HANGING BY A THREAD? HOLD ON!
BY CHARITHA FERNANDO
Starting a business can be a scary thought knowing that most won’t be successful. Entrepreneurs put everything on the line for an idea they believe in, and often anticipate the odds upfront in their startup journey. Yet, a nasty pitfall can catch them by surprise and make them feel as though they are hanging by a thread. Startups can stumble or crash for various reasons. Unforeseen challenges can come from anywhere: lack of experience, an unproven business model or scarcity of resources to address them could be some causes. One of the biggest issues facing new entrepreneurs is that people are uncomfortable about failure and talking about it. The US Embassy, in partnership with Hatch Sri Lanka, an accelerator and shared office space, hosted a discussion among young Sri Lankan entrepreneurs on their startup challenges.
“Fear of failure should motivate you, not paralyze you. More importantly, you must be prepared to learn from failure,” Deputy Chief of Mission of the US Embassy in Colombo Robert Hilton told young Sri Lankan entrepreneurs. Startup owners Charitha Abeyratne, Shehani Rasaputra, Praveen Premkumar and Shehan Selvanayagam shared their worst blunders, biggest challenges and greatest achievements on their journeys so far.
FIXING CASH FLOW WITH PRUDENT SPENDING AND AN EYE ON LIABILITIES
Chief Executive, Loops Solutions
Year founded: 2011
Shehan Selvanayagam is the founder and managing director of Loops, a digital marketing agency. Loops is not an ordinary agency because they create motion graphics, 3D production, film production, social media marketing, activation, web development and many other services for both local and international clients. Selvanayagam’s biggest challenge to-date has been of cash flow management. “As a typical startup, we got a bit carried away in getting new stuff; we bought a lot of nice things, but we should have been disciplined and thrifty in our expenses during the initial stages,” he said.
It’s not unusual that startups aren’t cash-rich. That’s why it is vital to manage the cash flow efficiently so they can survive and grow. With multiple things to spend money on, startups often lose control, embarking on frivolous spending. Late payments by corporate clients also aggravate the problem.
Shehan Selvanayagam, an experienced digital marketer, had the foresight to identify the issue. “As startups, we are vulnerable. Clients push us around because they know we need them more than they need us. We also focus on attracting clients so much that we lose track of invoicing and liabilities. On paper, everything will look good, but when you get down to paying bills and salaries, you realise that you’ve got problems.
Another thing you need to keep track of is your liabilities. Years later, an audit will tell you that your taxes are due, and with the fines,” he said. Eighty percent of work done by Loops is for the domestic market, but Selvanayagam and his team have been able to secure top international clients like Ooredo, Qatar’s largest telco, and Doh Bank. Loops has also forayed into far-flung markets like Samoa, where they create digital marketing content for telcos and airlines.
With Loops growing, Selvanayagam realised the need for proper structures and streamlined operations for better cash flow management. With prudent expenditure and increased revenue, he has been able to invest some of the profit in the growth of his staff. A part of the profits were reinvested in degree and masters programmes for some of his staff with no bond commitments, while others were in the form of payments for training programmes including overseas travel.
There have been a number of cash-crunch moments that made Selvanayagam feel like he was hanging by a thread, but he had the courage to hold on. “Many times, what got me though is the trust that our business model would work, and that on paper, we are quite profitable,” he added.
“THEY SAID I T WOULD NEVER TAKE ROOT.”
Founder & Chief Executive, Saraii Village
Young Entrepreneur of the Year, 2015
Year founded: 2011
Access to funding is a basic entrepreneurial challenge, but for women, the struggle is even harder. Charitha Abeyratne, the founder and chief executive of Saraii Village, says investors weren’t receptive enough of her idea of building an eco tourism resort of treehouses. Many didn’t even believe that a woman could grow a business like this. “The hospitality sector is male dominated and competitive. There weren’t many female business owners in the industry for mentorship. Industry leaders listened to what I said, but nobody believed in it.
They used to ask me, is this your husband’s gift to you? They wanted to know who else was behind this, and I would say it’s just me. There were so many negative comments, and when I kept hearing ‘it’s not going to work’, there were moments that I doubted myself. If somebody tells me that I can’t do something, I just want to prove that I can,” said Abeyratne.
When Abeyratne secured a scholarship, she enrolled in a MBA that focused on Global Social Sustainable Enterprise at the Colorado State University in the US. Her aim was to acquire the academic foundation. “Saraii Village is a dream, a concept, a connection and a business venture all rolled into one. We are catering to responsible travellers from around the globe to experience the essence of Sri Lankan life. At Saraii, travellers return to the basics and learn how to enjoy simple pleasures, healthy food and a sustainable lifestyle that also gives back to the community,” she said.
The idea to build eco-friendly treehouses was inspired out of a family-run organic agro business Abeyratne and her husband were working on. It was initially a barren plot of land in Weerawila that her husband was reforesting. It was the beautiful trees in this forest patch that inspired Abeyratne to build treehouses there.
“My idea was different to the sun, sea and sand concept Sri Lanka’s hospitality sector was familiar with. When I took this concept to the market, I lacked experience and it was hard to attract funding from banks. I secured funding from angel investors. It took a lot of work, conviction and dirt under my fingernails to get Saraii off the ground,” Abeyratne said.
SRI LANKA TOO SMALL FOR VENTURE CAPITALISTS
Co-Founder & Chief Executive, Pikanite
Year founded: 2017
Pikanite is a modern inventory management tool enabled by powerful application programme interfaces, supported by big data, and soon to be managed by artificial intelligence. The app simply helps travellers find a curated hotel by offering deals on hotel rooms for 48 hours before the check-in date.
Pikanite co-founders Akila Karunaratne and Praveen Premkumar were keen to offer a seamless experience to customers and partners in the travel and hospitality trade. “The travel industry is fragmented and this is an opportunity. We wanted someone to be able to book a room or an activity within a matter of seconds, and help hotels and activity providers sell their inventory efficiently through a combined marketplace,” Premkumar said.
However, the challenge in Sri Lanka for app-based startups is the limited number of venture capitalists. Praveen says Sri Lanka is a limited market for venture capitalists, and the lack of them is restricting access to capital for app-based startups.
For Premkumar, a business model like Pikanite requires different types of investors at different stages.
“We negotiated for six months with our first set of investors, but it was a great experience. It was definitely challenging to sell the story and the idea we had for the future, which is a lifestyle platform that covers the in-destination journey of a modern traveller. We are the only integrated mobile-first platform here selling last-minute rooms and activities, which makes us quite unique. We are also working on personalizing the experience for the user, with the use of AI, to enhance the overall experience of our customers,” he said.
For an app-based startup launched in March 2018, Pikanite has shown remarkable growth to include over 300 hotels, 20 cities and new experiences in Sri Lanka, and is ready for its second round of investors. “Travel is a market that has shown consistent growth. We see an increasing number of people yearning to travel, especially millennials, and the latest buzzword in travel is experiences. Asia is a strong market for travel, growing at a higher rate than any other region in absolute terms. Our aim is to be a regional player in the next five years, and eventually the world,” Premkumar added.
GOING I T ALONE; WEARING THE MANY HATS OF SUCCESS
Founder & Chief Executive, JustGoodness.co
Year founded: 2018
Shehani Rasaputra is the founder and chief executive of JustGoodness, an online store that offers easy access to natural, organic and safe products. Many of the JustGoodness products support local producers, as they are locally sourced. The JustGoodness team comprises 5 fulltime workers and over 30 vendors who supply natural, non-toxic or organic products.
Even though it is heartening for an entrepreneur to watch his/her business grow, providing employment in the community, it is wise to consider whether the operation can handle overhead costs in the early startup stage. With limited capital, it is not possible for startups to hire staff for every single job because excess staff can drain funds rapidly.
Rasaputra’s challenge was the many roles she had to play as an entrepreneur during the initial stages of the business. “My background was in operations and administration, but I had to do sales, marketing, clerical work, accountancy and many more. It was very hard. People expect you to know everything. When I was raising funds, investors asked me about company valuation and Google analytics, etc. I had no idea what they were or how to do it. Also, there was no one to mentor me on e-commerce. I used to spend hours on YouTube trying to learn these things. I even learnt basic graphic designing and how to do a photoshoot. I had to learn on-the-job and the difficulty was constantly switching from one role to another while dealing with customers,” she said.
Her worst nightmare was when her supply chain manager had to go on maternity leave four weeks in advance than the scheduled date, leaving Rasaputra with a new recruit who had no experience in the trade. “This period was the toughest. When you are the only point of contact, there are so many things to attend to, including phone calls and following up. I did all this while devoting extra time to train the new recruit. On bad days, when I just couldn’t handle it, my dad has become the operations manager, my husband the delivery guy, my sister in charge of edits and approvals, and my mom holding everyone together. I don’t think I would have been able to cope with all this had I not had my family to fall back on,” she said. To keep overheads low, she now outsources small jobs and offers flexible employment.