Funding is the biggest hurdle for Cambodia’s technology startups

Panelists answer questions during an announcement of the first three startups to receive investment through the $5 million Smart Axiata Digital Innovation Fund (SADIF) last November.
Panelists answer questions during an announcement of the first three startups to receive investment through the $5 million Smart Axiata Digital Innovation Fund (SADIF) last November. Hong Menea

Funding for the tech startup scene in Cambodia has been growing, but challenges persist for young entrepreneurs hoping to attract investment for their nascent businesses.

Investment in the startup ecosystem in Cambodia has been dominated for several years by small amounts of seed funding, usually amounting to a few thousand dollars, awarded via small-scale competitions. Recently, however, large funds have begun to focus on promoting Cambodian startups with heftier financial contributions. Yet many local startup founders say they are still finding it difficult to attract investment.

Melanie Mossard, director of community at startup business incubator ImpactHub, said that a lack of funding is one of the greatest challenges that tech startups face in the Kingdom.

“We see three main challenges for startups in Cambodia . . . access to network, technical business skills and access to funding,” she said. “There are very few [funding] options available in Cambodia, but I am optimistic about the future.”

She added that the launch of the Smart Axiata Digital Innovation Fund (SADIF) last year, a $5 million venture capital fund focused on promoting funding for tech startups by injecting between $25,000 and $500,000 into each viable startup it selects, has opened up opportunity for the digital ecosystem in the Kingdom.

“Most [startups] choose to bootstrap their activities by using personal savings, friends’ or family’s money or grants they win in competitions,” she said. “But the recent launch of SADIF and the new network of angel investors coming into Cambodia show that a new range of funding is available.”

Kem Bora, investment manager at Mekong Strategic Partners, explained that SADIF had already invested in a number of local startups, and learned in its year of operation that the most successful startups are those with the most dedicated customer bases.

“There are a lot of players in Cambodia, but there are no dominating players here,” he said. “We have to ask how we can add value when startups here often face a set of challenges that can seem insurmountable.”

One of the challenges facing the tech scene in Cambodia is a lack of access to stakeholders, according to both Roman di Geronimo, co-founder of the tech-focused online media platform Geeks in Cambodia.

“Most of the startups in Cambodia are tech-based, and the digital landscape is booming,” said di Geronimo. “But it’s hard for some startups to find funding. So we are creating a platform called Startup Cambodia that will help partner stakeholders with startups and encourage growth.”

Lack of communication between startups and potential funders is not the only problem facing young entrepreneurs in Cambodia. Many startups do not exhibit the qualities that investors are looking for, according to representatives of multiple investment firms.

Witt Gatchell, senior investment manager at private equity firm Belt Road Capital Management, said his company aims to invest between $2 million and $7 million in regionally-based tech startups that have proven to be money-making ventures.

“You have to focus on revenue,” he said. “A lot of startups focus first on just growing their user base, but they need to focus on revenues early on so they are in a better position to raise capital and stay afloat.”

Without that profitability, Gatchell said, startups would be hard pressed to attract any form of investment.

Shivam Tripathi, managing director at investment firm Obor Capital, said his firm is currently looking for opportunities to fund tech startups in the Kingdom, but added that it is often difficult to find strong candidates for a heavy investment.

“Not many startups here are yet able to grow into big companies, because they have issues with scalability, or with their teams,” he said. “There’s plenty of people willing to invest $10,000 to $30,000 – that amount is easily available – but there aren’t many willing to invest hundreds of thousands of dollars here.”

While there are not many investors focused solely on injecting funding into tech startups in Cambodia, he said, it is likely that the investors already in Cambodia will begin funding the tech scene when they see strong candidates for funding arise.

“Few companies are looking to actively invest in Cambodia and there are not many dedicated funds,” Tripathi said. “But investors will come when you show them there is an opportunity for growth.”​