Written by Stephanie Li
If you believe in investing in a vision rather than just in companies, Myanmar’s first tech hub, Phandeeyar, will give you the lowdown on the country’s burgeoning startup market.
Nowadays, buying a SIM card for $1.5 or less has become commonplace, yet it would have been unthinkable in Myanmar just seven years ago, when a mobile user had to pay $250 for a SIM card. In 2014, the Myanmar government granted Qatari telecom provider Ooredoo and Norway-headquartered Telenor the access to Asia’s final telecom frontier, bringing a nationwide mobile network and low-cost SIM cards to the country.
Phandeeyar was born out of a hackathon and simultaneously to the liberalization of the telecom market in 2014. From kick-starting Myanmar’s first hackathons to becoming the country’s first tech community, Phandeeyar aims to become more than an innovation hub with an ambition to foster the local tech ecosystem and help people within the system to enhance their impact.
“Myanmar is the world’s best tech test market,” said Phandeeyar founder David Madden at a TED conference in 2017.
Madden’s speculation on the country’s thriving tech market could come true now. As of January 2019, 39 percent of the population were internet users, while 38 percent were mobile users, according to Internet World Stats. In an interview with The Irrawaddy, Asia Centre’s regional director James Gomez predicted that internet penetration will reach a plateau at 50 percent before the 2020 election.
In December 2018, the Asian Development Bank (ADB) inked a deal to invest $10 million in a Myanmar-focused private equity fund in a bid to offer urgently-needed capital for the growth and expansion of small and medium-sized enterprises (SMEs). Together with investment from Singapore-headquartered Ascent Capital Partners Pte. Ltd. in January 2019, it provides the underpinning of growth for local startups that could contribute to inclusive and sustainable economic growth in the country. The untapped potential of the local tech sector is no longer a secret.
Phandeeyar has taken the lead in the sector from the start: Since 2016, it has committed $330,000 in pre-seed investment to 18 startups in Myanmar, while all of the companies are incorporated in Singapore in order to protect intellectual property and make them safer for investors. These startups include White Merak, a comics reader app, MMTutors, a tutoring platform, and Chate Sat, which provides an online job-hunting platform for freelancers.
Last February, RecyGlo, a Yangon-based recycling solution startup and one of the 18 companies assisted by Phandeeyar, received $150,000 from the Norway-based Katapult Ocean Accelerator program. On January 21, an Asia tech media agency reported that RecyGlo planned to raise a $900,000 investment round to fund a foray into existing markets in the region. So far, the startup has raised $350,000 in bridge funding without disclosing details on the investors and will close the final round at the end of the second quarter.
Although RecyGlo’s success proves the foresight of the tech accelerator and the booming startup landscape across Myanmar, investing in the country isn’t without its hurdles. Even with the recent political reforms, economic and political uncertainties have hampered the growth of the local tech scene.
Despite the surge in private equity investment, Phandeeyar investment manager Paing Hein Htet said investors are “reluctant” to invest more as “most of the local businesses are still going through transformation and many of them are unlikely to be ready yet”.
Although external investors are an important funding source for local startups, foreign shareholders in Myanmar are not only required to pay $50,000 in service industries or $150,000 in manufacturing industries, they also have to go through a burdensome licensing process – not to mention the fact that changes in government regulations are par for the course.
Paing added that the local tech scene has encountered a talent shortage at both leadership level and deep tech level. “In the next five to 10 years, we want to see more people that are deeply embedded in the tech side, and he/she has to be a cofounder who is able to execute very efficiently.”
Phandeeyar CEO Jes Kaliebe Petersen suggested in an interview with KrAsia, a China-based digital media company, that the Myanmar government should relax rules on transborder investment and introduce tax holidays for local startups. Such a move could help build loyalty in startups that have invested a great deal in their business and ultimately bring more into government coffers.
“The basic principle, however, is to help them grow big first,” Petersen said.
Paing also urged a more transparent tax structure and collection system, to ensure that small and growing enterprises are “investment-ready”.
Despite hurdles, he sees strength in local startups. “The founders [of local startups] are the most resilient people I have ever met,” he said. Having witnessed the country “leapfrog from zero to everything,” he believes that although Myanmar has a shorter life cycle of innovation, it provides the ground for testing and deploying new ideas.
“We always have this inside joke that once you’re able to do [a] startup in Myanmar, you can actually go anywhere.” he said.