What is the Sri Lankan startup ecosystem like? A YourStory Exclusive

And recently we caught up with Prajeeth Balasubramanian, Founding Partner, Lankan Angel Network to get a pulse of the Lankan startup ecosystem. Prajeeth has been working in Sri Lanka since the past 10 years and has a very deep understanding of the startup scenario in the region. In his past avatar, Prajeeth was the MD/CEO of Klevenberg Pvt Ltd, which is Sri Lanka’s sole distributor of Lucas Automotive Products. He currently serves as the MD of Blue Ocean Ventures, a seed-stage investment firm that helps address the lack of capital for the early stage Sri Lankan startups.

As the flag-bearer of Lankan Angel Network as well as Blue Ocean Ventures, Prajeeth is one of the best people to get in touch with to understand the Lankan startup ecosystem. Here are the excerpts of an exclusive conversation with Prajeeth:

YS: How big is the Sri Lankan startup ecosystem?

Approximately 40 to 50 companies have been started last year. This year we are expecting this number to grow by 50%.

YS: How well penetrated is internet in Sri Lanka?

The number is currently at 3 million plus internet users, we should reach 4 million by the year end. We have over 1 million registered users on Facebook. This number is expected to reach 10 million within 2-3 years.

YS: Where can one find most of the startup action in Sri Lanka?

Much of the startup activity is still focused in and around Colombo. At Lankan Angel Network, among our goals in the next few years is to promote the rise of entrepreneurship in areas away from Colombo.

YS: How is the angel ecosystem in Sri Lanka evolving?

The angel activity in Sri Lanka has seen tremendous growth since the launch of the Venture Engine program last year (2012). That event was followed with the Lankan Angel Network(LAN) being setup to provide a continuous forum where local entrepreneurs are able to access both capital as well as advice and mentoring. The Indian Angel Network (IAN) has been an invaluable partner. Venture Engine and LAN along with numerous IAN members are active investors in Sri Lanka.

YS: What about Venture Capital?

There are a few Private Equity firms, not VCs. It's a fine line between angel & VC though. Given the market size, the angel activity that we have may suffice and the angels may well do the VC role as well. 8 companies received funding through Venture Engine last year. The Lankan Angel Network was only setup at the beginning of this year. There is another local program called Spiralations that hands out $5,000 grants to startups. They probably had 6-8 in their class last year.

YS: Who are some active champions of the Sri Lankan startup ecosystem?

LAN and IAN have created this ecosystem. SLASSCOM, Corporate Partners (Dialog, Expolanka & Orion City to name a few), Ceylon Chamber of Commerce and Massachusetts Institute of Technology among others have partnered with us to turbocharge this ecosystem.

YS: What about prominent tech colleges and the developer ecosystem?

The University of Moratuwa is the unquestioned top technical college in Sri Lanka. This institution has in the last few years seen the most number of students, worldwide, being accepted into the Google Summer of Code. Informatics Institute of Technology, APIIT, University of Colombo are some of the other prominent universities.

YS: Some of the upcoming Sri Lankan startups to watch out for?

We have a good amount of activity in the consumer internet space.

• 24x7 techies (Tech support for SMBs)
• takas.lk (Online electronics store)
• trekurious.com (Tours listing)
• wild.lk (Discover wild trails experience)
• Linklk.com (Listings of cabs, sports, movies, finance etc)

YS: What are some of the initiatives that is pumping up the overall activity?

We have tied up with many institutes to promote startups in the respective industries. The Ceylon Chamber will run SparkIT to promote ICT entrepreneurship, Academy of Design for design students and Hikkahack to promote hacking culture within Sri Lanka. These are all annual programmes, which we support.

YS: Why should anyone start up in Sri Lanka?

It's a great place to test a concept. Though comparatively small, the market has sufficient size to sustain a decent business. With major population centres so close (India, China, Indonesia) and with economic power shifting to these areas as well, Sri Lanka is an ideal place for a startup. The local support network is very active (angels, a few PE funds for future rounds, IAN is working closely with LAN) and Government regulations are quite reasonable (e.g. it quite easy to setup a new company here).

YS: Final Words

We are accelerating at a very good pace. The interest levels from investors around the world (Singapore, India, Australia, UK, Japan, USA, Canada etc) has been amazing. Lots of them are involved via LAN. The number of plans received this year was much greater. There is a rapid increase in interest levels from entrepreneurs. We believe Sri Lankan startup ecosystem is bound to take off!

More about Lankan Angel Network http://www.lankanangelnetwork.com/