Rajan Anandan, vice-president and managing director of Google, South-East Asia and India wants Sri Lanka to be a top-10 destination for startups in the world over the next 10 years.
In Sri Lanka, he has set up Blue Ocean Ventures, a venture capital firm, with his friend Prajeeth Balasubramaniam to develop the start-up ecosystem with a Rs 1.5 billion fund dedicated to investing in Sri Lankan technology startups.
“For Sri Lanka to continue to develop and become a middle income country, the country will need to create a large number of high value jobs and these can only be created by entrepreneurs who build large new businesses,” he says.
He is also confident that the biggest financial services company in Sri Lanka in 2030 will be a one that the country has not even heard of yet.
A Sri Lankan, Anandan is the second son of the late swimming champion V.S. Kumar Anandan, a Guinness World Record holder who was best known for crossing the Palk Strait from Sri Lanka to India and back in 51 hours, in 1971.
In an exclusive email interview (he is currently in the US) with the Sunday Observer, Anandan answers our questions on how to build the next generation of Sri Lankan start ups and how he would continue to invest in the sector in an effort to build large global businesses from Lanka.
Excerpts:
Q: Could you describe your present role as the MD for Google India?
A: I lead Google’s business in India and South East Asia (SEA). This is a region with over two billion people and over 600 million internet users. India and SEA combined is the fastest growing internet region in the world and I am responsible for Google’s sales and operations across this region.
Q: What is your current interest in Sri Lanka? What are the projects that you are involved in, at present?
A: I was born in Sri Lanka and left Sri Lanka in the late 80s to attend university in the US. After spending almost 20 years in the US, I moved to India about 10 years ago. Over the past 10 years I have been a very active angel investor in early stage technology companies in India.
I have always been keen to engage deeply with Sri Lanka (my mother Manel Anandan lives in Colombo) and in 2010, together with Prajeeth Balasubramaniam we embarked on trying to help build a startup ecosystem in Sri Lanka. I have been deeply involved in the Sri Lankan tech startup ecosystem since about 2010. In 2016, we launched Sri Lanka’s first Venture Capital fund BOVCapital. BOVCapital is a Rs 1.5 billion fund dedicated to investing in Sri Lankan technology startups.
Q: You are known as a champion of entrepreneurship promotion. How did you get into this area? Why it is important to promote entrepreneurship among youngsters?
A: I have been investing in technology startups since the early 1990s. I graduated from MIT and Stanford (in the US) and many of my friends are entrepreneurs and I invested in some of their companies.
I stepped up my investing activity when I moved to India 10 years ago and am very active angel investor in India, Lanka and the US now.
Entrepreneurs are the growth engine of any economy and this is even more true for Sri Lanka. For Sri Lanka to continue to develop and become a middle income country, the country will need to create a large number of high value jobs and these can only be created by entrepreneurs who build large new businesses.
I strongly believe that Sri Lanka has the talent - thanks to the strong educational system- and talent is the cornerstone of all the best startup ecosystems.
Q: What special features have you seen among Sri Lankan start-ups/entrepreneurs so far – since you started BOVCapital?
A: We launched BOVCapital in 2016 and have already made seven investments in Sri Lankan startups from this fund. All our investments from the fund are technology startups with very strong founding teams. The most important criteria we look for is the founding team and in Sri Lanka I see teams who are deeply technical. This is the country’s competitive advantage and what we are counting on - technical talent. For example, Omak technologies is our first investment from the fund. Omak is the leading provider of restaurant Point of Sale (POS) systems in Sri Lanka and is now expanding in Indonesia, Malaysia, Singapore and India. The technology built by Omak is better than every other technology stack we have seen anywhere in the world. Building very sophisticated vertical software solutions is a clear strength of the Lankan ecosystem. Many of our investee companies will focus on niches that they can target across the region or globally.
Q: What shortcomings have you seen in the sector in Sri Lanka?
A: The startup ecosystem in Sri Lanka is still nascent and has the challenges that every startup ecosystem at this stage of development will have. There is no risk capital beyond the seed stage - this is the gap we are trying to close with BOVCapital. Before we launched BOVCapital, raising Rs. 100 million or more to scale up a company was very difficult. Now that has become easier. Hiring large numbers of technical talent is hard. Sri Lanka has great quality but in limited quantities. So we need to train more engineers. The domestic market is small; hence the focus needs to be on regional and global markets. Penetrating international markets take time. Finally we need to see many more talented young people setting out to build their own companies. I am incredibly excited to see our young founders - like Lahiru and Murtaza at Takas, Sankha and Rajith at Linear2, Inas and Thilina at Simplex and Dinindu and Chamindri at ZigZag. This next generation of entrepreneurs will change Sri Lanka. We need many more Lankans to take risk and embark on the path of entrepreneurship.
Q: Any suggestion that you would like to make for further improvement of start-ups here? Is Sri Lanka a choice destination for promoting entrepreneurship?
A: Sri Lanka has the potential to become a top 10 destination for startups in the world. Prajeeth and I are committed to make that happen over the next 10-20 years. The Government can do several things to help accelerate the development of the startup ecosystem. The most important is to increase the quantity of high quality engineers. Ideally the Moratuwa University should graduate 500 software engineers every year, not just 100. We have high quality higher educational institutions - but they produce graduates in limited quantities. We should also open up to talent from outside Sri Lanka. The reality is to build a large and vibrant startup ecosystem we need to attract the best minds in the world. Silicon Valley was built by migrant entrepreneurs. Sri Lanka is a great place to live and there is no reason we can’t become a magnet for great founders and technical talent from all over Asia to come here and build companies from here. The country should also develop forward looking policies in areas like autonomous cars, drones, payments, block chain and AI. Competitive advantage of nations used to be derived from low labor costs and tax free zones. Now in technology the real advantage comes from talent and forward looking policies. Sri Lanka should lead on these two fronts.
Q: One of the issues that entrepreneurs are facing is lack of investments. What is your advice on this?
A: Yes this is hard. In 2010, when Prajeeth and I set out to try to help build an ecosystem, raising even Rs. 5million to build a startup was impossible. Over the past seven years raising seed stage/angel stage capital (say up to Rs. 20 million) has been solved. Today the Lankan Angel Network and several HNIs invest actively in startups. Today if you have a good idea, an early prototype and some early validation it has become much easier to raise the first round of external capital. However, raising the next round - say over Rs. 100 million - is very hard. This is the problem we are trying to solve with BOVCapital. For entrepreneurs the most important thing is to build a very strong team and solve a large, hard problem. If you do that, the funding will come - it will be hard to raise money, but if you are building a real company the investors will find you.
Q: Coming back to entrepreneurship, how do you see Sri Lanka’s start-up growth over the next few years? What are your expectations?
A: I am very bullish on the Lankan startup ecosystem. This is why we raised the country’s first venture capital fund BOVCapital. Over the next five to seven years we will see at least 50 Sri Lankan startups that will get to at least Rs. 1 billion in valuation and I would want at least 10 of these companies to get to Rs. 10 billion in valuation over the next 10 years. I would hope that within the next 10-15 years, the most valuable companies in Sri Lanka would be next generation companies that build large global businesses from Lanka. Our goal with BOVCapital is to fund passionate, driven entrepreneurs who want to build world leading companies from Sri Lanka.
Q: In which areas do you see the most start-ups in the future? What sort of start-ups should benefit the country’s economy?
A: We invest in technology focused startups - so let me comment on tech startups. At the highest level there are two sets of opportunities for Lankan startups over the next decade: 1) targeting the domestic consumer internet market, and 2) targeting global B2B markets.
We see many opportunities in the domestic consumer internet space. Ecommerce is still very nascent in Sri Lanka but will become a US$1 billion plus market over the next 10 years. The leading players in ecommerce in Sri Lanka will become very large. Takas, one of our investee companies is growing very rapidly and it will become one of the most valuable companies in Lanka over the next decade. Retail in Lanka will change and Takas will lead the way is transforming retail in Lanka. If you take ecommerce, in addition to the actual ecommerce ventures there will be many “ecommerce enablers” that will get built. For instance, Simplex, one of our portfolio companies, is the #1 player in ecom logistics and is on track to become a large business very quickly. They launched two years ago and are already the #1 player in ecommerce logistics.
There are hundreds of opportunities in the domestic consumer internet market - ranging from ecommerce, local, online education, financial services and online health. Every industry in Lanka will get impacted by technology and every time there is change there is opportunity to build new companies. Payments are a space that is ripe for disruption. I am confident that the biggest financial services company in Sri Lanka in 2030 is one we have not heard of yet. The other major set of opportunities for Sri Lankan startups will be in building regional and global B2B businesses. The most important trend in technology over the next decade is Artificial Intelligence (AI). We believe that AI gives the opportunity for Lankan tech companies to build large and very valuable global businesses. We recently invested in Linear2. They focus on building AI and Machine learning driven vertical solutions in industries like consumer products, telecom and apparel manufacturing. They have fully automated one of the core processes of the apparel industry and created the world’s first ‘AI driven planner’. There are hundreds of opportunities in every industry to create value using AI and this is a theme we think Lankan startups should pursue.
Q: How do you rate Sri Lanka’s start-up eco-system at present?
A: It is still early but we are very bullish. I invest in US, India and SEA. So given all the countries I could be focusing on the fact that we have launched a fund in Sri Lanka should indicate how bullish Prajeeth and I are about Lankan startups.
Q: Should all start-ups work very well and successfully? When a start-up fails, what lessons can we learn?
A: Actually most startups fail. This is a very important thing to know about ‘starting up’. The basic rule is that one out of 10 startups will become a huge winner (think Google like scale and returns). And three to four of the 10 startups will do reasonably well and could become market leaders in their niches. The rest will fail. So at least five out of 10 companies that started will fail - this is true in Silicon Valley - true in Bangalore and Shanghai and will also be true in Colombo.
Therefore, the key as an investor is to have a portfolio of investments and back the winners. Our fund invests in companies at the Series A stage - so the early stage risks are largely mitigated and hence we expect most of our companies to do well, although one out of 10 will be a really big winner.
For entrepreneurs, the big lesson is ‘if you fail, try again…and keep trying until you get it right’. As a society we need to become much more welcoming of failure. That will be very important.
Q: Any advice you would like to share with the youngsters?
A: There has never been a better time to ‘start up’. When I graduated from MIT over 20 years ago, it would have taken at least $5million of capital to build even a small tech company. Today, given the very large internet user base (over 3.5 billion internet users in the world), cloud computing (and the impact on infrastructure costs) and the ability to launch fast and iterate, it is easier than ever before to get started. However, it is also important to note that building a great company takes 10-15 years and the journey is long and arduous. Start-up is a test match not a T-20. So you have to be in it for the very long haul to win in this game.
