In May 2024, WSO2, an enterprise software company founded in Colombo, sold to private equity firm EQT for $600 million, the largest tech exit in Sri Lanka’s history. It was still $400 million short of a unicorn, the term coined in 2013 for a startup worth $1 billion or more. Sri Lanka has never produced one.
Investors and founders trying to build one agree on why it hasn’t happened: there isn’t enough capital at home to grow one. That forces a choice — stall, or relocate to Singapore or Silicon Valley to raise the money needed to scale. Either way, Sri Lanka carries the risk of building the company and forfeits the reward of owning it.
The ecosystem is small by design of circum stance, not ambition. Sri Lanka’s startup sector was worth $821 million between mid-2022 and the end of 2024, according to Startup Genome, a research firm that compiles the data with local partners including the ICTA. This year the country climbed more than 65 places in the firm’s global rankings, the largest jump of any ecosystem in the report. But the same report flagged what hasn’t kept pace: early-stage investment of $58 million, against a global average of $5.2 billion, and a median Series A round of $150,000, against $6.8 million elsewhere. Exits have been rarer still — just six since 2020, versus a global average of 86.
Now in its second year, First Capital Startup Nation by Hatch, a competition to identify the region’s top 10 startups, is trying to close that gap without sending founders abroad to do it. It has drawn more than 300 applicants from across South Asia, roughly half of them Sri Lankan, and pulled in more than 75 investors, up from 50 last year. Hatch and its partners are backing the eventual winner with close to $1 million. Those behind it hope it brings Sri Lanka closer to its first unicorn.
“Startups in Sri Lanka lack funding,” said Prajeeth Balasubramaniam, managing partner at BOV Capital. “To overcome this, they incorporate in Singapore, in Silicon Valley, to get more funding. Then we lose their funding. Then it doesn’t become a Sri Lankan company anymore.”
Dilshan Wirasekara, managing director and chief executive of First Capital, an investment bank and title sponsor of Startup Nation, doesn’t think talent is the constraint. He adds, “What’s holding that talent back from going global and creating greater value at a faster pace has been the capital invested in such initiatives.” Without it, he said, a startup stalls before it can grow into an SME, let alone go public.
More capital would, in theory, fix that. It hasn’t, because of a trap of its own making. Jeevan Gnanam, co-founder of Hatch, the organisation running Startup Nation, has spent years pitching Sri Lankan startups to investors. “We tell them, invest now rather than later because you’ll get a better deal,” he said. “So it’s kind of like a chicken-and egg situation.” Investors want proof before they commit. Proof requires investment first. Few want to risk capital going first.
That trap may be loosening. “Sri Lanka is an unproven market right now,” Gnanam said. “But it’s fast becoming that tipping point, where firms that were startups a decade ago; InsureMe and PickMe, are now listed.” PickMe, founded in 2015, listed on the Colombo Stock Exchange nine years later — faster than the average Sri Lankan exit, which takes 14 years, and three years longer than the global norm, according to Startup Genome.
Balasubramaniam agrees the market is proving itself. What still needs to shift, he said, is local investors’ appetite to risk capital on it. “It has been very hard to unleash capital in Sri Lanka,” he said, pointing to India: “In 2015, there was only one unicorn. Once capital started coming in, today there are over 150 unicorns in India, from one in 10 years.” Closer to home, when WSO2 needed its first serious investment, it went to Intel Capital, the American venture arm of Intel.
“Investors and founders trying to build one agree on why it hasn’t happened: there isn’t enough capital at home to grow one.”
Wirasekara said he wants to close that gap. “We’ve committed not just to sponsorship, but also to exploring opportunities to invest in these startups,” he said when the firm signed on as Startup Nation’s title sponsor. For now, that means building internal expertise to “better understand the startup ecosystem,” he said. The firm’s core business — trading government securities and brokering listed stocks — “is very competitive and margins are thin.” Finding a unicorn, he believes, could be worth far more, he says.
The Perspective Gap and Missing Reforms
Capital alone won’t finish the job. Gnanam thinks the bigger constraint is something money can’t fix by itself. “Perspective is the one thing Sri Lankan founders lack,” he said. “We can take on some of the best founders in the world, but having that global perspective is very difficult when you’re based in Sri Lanka.” The result, he said: “Sometimes we have founders building solutions that don’t have problems — building too much tech, not finding product-market fit.” That’s why this year’s Startup Nation didn’t just raise more money — it expanded beyond Sri Lanka, bringing in founders and mentors from across South Asia to expose local startups to markets they wouldn’t otherwise see. It’ll be, as Gnanam put it, “healthy competition for our own startups in Sri Lanka itself.”
Even if capital and perspective both arrive, policy hasn’t caught up. “More funding is one thing we need,” Gnanam said. “The government has said they’re going to improve laws that allow for pass through taxation.” Sri Lanka currently taxes venture funds twice — once when a fund exits a startup and realizes a gain, and again when investors receive their share of it. Gnanam also pointed to the government’s fund of funds, a program matching private investment in startups with public money: “If I invest $10 million, they’ll invest some of that too,” he said. The government announced the program in September 2025, backed it with $5 million in this year’s budget, and set a January 2026 launch. Seven months past that date, it has yet to open. “If those things come to fruition,” Gnanam said, “we’re through.”
Startup Nation is the latest attempt at supplying both capital and international exposure. More than 300 startups applied this year, drawn from Sri Lanka, India, Bangladesh and Nepal. The field narrows over the coming months, first to a shortlist, and eventually to the 10 finalists competing for a winner to be named in October, who will receive close to $1 million in funding. More than 75 investors are expected to attend — not to pick the winner, but to watch the field, and potentially back some of them regardless of who takes the prize. None of it guarantees a unicorn. But it’s a real attempt at building the conditions that could produce one.