IFC says stability and favourable policies are a must for startup success

‘Why can’t we do better?’ is always a question we ask ourselves in all kinds of situations. The tech world is no different and the big question is how can we build a billion-dollar company?

To speak on the topic, ‘Why haven’t we seen a unicorn in Sri Lanka,’ at the recently held ‘Sri Lanka Internet Day 2022,’ the Digital Chapter of FITIS invited International Finance Corporation (IFC) Disruptive Technology Investments South Asia Lead Ruchira Shukla. Her belief is that it’s not impossible to build one in Sri Lanka, but only if certain conditions are met.

On the upside, she said Sri Lanka does not lack innovative people, but importantly, given the country’s recent economic turmoil, stability needed to be seen. “A very distinct commitment to supporting tech start-ups is necessary in order to create the ecosystem for stakeholders to come together to make it happen. Stakeholders include entrepreneurs, investors, regulators, offline businesses that need to partner with digital businesses, large domestic corporates, even Sri Lankans living overseas, who are willing to bring insights and capital back to the country. Sri Lanka has the key ingredients, but stability and a commitment to policy that supports digital businesses is a must for the whole thing to come together, especially considering the country’s volatile past,” she said.

Speaking of Sri Lanka’s tech ability Shukla said: “You have really strong tech talent. For example, we are very pleased with the achievements of the tech start-up IFC backed, PickMe. They have executed really well through the macroeconomic storms over the last two years.

“Tech entrepreneurs need to start learning from each other and share their learning and insights. Then they need to go after traditional businesses and find ways to disrupt them. Some solutions can be borrowed from what is happening in the United States, China, and India, but sometimes those new business models and solutions have to be adapted to the local market. This is where disruption in business models and disruption in thinking has to be seen. All of it together will bring about a favourable environment which will spur new business creation and attract capital in the future.”

Connectivity and digital engagement are key to building a strong digital business, and Sri Lanka has very good connectivity, which compares very well with population percentages of other countries in the region. Sri Lanka also has a very strong pool of tech talent, of which the country can be proud.

The Global Startup ecosystem report that came out in 2022, ranked the country number two in the Asia ecosystem for affordable talent, which measures the ability to hire tech talent. This is relevant for today because with the right teams and technology, companies with vision can become bigger in scale and solve very critical problems across sectors.

“Sri Lanka certainly has the key ingredients. It also has large domestic conglomerates who are beginning to see the value of technology and want to adopt technology solutions as well as support digital start-ups,” Shukla said. “Down the road, these domestic players could acquire disruption created by the start-ups. With the key ingredients and the right enabling environment, Sri Lanka is certainly very well positioned to make it happen.”

Shukla says IFC is a keen investor in South Asia in countries such as India, Bangladesh and Sri Lanka. IFC has invested in India’s digital economy backing 16 direct investments and seven venture capital funds, with 8 of the 16 direct investments growing to become unicorns. India’s leading grocery start-up, Big Basket, was an IFC investment which became a unicorn. In Bangladesh, IFC has backed Chaldal, the country’s largest e-grocery store, again a leader in its category. “IFC has invested across e-commerce, health tech, edutech, logistics, and except for some sectors which are against our policy such as alcohol industries, by and large we invest across multiple sectors.”

Since 2016, IFC’s Startup Catalyst Program, for example, has supported more than 1,180 start-ups in 24 emerging markets by investing $ 60 million in more than 19 accelerators and seed funds. The IFC investments have helped those start-ups collectively mobilise $ 4.5 billion in follow-on funding, driving innovation and job creation. IFC is now doubling the Startup Catalyst Program with a new pool of $ 60 million to support incubators, accelerators, and seed funds in the most nascent venture ecosystems, as well as those focusing on areas such as climate innovation, gender and inclusion.

In terms of Sri Lanka, Shukla also points out the country has the potential to create winning businesses in healthtech, creator economy, transportation, and logistics. “I think Sri Lanka continues to do well in the transport sector, with PickMe as a star standout. E-Logistics and digital transportation are critical enablers for the growth of E-Commerce and there is promise for companies out of Sri Lanka to expand regionally. The other space that I think is important is health tech, where IFC has a particularly strong focus.

“Sri Lanka was the first country to benefit from an IFC global initiative designed to boost access to affordable and quality healthcare through digital technology. The initiative with Hemas, one of the largest private sector healthcare providers in Sri Lanka, was devised amid increased demand for services in the wake of COVID-19 and supports the adoption of technology solutions by health service providers. I think telehealth, e-diagnostics, e-pharmacies, hospital information systems, and health data records can be deployed across national boundaries very easily.

“These can be deployed across country borders in Asia, Africa, Middle East, and other markets. In health tech, there is a lot of room for innovation around the use of AI, AR, VR for making health services accessible and affordable for people who are underserved today. So, there is a lot of room for innovation in health tech in Sri Lanka that would help not just the country but benefit the region as a whole.”

The third sector she talks of, where important innovation is happening across the world, is the creator economy – a space that is supported by the emergence of innovative tools for individuals to create content and make the content available globally via digital platforms. “There is a large base of influencers leveraging the power of content creation tools and individual creators developing and publishing educational, informational, and business content. IFC is very actively looking at that space across the world because we feel it has the power to generate livelihoods while transforming the interactions between businesses and communities. There again, Sri Lanka should view itself as a country with an advantage because it has a pool of strong tech talent and the opportunity to create content platforms that can be made available regionally as well as globally.”

Overall, Shukla continues to be bullish on the potential for Sri Lankan technology start-ups but emphasises that, while stability is an important part of the equation for the future of Sri Lanka’s digital industry, there is also the question of policy. As for the need for policy that’s favourable to the digital industry, we can take a cue from what President Ranil Wickremasinghe said in his ‘Sri Lanka Internet Day 2022’ message: “I believe it is the duty of the relevant state agencies and lawmakers of this country to establish a favourable environment for the information highway to thrive in a manner that is beneficial to all. Laws and regulations need to be formulated to protect local industries and especially start-ups, in a bid to foster a flourishing spirit of entrepreneurship, which would generate new job opportunities and sustain livelihoods.”

The writer has worked as a journalist in print, radio, and television. He is currently a Public Relations specialist and an influencer for policy change.