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Start-ups in Sri Lanka are gaining in popularity due to the efforts of investors who have banded together to support entrepreneurs in the targeted fields that are needed for Sri Lanka. One such group of investors is Lankan Angel Networks (LAN), comprising individual investors, venture capitalists and angel investors. In an interview with the Business Times, co-founder of LAN and Founding General Partner and Managing Director of Blue Ocean Ventures (Pvt) Ltd, Prajeeth Balasubramaniam said after the creation of LAN in 2012, they have funded about US$6 to 7 million as seed capital towards 22 companies.
Those 22 companies include takas.lk, Trekurious, a high end experiential travel company, Saraii Village Hotel, and Wild Trails, an eco-friendly hotel with luxury tents based in the elephant kingdom of Sri Lanka in Udawallawe. Angel investors bring in smart money which means the resources they bring in are more than the money they give. Mr. Balasubramaniam said LAN has selected targeted industries with differences that make a social impact on the community such as education, IT, BPO, tourism and fashion design. “We are also funding logistics companies. We have looked at sectors that are needed for Sri Lanka.”
Mr. Balasubramaniam said LAN takes a minority stake in each company, empowers the entrepreneur and exits in five to six years. The investors make money by taking a minority stake. If funding a company fails, LAN writes it off. So far, he said that hasn’t happened. “It’s high risk capital. We have also been in the game and can select good entrepreneurs who have passion and are adaptable.” He added that due diligence is done more on the entrepreneur than the idea itself. The investor and entrepreneur sign a shareholder’s agreement. “It’s very clear cut.”
Success
Mr. Balasubramaniam explained that one in 10 companies succeed in a start-up. “In our case, we have done 22. I wouldn’t say that all will give us major profits but so far, nobody has closed up yet. That is a good sign after four years. We have companies that are not performing well but we restructure them and they are sustainable.”
Blue Ocean Ventures was founded in 2009 by Mr. Balasubramian and his partner at a time when there was no real venture capital in the country. LAN came out of Venture Engine, launched in 2012 as an annual entrepreneurship programme providing a platform for entrepreneurs to launch or expand their business. “Venture Engine was created as a business competition to create awareness in Sri Lanka and provide a platform for entre-
Start-ups have become a buzzword in Sri Lanka. Most people have heard it, but many people don’t really know what they are, or how start- ups contribute to the overall economy. A startup is essentially a new business usually very much tech driven and most importantly has the ability to ‘scale’ in a relatively short amount of time. All start- ups in essence should exhibit ambition, innovation, scalability, growth and disruption. Start- ups will be one of the greatest enablers in the 21st century and will play a pivotal role in job and wealth creation given the eco-system to flourish in.
Start-up community in Sri Lanka
Over the last few years there have been many start- ups that have taken root on the island. While some have been funded by bootstrapping, ( self- funding/ very low cost base), others has been funded by angel funding (high risk taking individuals who fund start- ups and who have the interest of founders at heart). The start- up that I co – founded, takas. lk, was funded by the latter, whereas companies such as yamu.lk have followed the former path. There is no right or wrong ways to build a start- up, but the start- ups that succeed have to have lean cost models that have the ability to also grow.
Now more than ever there are many resources and funding opportunities for entrepreneurs to start their start up journey in the island. There are collective groups such as The Lankan Angel Network ( LAN) who will fund start-up ideas. Further to this there are events being hosted such as Spike and Disrupt 2.0, which brings together entrepreneurs, techies ( people who code), and investors for discussion and support.
Thus the opportunity and timing in terms of both resources and interest is within reach for individuals who preneurs to apply directly Balasubramaniam said. “There is no brokerage fee taken. It is a clear platform pitch to investors. That w the whole ecosystem that
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