“The value of the Sri Lankan startup ecosystem has quadrupled over the past two years. It has risen from LKR 5.4 billion to LKR 21.8 billion,” stated the Chairman of the ICTA, Jayantha De Silva. He stated this reflecting on the findings of the 2020 Global Startup Ecosystem Report (GSER). The GSER is an initiative by Startup Genome and the Global Entrepreneurship network.
Published annually, it’s the most comprehensive research on startups globally. To support the ecosystem, the ICTA engaged with Startup Genome on this initiative. Together they were able to benchmark Sri Lanka’s performance against 250+ ecosystems globally in the report. Launched at The Ecosystems Couch Conference, the GSER’s release comes at a crucial time.
In the wake of the coronavirus pandemic, startups everywhere are struggling. Even in Sri Lanka, many are facing closure as revenues dry up. Yet, the findings of the report shows there is hope during these trying times.
Sri Lanka’s Strengths: Government Support & Strong Talent
The GSER highlighted two key reasons for startups to consider operating in Sri Lanka. The first was the Sri Lankan government’s support for technology companies. The second was the availability of a talented workforce. The report recognized Sri Lanka as the #2 destination among global ecosystems for affordable talent.
Reaffirming the government’s support, Jayantha said, “ICTA is committed to facilitating the continued growth in ecosystem value and startup output. We, as the ‘Island Of Ingenuity,’ take pride in our product engineering talent pool which has delivered world-class products and gained investor confidence globally.”
Jayantha’s words come as a sign of reassurance. In the wake of the coronavirus pandemic, startups have sought additional support from the government. The critical need of the hour being access to funding. The GSER states that globally, “4 out of every 10 startups are in the red zone: they have three months or fewer of capital runway.” In Sri Lanka, over 80% of startups are said to be in this situation.
Despite these challenges, the Sri Lankan startups show great promise. In recent years, we’ve witnessed the growth and success of local startups attracting the attention of foreign investors. A recent example is the $15.5 acquisition of nCinga by the Singaporean eCommerce company Zilingo. Another notable example was the $2.5 million investment by the IFC in PickMe in 2018.
Recognizing their potential local investors have reassured their support for local startups. Chairman of the Lankan Angel Network, Mano Sekaram said, “Over the past decade, regional VCs, foreign investors, and other parties have made significant investments into tech startups. With this backdrop, we’re excited to launch Sri Lanka’s first Angel Fund to further support the growing ecosystem.”
eCommerce & Fintech: The Next Big Thing?
The report goes onto identify two sectors that show strong potential. The first of these is eCommerce. The annual domestic eCommerce sales and services are estimated to be at $40 million. By 2022, this figure is expected to hit $400 million. The recent curfew saw the widespread adoption of eCommerce. A nation desperate for groceries and other essentials turned to online retailers. Initially, there were struggles due to the sudden spike in demand. But in the weeks that followed, several companies overcame the challenges of selling groceries online. In doing so, created a much-needed stream of regular supplies.
Facilitating this eCommerce drive has been the FinTech sector. The GSER also recognized this to be another sector showing great potential. Earlier this year, the Central Bank of Sri Lanka announced a regulatory sandbox for FinTech applications. This offered companies a chance to test their applications without infringing regulatory requirements. A move that the report has recognized as a key enabler that’ll allow the sector to grow. Beyond this, it also mentioned the support from the private sector. Notably the recent launch of HatchX, which is Sri Lanka’s first FinTech accelerator.
Sharing his thoughts on these findings, CEO of PayHere, Dhanika Perera said, “The COVID-19 pandemic expedited consumer adoption of eCommerce out of necessity. PayHere recorded a remarkable 4x growth on daily payments processed for local eCommerce businesses. This shift in consumer behaviour has now convinced traditional businesses to move online. During the curfew, we saw 200+ businesses applying to use PayHere’s services. It’s the silver lining from COVID-19. This unprecedented growth is here to stay.”
The opportunities available & how startups can seize them
With an expanding footprint, the 2020 GSER offers valuable insights. These can serve as guidance for leaders to foster thriving ecosystems. In doing so, leveraging startups to restart economies following the COVID-19 lockdowns. “This is the time for policymakers, community leaders, and foundations to double down on their support of local startups — the #1 engine of job creation and economic growth,” said JF Gauthier, Founder & CEO of Startup Genome.
For Sri Lankan startups, while the report highlights two sectors, there are several opportunities out there. All founders need to do is simply look beyond IT. COO of SLINTEC, Heminda Jayaweera pointed out that there are several industries with room for innovation. Agriculture, energy, material science, and nanotechnology to name a few. “We can leverage the value of our raw materials and also utilize the highly advanced expertise of scientists and engineers we have in Sri Lanka,” he said showing the way forward for Sri Lankan startups to seize untapped opportunities.
To find out more, click here to view the full report.