Start-up to world leader

How many small and medium-sized companies can claim to reach national status in the country? How many SMEs can boast of staging events where streets are closed and staggering revenues earned by the state by the sheet size of the event?

Last week in San Francisco in the US, a once, small start-up company staged the world’s biggest IT conference cum exhibition, stopping traffic, closing some streets and raising millions of dollars for government coffers.

The traffic stops and temporary inconvenience was so unlike the daily inconveniences we undergo in Colombo to allow ‘powerful’ politicians to have their say and way. No! … here the inconvenience was welcomed by the State of California, with landmarks such as Silicon Valley, Las Vegas and Hollywood, and its residents as San Francisco warmly greeted the thousands of visitors that flowed in for the conference and spent millions during that period. In our story on the conference below a resident is quoted as saying that there were anxious moments when – due to some local issues – there was an attempt to shift the event to Las Vegas, which didn’t thankfully happen.

The city earned a staggering US$80 million revenue for the 4-5 day event which drew some 42,000 participants from across the US and 100 other countries – all due to the efforts of a once, small company. This single event is almost a quarter of what Sri Lanka struggles to raise annually from tourism proceeds.

Oracle – that small start-up operation which began in 1977 – has 30 years later emerged as the world’s largest enterprise software company. How many of our SMEs can boast of reaching even national status? Is this a problem that is specifically to do with the inability of our start-ups unable to get the momentum going or is it due to lack of state support?

Sri Lanka is a land of entrepreneurs as we have consistently emphasized in the past. One only has to consider the number of inventions and creations through events organised by the Inventions Commission and many more, to realise that there are enough and more budding entrepreneurs in the country – if only they are given a chance to further their dream projects. Elsewhere in this section, there is a story of students in Trincomalee developing battery-operated cars and washing machines. What happens next is the question … how are these creations (like hundreds in the past) put to commercial use for the benefit of society and the Sri Lankan economy?

Dr Sarath Ranaweera, a Kandy-based organic food producer whose success was recently profiled in this newspaper, says the lack of capital and the demand for collateral is the biggest stumbling blocks in developing entrepreneurs. He recently proposed an effective way of tackling capital inadequacies by suggesting that banks should – as much as the entrepreneur – share the project risk and place a financial value on the applicant in terms of his experience and qualification.

He says the applicant-entrepreneur brings enormous technical knowledge and know-how and that value should be measured in financial terms and used in project valuation and cost in seeking financial support. Unfortunately, like so many well-intentioned good ideas, his proposal is yet to be even acknowledged by the National Council for Economic Development, to which it was sent.

In Dr Ranaweera’s case, it was his own sweat and tears and those of poor villagers that turned his project into a huge success – not government handouts or pledges. In fact the state has been more negative than positive. For example the road to his state-of-the-art factory, visited by many foreign buyers, is in such a bad condition that he was forced to relocate the office to a better location in Kandy to be able to greet buyers in much pleasanter surroundings!

In another negative development, the government recently amalgamated the risk-taking SME Bank with the Lankaputhra Development Bank. The only institution that would have jointly undertaken risks along with the entrepreneur is now no more. A respected but now retired development banker said it is unfortunate how policies such as this kill the very essence of the country’s economy where more than 70 percent of its development is driven by small and medium-sized enterprises, not the big guns in industry and trade!

The budget, as tax expert N.R. Gajendran pointed out this week during a presentation on “Tax issues and the Budget” at the monthly meeting of The Sunday Times Business Club, has some laudable objectives to develop SMEs which he says is the lifeblood of the nation. But to what extent this would actually happen – given past experience --- is the billion rupee question, he says.

The Oracle experience in San Francisco of how a small start-up became a world leader is a lesson for our policy makers and an eye opener on how to develop the SME sector. But will we ever learn?