar is to set up the support system needed for a fintech startup to go regional. For this cohort of startups, that meant helping them form connections with banks and other stakeholders that’d help them grow their business. “With each startup, one of our biggest questions was, ‘How could we offer value to them?’,” explained Sanchitha. As such, HatchX obtained the endorsement of the Central Bank of Sri Lanka (CBSL) and Fintech Association of Sri Lanka to offer this support to fintech startups.
The third pillar is to help fintech startups obtain capital. This involves not only offering access to capital but also preparing them for fundraising. So before they even meet potential investors, the programme would help them get their pitch decks right, refining their strategy, and other aspects. Afterwards, HatchX would facilitate an introduction to investors that could offer the capital needed for the startups to scale up rapidly to obtain customers and increase revenues.
Returning to the drawing board and creating Sri Lanka’s first virtual fintech accelerator
Once the blueprint for the HatchX programme was finalized, applications were called. Following a rigorous evaluation process, 7 promising local fintech startups were selected. But just as it was set to formally launch in March, the coronavirus brought life to a screeching halt. With a physical accelerator being impossible, HatchX was forced to go virtual.
“We had to make some quick and hard decisions to change the format of the programme into a virtual one. After making the decisions in a few days, we literally had a week to execute things before the programme started,” recalls Nio.
The decision meant HatchX was now venturing into uncharted territory. Already, it was the first fintech accelerator in Sri Lanka and now it was the first in the region to be done virtually. The many activities that were originally planned to take place inside Hatch became Zoom calls. Both Nio and Sanchitha confessed that they expected tough challenges replicating a quality startup accelerator programme in a virtual environment.
Throughout the virtual accelerator, Nio and Sanchitha emphasized to the founders this wasn’t a student-teacher programme. Rather HatchX was, “A supporting member of their startup team.” It was an idea the founders took to heart enthusiastically. Further, its weekly sessions offered the startups a chance to learn and connect with senior members of the banking industry. Eventually, as the situation improved and the lockdown was lifted, HatchX slowly resumed having physical sessions to replicate the social element of a typical accelerator.
“There was a strong buy-in from the founders who saw the value of the HatchX programme. Their enthusiasm greatly helped us succeed in a virtual environment. It’s a testament to expertise and support offered by the stakeholders we’ve connected with through the Hatch ecosystem,” reflects Sanchitha.
Both Nio and Sanchitha also credit the Hatch team for helping create a supportive environment at every stage of the programme. Hence, despite the odds, with strong interest from the founders accepted into the programme and a supportive environment, HatchX was able to replicate many qualities of an effective fintech startup accelerator in a virtual environment.
Shaping the future of Fintech in Asia
As the fourth industrial revolution continues to reshape our lives, fintech holds the promise of solving the problem of financial inclusion in developing economies. Already we’ve seen examples of this happening with a notable one being M-Pesa in Africa. One of the goals of HatchX is to help Sri Lankan fintech startups do the same regionally.
According to a report by Google, Temasek, Bain & Company, 70% of the adult population of South East Asia is unbanked or underbanked. But the region has a high smartphone penetration, offering fintech products an opportunity to step in and solve the issue. The report estimates a fintech boom in the next 5 years with digital payments hitting $1 trillion in gross transaction volumes. Similarly, other emerging services like lending, investment, and insurance are expected to grow 20% annually through 2025.
Looking at the regional fintech landscape, Nio comments, “Sri Lanka being an emerging market is in a unique position where if we do the right things, we can move faster than larger markets like India.” Sanchitha adds that local fintech startups have several opportunities to collaborate with banks and improve the financial system. These range from frictionless digital payments to using AI to make credit decisions to offering greater financial transparency to customers.
Getting things right to seize those opportunities
To seize these opportunities, startups need to get several things right. A crucial one is finding the product-market fit, which Nio described saying “I need to prove there’s a problem, find my customers, and solve it for them.” Equally important is for founders to not be too aggressive and to collaborate without fear of ideas being stolen. “Collaboration is essential for startups. Founders should be open to working with others and absorbing knowledge from their surroundings,” adds Sanchitha.
Another crucial point the duo emphasized was the importance of focus. Many early-stage startups tend to fall into the trap of trying to do too many things. “Founders should only focus on 2 – 3 things at any given time. Your focus fundamentally affects your quality. That’s something we’ve emphasized to the startups in the HatchX programme,” explained Nio. Several other factors affect the chances of success for a startup. Getting the above right may not necessarily mean success. But getting them wrong is a guarantee of failure.
Still, if things work out then afterwards it’s possible to look at international expansion. But here fintech startups face a unique set of challenges. “You can’t have one playbook to scale into different countries,” shares Nio pointing towards the complexities of regulations. Startups also need to identify the needs and wants of their potential customers in these markets. Their findings can vary greatly from one country to another due to several variables ranging from the level of technology adoption to cultural differences. Hence, it’s necessary to identify synergies between the market a startup is looking to enter and the one they’re operating in.
Demo day and beyond
Over the past 4 months, the Hatch programme has defied all odds to successfully conduct Sri Lanka’s first fintech accelerator in a virtual environment. The success can be attributed to 3 crucial factors. A strong buy-in from the founders, swift planning, in the beginning, to identify the support startups needed, and continuously helping the startups form connections with industry stakeholders to navigate the complexities of the banking industry.
Reflecting on the importance of financial inclusion, which highlighted the need for such a programme, CEO of Hatch, Randhula De Silva said, “The coronavirus pandemic has proven the importance of financial inclusion in developing countries like Sri Lanka. Fintech startups are in a unique position to bring about greater levels of financial inclusion for all. The HatchX programme came about as a result of this.”
Co-Founder of Hatch and Board Member of the Lankan Angel Network, Jeevan Gnanam added, “Everyone is becoming receptive to more digital forms of transactions. The fintech startups accepted into HatchX will eventually have products that’ll greatly improve how we access financial services in Sri Lanka and beyond. With the support of LAN, CBSL, and the Fintech Association of Sri Lanka, they’ll get the support needed to make it in a tough space and emerge stronger and more investable.”
In the coming days, the first cohort of HatchX will graduate on its demo day. Here they will pitch in front of investors and get the chance to network with industry stakeholders. You’d be mistaken to think this would be the end of HatchX though. Nio shared that they’ve already begun discussions with investors to help the startups expand regionally.
Similarly, the mentorships and other forms of support the programme has offered would continue. “The startups are now part of the wider Hatch community. It’s only the formal programme that’s ending. We’ll continue to support them in every way possible,” said Sanchitha confidently reaffirming Hatch’s commitment to supporting the local fintech startups to grow and expand beyond the shores of Sri Lanka.