On 19 October, the GSMA Ecosystem Accelerator team was invited to judge early-stage tech start-ups for Seedstars Colombo in Sri Lanka, the winner of which was invited to join the exclusive Seedstars family, and compete at the Regional and Global Summits. The event coincided with our Innovation Fund’s due diligence visit to local start-ups which allowed us to deep-dive into the ecosystem. Here are our main takeaways.
Strong Technical Talent
The technical talent in Sri Lanka continues to impress. Of the eight start-ups seen pitching at Seedstars Colombo, two were using chatbots as a core product. Alakazam uses a bot to support SME sales and marketing campaigns, and BotFactory actually allows small businesses to create their own bots.
This point was reinforced by start-ups we met outside the competition. Senzmate boasts being the first Sri Lankan IoT start-up that provides end-to-end solutions for enterprise applications.
In fact, Sri Lanka has an established reputation for producing strong technical products in the corporate space, albeit rarely in the spotlight. Uber and eBay are using software produced from local WSO2, while Paypal recently preferred to use Calcey Technologies to produce a dashboard over in-house.
When the macro-level technology is strong, unsurprisingly it trickles down to the entrepreneurs. The strong engineering education and good corporate training results in developers/engineers that are interested in building tech. The cost of living is also cheap (in relative terms) so that developers can build and fail; build and fail.
However, there is a double-edged sword to consider. While most start-ups are technologically strong, they lack commercial awareness and viability. Mangala Karunaratne, CEO of Calcey and Director of Start-up Sri Lanka, offers his insight: ‘In Sri Lanka, a lot of the start-up founders are techies. Techies who are more interested in what they are building, as opposed to why they are building it. So there is a product-market-fit problem, impacted by a lack of founder domain diversity’.
In short, there is a need to improve the business fundamentals. More exposure to international markets, mentors and successful entrepreneurs address this issue, demonstrated by community initiatives such as Startup Sri Lanka or global programs such as Seedstars.
The winner of Seedstars Colombo is a fine example of a strong technical product with a clear commercial market: Jendo is a health-tech wearable and cloud-based solution that can identify early signs of cardiovascular diseases through their own algorithm. The first runner-up was Alakazam, the bot start-up mentioned above, and second runner-up was Lotus360: a cloud-based ERP system, designed for the construction industry, providing a one-stop solution for different stages of the construction supply chain.
SMS is King for consumer engagement
To re-emphasise a business maxim: products and services must localise if they are to address the needs of the consumer market. Like many emerging ecosystems, there’s a gap where the global players either are not present or not effective.
- Take PickMe, the Uber competitor ride-sharing app which is picking up traction due to the onboarding of local Tuk Tuks.
- For ecommerce, the absence of Amazon, Alibaba, Lazada etc. has meant that local Kapruka.lk enjoys the lion’s share.
- As a strict marketplace, eBay competes but is a close second to local frontrunner Ikman.lk.
For these large, local tech companies, being the first mover is a clear advantage over the international brands, as is having a better understanding of local behavioural economics and consumer engagement.
But even for local start-ups looking to set up, how do you localise for the Sri Lankan market?
Having spoken to a number of start-ups, it seems that SMS is still the preferred, most effective way of engaging with their consumers. Mobile Internet penetration in Sri Lanka is 39 per cent, and data-based communication, such as emails, does not yield the same open/response rates. Start-ups are taking the right approach in utilizing the right communication for the right market.
Take the following 3 start-ups as core examples:
- Guru Paara: A teacher-student matching platform, using SMS as a way of communicating with students, given that students frequently turn off data.
- ZigZag: A local ecommerce specialising in women’s fashion, saw SMS as the most effective in delivering loyalty campaigns, which converted in sales. The SMS includes a code that can be redeemed via digital channels (eg. website; Facebook).
- Yoho Bed is a room-renting platform, tantamount to the ‘uber for accommodation’. They preferred SMS as they can engineer campaigns based on location more easily than with email.
Some mobile operators recognise and support this tool for engagement. Dialog (Axiata) enable start-ups to use SMS by opening up their APIs. We covered this in a previous report. As recently as 9 November, Ideamart (Dialog’s API platform) announced a deal with Sri Lankan operator Airtel, meaning that start-ups can now access the customer bases of three of Sri Lanka’s major operators: Dialog, Hutch and Airtel.
Recognising the size of the local market, and the potential overseas, Ideamart are also helping the start-ups prepare for international expansion within the Dialog network – eg. Malaysia.
A growing ecosystem
Sri Lanka’s ecosystem continues to excite due to its rapid growth. There are more start-ups, more hubs, more events, more support from the public and private sector and more investors.
First, there is a notable increase in infrastructure and space we see in Colombo. Seedstars Colombo took place at MAS Innovation Centre, colloquially called The Hive, which houses entrepreneurs and experts to foster innovation. Also heeding the call for providing space is Business Hubs (also called Entrepreneurs’ Hub) who responded to the demand by opening 5 hubs in the space of 12 months across Colombo.
Secondly, the government has been increasingly active in introducing more start-up friendly policies, lead by the ICT Agency. In particular, the government have introduced 200 per cent Capital Allowances for business making investments in the Northern Providence, and 100 per cent Capital Allowances for Eastern Providence Investors (further info found HERE). Last year, the Sri Lankan Export Development Board (EDB) implemented a budget proposal on start-up funding, where 26 start-ups were recommended by a committee appointed by the EDB for concessionary loans provided by State Banks.
Last but not least, the investment cycle is picking up. Earlier this year, oDoc, a Sri Lankan mobile telehealth platform, received 1 million USD in Seed funding – the largest seed in Sri Lanka. More promising, however, is that the investment came from local investors – Phoenix Ventures, Loits and a prominent angel.
We would like to end this blog by thanking the Seedstars team for inviting us to participate at Seedstars Colombo, Mangala Karunaratne for his input, and our partners for their continuing support.
The Ecosystem Accelerator programme is supported by the UK Department for International Development (DFID), the Australian Government, the GSMA and its members.