Start-up ecosystem grappling with crisis but forging ahead

Sri Lanka’s start-up ecosystem is 10 steps behind with all the current issues it is grappling but industry officials say certain innovative businesses are taking shape after changing their business model to match the new normal.

Sri Lanka also lacks funding for the growth stage of start-ups which in turn impacts the country's economic growth, industry officials say.

Start-ups are heavily affected by the current economic situation. Some start-up firms don't see any signs of continuation but in others, there is a golden opportunity in this dire situation, Kanishka Weeramunda, Founder of DirectPay and PayMedia - both start-ups - told the Business Times on Thursday. He pointed out that the latter had pivoted their business models to the new normal. “About 70 per cent off the start-ups will not continue while the balance is thriving.”

He said some of these companies started last year in sectors such as social enterprises and projects funded by donor agencies such as the World Bank and the United Nations.

He added that social enterprise startups such as career me.lk and We Care For Children are doing well. Also, fintechs such as anybank. lk are also doing well. Mr. Weeramunda said that donor agency-funded projects such as Loons Lab which is into health tech and Elysium Crest which has a business model to digitalise government sector departments are also in a good position.

Prajeeth Balasubramanian, CoFounder/Managing Partner – BOV

Capital, said that to attract investments during these volatile times will be tough given the country's ratings.

Mr. Weeramunda agreed noting that investment in the start-up sector is challenging as foreigners aren't looking at the country and the local entrepreneurs on the other hand are holding on to their funds due to the instability in the country. Thus, it’s important to have corporates and banks jointly look at re-investing some of their profits in innovation and entrepreneurship.

“Despite no support from the government, we have supported start-ups via the very few private funds in Sri Lanka. With government support this can increase further,” Mr. Balasubramanian reiterated.

He said that entrepreneurs contribute 52 per cent to the gross domestic product GDP and 45 per cent of employment in the country.

There are certain start-up companies in enterprise software, banking fintech, blockchain, cyber security, and banking software that they are looking at, Kishan Nadarajah, Principal BOV Capital, a foremost funding platform, told the Business Times on Wednesday.

He said there is a company which is Uberising the services subsector such as hairdressing, plumbing, electric wiring, woodworking etc. “It is a promising company. It is also an old concept in the world but in Sri Lanka it is something new.”

“We also see smaller deals happening which means lesser equity for the funders,” Mr. Nadarajah added.

He also said that more and more firms are trying to set up in Singapore especially owing to the exchange rate conversion disadvantage.