With incubation programmes helping to attract foreign capital for local enterprises, the future looks bright for Phnom Penh’s blossoming startup community
This article was published in Focus Cambodia, a sister publication of Southeast Asia Globe. For full access to the latest issue, click here.
Words by Euan Black Photography by Sam Jam
“Ideas are like rabbits,” John Steinbeck told Cosmopolitan in 1947. “You get a couple and learn how to handle them, and pretty soon you have a dozen.” Unfortunately, it takes more than a good idea to run a successful business. A lack of expertise, limited access to finance and a host of burdensome business regulations have previously prevented Cambodia from realising its commercial potential. But a new generation of entrepreneurs – with a little help from some friends – have proven that where there’s a will, there’s a way.
Cambodia’s startup sector has been through a growth spurt in the past few years, an upswing that can largely be attributed to the work of the Mekong Business Initiative (MBI). Established in 2015, the MBI is a development partnership between the Australian government and the Asian Development Bank that has helped to accelerate economic development across Cambodia by promoting innovation in financial technology and connecting Cambodian entrepreneurs with a global network of angel investors.
While securing funding is a challenge for startups everywhere, it is particularly difficult in Cambodia, as most of the country’s banks only accept real estate as loan collateral, according to MBI’s Cambodia country manager Khemara Ros.
“A lot of startups only have one building, which they pledge as collateral to get financing for capital investment. Later, when they inevitably need to take out another loan for working capital, they are unable to do so because they have no more fixed assets,” Ros explained.
But rather than wait for the system to catch up with the needs of startups in Cambodia, MBI decided instead to promote innovation within the pre-existing regulatory framework. After analysing developed economies such as Singapore, MBI identified peer-to-peer (P2P) lending as a feasible method of alternative financing. This led them to invest in the Cambodian Investment Club (CIC), which had already begun developing the country’s first ever P2P lending platform.
CIC’s P2P online lending platform, known as Komchey (Khmer language for ‘loan’), enables startups to access funding through pre-existing businesses within Cambodia. To begin with, only CIC’s members will be able to use the platform, but the company hopes to open up Komchey to the wider public as soon as possible.
Other challenges are the country’s confusing regulatory business framework and complex registration process, which contributed to Cambodia being ranked 180th out of 190 economies in the World Bank’s Doing Business 2017 report. But Ros believes the benefits of doing business in Cambodia – such as preferential trading agreements like the EU’s Everything But Arms initiative, as well as the country’s average annual economic growth rate of 7% – far outweigh the negatives.
“The Doing Business report has a specific criteria that focuses on the legal side, but the happening on the ground can be somewhat different. If you are willing to pay a small amount of money for an agent’s services, they can help you set up in a week or so,” said Ros.
In addition to assisting CIC develop Cambodia’s first ever P2P lending platform, MBI established the Mekong Angel Investment Network, or Main, to help connect Cambodia’s entrepreneurs with a global network of investors that has the capital, commercial knowhow and business links required to successfully scale up a startup business. The network’s first investor tour, which involved potential angels being introduced to local investors and entrepreneurs and conducting training sessions for them, took place in June 2016, with angels touring again in September and October that year.
In the eyes of Steve Landman, a prominent angel investor within the Main network, the tours not only provided Cambodian entrepreneurs with the opportunity to procure capital, but also the chance to learn from the people who had already done what they were trying to do.
“Like many countries, Cambodia suffers from a depth of experience. And the Main network is about establishing links with a global community of people so that Cambodian entrepreneurs can reach out and say: ‘Hey, we need help with marketing; how would you do it, and who could you put me in touch with?’”
One of Cambodia’s biggest success stories has been Bookmebus, a website and app through which customers can purchase national bus and ferry tickets. It saw $70,000 worth of transactions in November 2016 alone, up from roughly $30,000 in July 2016.
“The Vietnam government is more active, more flexible and more supportive of entrepreneurs…If we could go in that direction it would be great and, in no time at all, Cambodia will pick up.”
Bookmebus founder Langda Chea was lucky enough to be chosen for a three-month accelerator programme run by co-working hubs Smallworld Cambodia and Tikers@Mekong (it was dubbed ‘Startup BoomCamp’) that began in October 2015. The experience was eye-opening for Chea, who admitted that prior to participating in the programme, even the idea of a ‘pitch’ was alien to him.
“As part of the programme, I met successful businessmen every week who gave me advice. During the pitches, investors would ask questions about my financial projections and exit strategies, which I found challenging to answer… so I learnt a lot,” the young entrepreneur said. After the boot camp, Chea went on to secure further investment for Bookmebus from five Main investors following the network’s first tour in June 2016.
My Dream Home is another example of a Cambodian startup success story that has profited from the country’s growing business support network. On his return from a brief stint in Australia, founder Kongngy Hav was dismayed to discover that given Cambodia’s low GDP per capita of $1,200 a year, it would take roughly 70 years for an average Cambodian to afford to buy a house in the suburbs of Phnom Penh. He immediately set to work on finding a solution to his country’s chronic affordable housing shortage, eventually settling on a construction method using interlocking Lego like bricks made from local, eco-friendly materials.
In 2014, he secured funding from the Dutch development organisation Investing in Children and their Societies (ICS) after participating in a startup competition. He says he continues to benefit from operating out of co-working space Impact Hub Phnom Penh, which has connected him with an extensive business network and actively developed his leadership and pitching skills. Since taking his product to the market about two years ago, Hav has gone on to sell more than 90 houses, which are up to 40% cheaper to buy than regular brick houses.
Cambodia has always had good ideas, but the recent emergence of a startup business community means it is finally figuring out how to handle them. However, Impact Hub’s co-founder Alberto Cremonesi believes the government must become more actively involved in the startup community if it is to emulate the success of Ho Chi Minh City’s thriving tech and startup scene.
“The Vietnam government is more active, more flexible and more supportive of entrepreneurs. Cambodia has started going that way, but even something as simple as waiving taxes for the first two years for SMEs would be awesome,” Cremonesi told Focus Cambodia. “If we could go in that direction it would be great and, in no time at all, Cambodia will pick up.”