Sri Lanka’s startup ecosystem has all it needs to thrive

This story was republished with permission from The Realistic Optimist, a paid newsletter covering the global startup scene. It was moderately edited to reflect Tech in Asia’s editorial guidelines.

Sri Lanka’s tech industry is about 35 years old, but its startup scene is less than half that age and can be divided into three distinct phases. The phase it finds itself in today is ripe with potential that can be fulfilled if a few key elements are brought into play.

The first phase entailed shifting mentalities and was informed by Sri Lanka’s bloody, three-decade-long civil war that ended in 2009. Sri Lankan talent either left the country or pursued safe careers in law, medicine, and large corporations.

A view of Colombo, the capital of Sri Lanka / Photo credit: Aleksandr Medvedkov / Shutterstock

The risks associated with starting a company, let alone in the nascent tech industry, were deemed unjustified. The ecosystem’s pioneers had to convince the best and brightest that there was another way.

The second phase ran from approximately 2014 to 2019. Local founders started realizing the potential that technology held, the problems it could solve, and the careers it could foster.

That period saw local founders launch tech companies mostly aimed at specific Sri Lankan problems, with little thought given to international expansion. While laudable and useful, this all-in focus on Sri Lanka’s small domestic market of 22 million people hardly made these companies VC-investable.

The third and current phase marks a change in that aspect. Sri Lankan founders today better comprehend the mechanics surrounding VC funding, the need for scale, and the recognition that Sri Lanka is a good test market but is not the be-all and end-all.

Buoyed by the advantages of remote work, founders have overcome mental barriers and broadened their geographical scope. The ecosystem is expanding, with smaller cities such as Jaffna and Kandy mustering their own startups.

The talent pool: sales sense and diaspora needed

Sri Lanka has more than proverbial youth and human potential – it has bonified reservoirs of competent techies. The country’s tech talent works for the world’s largest corporations: Microsoft, Google, Intel, Oracle, and HSBC, to name a few.

These companies benefit from geographical arbitrage, hiring competent Sri Lankan tech talent for a fraction of what they cost at home. In 2020, the country’s business process outsourcing industry raked in US$971 million and was projected to cross the billion-dollar mark. An approximate 80,000 Sri Lankans are employed by it.

What that talent lacks is sales acumen, with many tech workers excellent at building state-of-the-art products for others, but they have seldom built (and sold) their own. The new generation, recognizing the limits of the outsourcing industry, is increasingly business-savvy, but more is needed.

This calls for the diaspora’s involvement. Sri Lankans with foreign work experience in sales, marketing, or strategy roles could engage in a fruitful co-founder partnership with a local techie.

Sri Lanka has no shortage of competent diaspora members, investor Chamath Palihapitiya and Macquarie Group CEO Shemara Wikramanayake being two prominent examples.

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