Start-ups, the new generation
View(s):In the good old days, most budding entrepreneurs didn’t have the foggiest idea on how to transform an idea or innovation into a successful business. They had a plan but often the struggle to set up took months, even years. Times have changed, drastically. In today’s world of business, new groups are emerging and one such is the start-up community, a sector which is taking the world by storm and making a strong impact in Sri Lanka too. Start-ups are not rocket science: people need just an idea, some initiatives, a desktop computer or a laptop. No storefront or a shop. Often the multitude of cafes in Colombo and the suburbs serve as temporary store fronts or meeting places to sit down with a client over a cup of steaming coffee or tea, malu-paan or rolls.
Colombo’s coffee culture is very much linked to the start-up community where meetings take place, deals are clinched and ideas exchanged. It was one such recent conversation about this new generation of entrepreneurs that got the Business Times interested. This group of entrepreneurs has their own social media networking which occasionally results in informal meetings at a convenient café in the city. The idea to focus on these businesses and support their cause through seeking necessary state intervention and other needs in a special series (turn to Pages 10-11), once a month, in the Business Times arose after one of these meetings. By the way, cafés are a great place to run an on-the-go business; requiring only a laptop, mobile phone, free Wifi (from most cafes), lots of plug-in connections, and loads and loads of coffee or tea.
Start-ups however have their share of problems and issues, similar to any small business or small and medium scale business. Approvals to start a business go through the same process as any other operation with the exception that if one can manage a unit from home or a smaller office, then the rigmarole of setting up a fully-fledged office, the connected trimmings and approvals from the municipality, etc can be done away with, if necessary. PickMe, BuzzBird, Readme, yamu or takas are among an array of start-ups in Sri Lanka that have succeeded with little or no capital in the formative years. Success is not easy but the more ingenious and innovative you are, the better it is. Start-ups are also connected to the new age of disruptive business where organisations ‘disrupt’ the traditional form of trading to create an unconventional trading platform.
Some start-ups are also what one could describe as ‘middlemen’, a much-bandied term to describe (often in a negative context) a trader who buys and sells goods or fixes deals. However in today’s context such start-ups are more respectable businesses like takas.lk or wow.lk which are modern marketplaces for trading in goods and services through the web. For that matter, today’s entrepreneurs often trade through the web so much so that there is little or no face-to-face contact between the vendor and the buyer; except for the delivery man! Delving into history, how the word ‘start-ups’ originated is debatable but the term is believed to have been first used by Forbes magazine in 1976. It is also described as an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leaders and alliances.
Is there a difference between start-ups and small businesses or SMEs? Dave McClure, founder of 500 Startups, is quoted as saying that “… start-up is a company that is confused about a number of things: what its product is; who its customers are; and how to make money. As soon as it figures out all three things, it ceases being a start-up and becomes a real business. Except most times, that doesn’t happen.” In Sri Lanka, start-ups have in recent times been helped along the way by various, small funding opportunities- however all private-sector driven. There is little or no support in funding from the government for this new breed of entrepreneurs except stumbling blocks, as our series today highlights. The Lankan Angel Network offers some funding options while MTI Consulting recently initiated an ‘ideas’ funding tool raising 700 million rupees worth of interest from Sri Lankan corporates.
A bigger problem is that taking risks has become a costly affair. Rather than encouraging risk-taking, for without this Sri Lanka cannot create a surfeit of innovators or creators who can take their ideas to the next level, closure laws are too rigid. Apart from that funding from the established financial sector comes with many questions and demand for a lot of collateral. Very little recognition is given to being imaginative, creative or innovative. And this is where Sri Lanka will once again miss the bus – by turning a blind eye to the creative minds that start-ups will eventually spawn as millennials transform into budding entrepreneurs with no collateral except their ideas, initiatives and determination as ‘collateral’. What is lacking is an enabling environment for this industry, a few dozens’ now but with potential for thousands in the near future. Exit clauses for failed companies in Sri Lanka were made even worse by the recent budget where closures now cost a lot of money.
As guest columnist Shakya Lahiru Pathmalal has pointed out, there is a lot of work needed in Sri Lanka before start-ups flourish, adding that one of the main contributors in the growth of start-ups is that the US government has made it very ‘cheap’ to fail. While SMEs are said to be the backbone of the economy, there is no specialised or prominent ministry or much state attention given to small business. Some years ago, the Business Times suggested the creation of an independent authority or Entrepreneurship Council, ideally in a joint public-private partnership, to help small businesses grow. With the entry of the start-up community, an organisation like this becomes more imperative to help this new generation of entrepreneurs who apart from being risk-takers are energetic, vibrant, creative and innovative and fast becoming a vital part of the nation’s post-war path to progress and the economic landscape of the future.