Myanmar is getting its first tech start-up accelerator. The Southeast Asian country, which has been slowly opening up to the world, has a very nascent start-up scene that is being assisted by Phandeeyar, an ICT support organisation.
In its next step to encourage entrepreneurship and tech development, Phandeeyar is launching its own accelerator next year and has begun the process of finding applicants to join the program at its innovation hub in Yangon.
The six-month accelerator is an opportunity for budding start-ups with little or no funding to access mentors and office space. The organisers add that they will help start-ups on their way to finding funding.
Phandeeyar launched in 2014 as a hub for Myanmar’s entrepreneurs to network and hold events. It was founded by American entrepreneur David Madden and received a grant worth $2 million from Omidyar Network, the philanthropic organisation by eBay founder Pierre Omidyar.
The hub has a mission statement for the next three years, where the accelerator will host between 15 and 20 start-ups with mentorships and free office space. It has received about 80 applications so far, says Madden.
The program is a big step for the young start-up landscape that’s been in need of support networks for some time while many of its neighbouring countries race ahead.
Funding is the primary challenge for start-ups in the country and it’s the hurdle that causes most entrepreneurs to stumble.
This means Phandeeyar has some caveats. Like many start-up programs, it takes equity in the company (12%) if it raises funds in the future. However this investment will go through a Singapore entity and the start-up will also need to set up a Singaporean presence. Madden explains that this practice is common in Southeast Asia due to the high presence of investors in Singapore.
Local investing, much like the start-up scene, is new and inexperienced. But with Myanmar electing a democratic party and the loosening of trade sanctions, the country has become an attractive prospect for international investment that sense an opportunity.
“The major challenge is that there really aren’t any tech investors in Myanmar yet. Most of the start-ups that have raised money have had to get it from international investors, mostly from elsewhere in the region,” says Madden. “It’s not that there’s not money in Myanmar, it’s just that people are not yet familiar with investing in tech start-ups. Hopefully Phandeeyar Accelerator will help address this.”
Several big corporates have made investments or acquisitions in the country of late. Colgate bought Laser Brand Toothbrush in 2014 for $100 million and Japanese beer giant Kirin purchased a majority stake in Myanmar Brewery Ltd. But tech investments have been thin on the ground, Omidyar Network’s investment in Phandeeyar, though philanthropic, remains the highest profile tech-related investment yet.
One of the biggest barriers for foreign investments is still around regulations. International investors cannot invest directly into a Myanmar firm company without setting up a joint venture. It’s hoped that the government will repeal this law soon to make the business climate more attractive, which would allow outside investors to directly buy stakes of up to 35%.
Nex is a Yangon-based app and web development start-up that has raised a small amount of VC funding from international backers. It raised $300,000 over two rounds from Blibros Capital Partners, a Swedish investment firm with a presence in Singapore.
Nex is something of an outlier. It’s one of a few young tech start-ups in recent years to obtain international VC funding, albeit a small amount when compared to other regions. CEO Ye Myat Min explains to IDG Connect that trust is a big issue for investors, who see the country as too risky because of its “lack of financial and legal infrastructure” while setting up a company is a paperwork nightmare.
“It’s still difficult to set up a proper company structure; ideal structure now is to have a holdings company in SG [Singapore] and have a subsidiary underneath it. But even that requires significant amount of paperwork and legal fees,” he adds.
While the country may be loosening up some restrictions, it begs the question of what more can be done to help start-ups gain investment and grow in general. There’s still plenty to be done if Myanmar is to truly foster its young entrepreneurs. Cutting away some of the red tape is one thing but also developing its schools and universities as well as improving its ailing internet infrastructure, though in the case of the latter, the government has begun issuing the first licenses to private ISPs and telecoms in recent years.
“Making it easier to invest in start-ups probably isn’t the most important thing that the government could do to support the tech ecosystem right now,” counters Madden. “Accelerating infrastructure development, investing in education, putting appropriate legal and regulatory frameworks in place; these sorts of things are more urgent.”
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