How Cambodia’s Startups Are Shifting From Bootstrapping To Angels

In 2011, Cambodian entrepreneur Ear Uy and a few partners founded Sabay Osja Co., Ltd. with the goal of creating video games. They had an idea for their first project, and knew they wanted to release it before Christmas. The game, Santa Adventure, was built in two months, as a test of the team’s ability to create a mobile game and get it listed through the App Store.

After Santa Adventure was released, Sabay Osja had the proof of concept it needed to keep building. The team knew that they could successfully produce mobile games, and had a better understanding of what it takes to create and ship a product.

But could they fund the business? “At that time in Cambodia, there was no concept of finding an investor or anything,” Ear told me in an interview. Loans weren’t an option either, with commercial lenders unwilling to fund Cambodian businesses without considerable collateral in the form of hard assets like land and equipment.

The only option: bootstrapping. Each of the founders put in money month after month to keep the company running. Fortunately, expenses were low – they only needed to purchase computers and pay for a low-rent office space.

Sabay Osja used Santa Adventure as proof of concept to land a contract with NGO PYD Cambodia, to develop a game on its behalf: Good Man Quiz, a game that promotes gender equality. While developing it, Sabay Osja was able to continue working on its next game, Asva The Monkey, using cash flow from Good Man Quiz.

In many startup communities, straying from your core product to take on consulting work could be a death knell, allowing the market to change or competitors to pass you by. For Sabay Osja however, it was the only way to stay on target – completing the outsourced game allowed the team to finish Asva The Monkey in six months.

The compromise paid off. Asva the Monkey rose to the number one spot in Cambodia’s App Store.

Asva The Monkey reclines against a branch.

Asva The Monkey, by Sabay Osja. (Photo credit Sabay Osja)

Sabay Osja is now self-sustaining, and its latest game, Ey Sey Storytime, is a collection of popular Cambodian folktales for children six years old and below.

In the five years since Ear grew Sabay Osja through bootstrapping, Cambodia has grown into a different environment for entrepreneurs:

It’s very, very completely different. At that time there was no community of startups. The word startup didn’t exist at that time. In Cambodia, we had never used the word startup yet.

Today, Cambodian entrepreneurs have an opportunity other than bootstrapping, in the form of angel investors.

From Bootstrapping to Angels: What’s Changing Cambodia?

Ear referred me to someone he believes is changing the Cambodian startup scene for the better: Khemara Ros, Cambodia Country Manager of the Mekong Business Initiative (MBI) at the Asian Development Bank.

Khemara recognizes that it’s hard to fund a business in Cambodia, and young entrepreneurs have no options beyond friends and family to fund development.

“No matter how good their business plan is, [startups] cannot get access to financing from the bank,” Khemara told me by phone. There are business education centers, but once entrepreneurs “get the business plan ready to start a project, they don’t have the seed money really to start a business. And that’s where the angel investors came in.” Khemara went on to add, “And I think it’s a very good development in Cambodia, especially for young entrepreneurs.”

When MBI launched MAIN, the Mekong Angel Investor Network, not that many Cambodians knew what angel investing was, Khemara said. That changed when MAIN closed its first deal.

MAIN brought foreign angel investors from New York, San Francisco, Europe and Australia to Cambodia, and in short order had committed to invest $7,500 in BookMeBus, an online travel booking system for locals and foreigners within Cambodia. To spread the idea of angel investment, MAIN partnered with prominent Cambodian businessmen as co-investors who matched MAIN’s commitment, for a $15,000 combined investment.

Moreover, the proof of concept established by completing a deal with foreign angels inspired local Cambodians to form their own angel investor group, wherein each member has pledged to invest a minimum of $10,000 per year, with the group targeting three to five annual deals.

Khemara is pleased with the progress: “The total investments so far [may be] small, but the impact on angel investing itself is good in Cambodia.”

Finding Investment-Ready Startups

In addition to finding investors, to build a thriving entrepreneurial scene Cambodia needs to increase its number of startups. According to Khemara, Cambodia only has 70 startups on record and, as in any community, many aren’t ready for investment.

Founder education is a big part of getting some of those startups to an investor-ready state:

They have a good idea, but when we ask them ‘What is the market size…What are your strategies to penetrate or capture your market share?’, sometimes they cannot understand. ‘Where is the source of your profit?’ That’s still the kind of question they need to work on more…they’re not investable yet.”

But with guidance from investors, Khemara believes they will become worthy of investment.

In addition to providing investor exposure to young founders, MBI is working to pull more fledgling entrepreneurs into the community. The term “startup” may be better known since Ear founded Sabay Osja five years ago, but Khemara thinks there are young entrepreneurs building businesses under the radar:

They’re not coming to co-working spaces, they’re not coming to incubation or accelerator programs…and [those 70 startups are] just in Phnom Penh. But I think there are a lot more in Siem Reap as well…I’m trying to test Siem Reap’s market and see how active it is.

The improvements for young Cambodian entrepreneurs are already palpable, and MBI is only in the first phase of its strategy. In fact, MAIN already has several more deals in due diligence.

“From our results [funding BookMeBus], there is some interest in a few more projects. …One of the projects is looking at investments from angels of $300,000, and another project is looking at $500,000 to $600,000…they’re now under due diligence,” Khemara said.

Ear bootstrapped his business for lack of better options; MBI is building a startup community so that other Cambodian entrepreneurs won’t have to, with the same guiding principle: proof of concept.

[“source=forbes”]