Start-ups in Sri Lanka; the long journey ahead
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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 start-up 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 choose to follow the path.
What to watch out for
When I speak to young entrepreneurs they feel that start-ups should essentially be an overnight success story or the next big idea. The reality is that in the world of start-ups there is no such thing as overnight success (or very few). While, start-ups should grow and grow fast the journey of a start-up success story will take sometime. Take any of the big global names: Uber, Paypal, Airbnb, Hubspot, Tesla, SpaceX, Chobani, GoPro, all have taken at least five years to be a success in some cases up to 10. Inevitably in Sri Lanka this trend applies as well.
Amy Wilkinson is a senior fellow at Harvard University’s Centre for Business and Government and the writer of the best seller “Creators Code.” She has interviewed more than 100 entrepreneurs in the US who have built up businesses that have grossed more than US$100 million, and one of the key features of these success stories was that almost all of these businesses took a relatively long time to build up. The summary is that building a killer business takes a little time, lots of effort and funds.
There are also at times an over-emphasis to raise large amounts of funds in order to solve problems; capture markets. While having funds, and raising funds for growth is a part of start-up systems it’s by no means the be all and end all. Equal if not greater time needs to be spent on building a great team, and a great team culture. Like most things in life start-ups will have good times and bad, and then times are difficult you need a team that works and have each other’s back! Once you have a great team you will be able to execute and execute very well so your start-up can be a winner.
Impact of start-ups and next steps
Based on the studies done, The Economic Impact of Venture Capital: Evidence from Public Companies (Stanford University Graduate School of Business Research Paper No. 15-55. 2015). Start-ups add a significant percentage of jobs to the US economy. The paper goes on to say, “From research and development to employment to simple revenue, the companies funded by venture capital are a major part of the U.S. economy.” In terms of the US there are many opportunities created by both the government and private enterprise, which makes it relatively easy for start-ups to grow. Unfortunately in Sri Lanka we have to do a lot more work in order to make sure start-ups flourish.
For instance, one of the main contributors in the growth of start-ups is that the US government has made it very ‘cheap’ to fail. This is hardly the case in Sri Lanka, and the government must take steps to address this (terms of hiring/lay offs/bankruptcy). Also there could be far more incentives given to investors who invest in start-ups in terms of tax benefits since investor’s funds and mentorship are key drivers of the start-up eco system. The government should look into giving tax breaks for start-ups till they are able to stand on their own two feet. In the 21st century start-ups will play a major role in developing economies of countries. Its in our best interest to make sure that we (government/public) create the framework and the mind set so that we will be able to gain from start-ups and as a country not get left behind.
(The writer is co-founder of takas.lk & CEO)