Although renowned globally as a land with highly skilled and capable IT professionals, Sri Lanka has struggled to attract overseas investors due to economic uncertainty and detrimental regulations that impede business and economic activity. Hatch Co-founder Jeevan Gnanam is a firm believer in Sri Lanka’s potential to reinvent itself from a nation struggling to hold its economy afloat into a thriving hub for tech startups, and his latest venture – a partnership with Draper Startup House – is only one part of a much larger programme to help create this change. Billionaire Silicon Valley Investor Tim Draper has also flown into the island capital to mark the beginning of this partnership. The two shared their views on entrepreneurship and Sri Lanka’s potential to become a startup nation with Echelon.
What potential does Sri Lanka have as a startup nation, and how does the ‘troubled nation to startup nation’ programme fit into the picture?
Gnanam: I want to create a platform using the ‘troubled nation to startup nation’ movement for Sri Lanka to connect to the rest of the world through startups, especially. We want to be known as the number one destination in South Asia for connecting with them, and I believe this is timely because we are in the middle of coming out of a financial crisis. There’s a lot of hope for the country to reposition itself in the region as a rising startup destination.
One part of this is the collaboration between Hatch and Draper Startup House to create Sri Lanka’s first co-living space focused on promoting digital nomads to come into Sri Lanka. A digital nomad can work with and collaborate with local startup founders and share technology in addition to supporting the tourism industry. They can contribute to economic development along with a tourism and hospitality angle.
What were your initial thoughts on this collaboration, and what was your thought process when deciding investing in Sri Lanka is worthwhile, although it ranked 173 on the Draper Innovation Index?
Draper: I like to explore new areas, and I knew that Sri Lanka was going through a financial crisis, and they had to overcome all sorts of problems – corruption, currency devaluation – all sorts of horrible things were happening. When there’s that kind of chaos, people are more open to new ideas, and new ideas transform countries to make them better because technology has transformational effects.
Sri Lanka ranks 173 out of about 200 countries on the index; it’s not great. There is a bunch of different data that goes into deciding where countries fall in the Draper Innovation Index, and I would guess that the financial crisis and the corruption didn’t help. They don’t accept Bitcoin as a national currency either. Several factors aren’t good for innovators, including a bunch of regulations that don’t need to be there. But Dubai has overcome similar troubles, and they’ve risen very high in the index. They did it by creating a free trade zone of sorts which is now a Web 3.0 zone, and I think there’s an opportunity for Sri Lanka to do something like that, just a good free trade zone, a nice sandbox that isn’t overly regulated, that enables technologists to experiment with something like this.
Being here in Sri Lanka is very exciting, and now we have a startup house open in Orion city. Together with Hatch, we think this relationship will be very synergistic.
Gnanam: Our partnership with Draper Startup House leverages each other’s strengths. Draper Startup House owns multiple co-living spaces across India, Singapore and other nations. Our goal is to create synergies between the two.
We opened yesterday, and so far, it has all been great. In addition to the opening, we are also shooting a Meet the Drapers show, which regularly has over 30 million viewers globally. It will put our entrepreneurs on the map, exactly what we need because we need more of this to take Sri Lanka to the world.
You have a track record of picking great startups to invest in that grow and reach a global presence, from Tesla to Baidu, to Twitch and Skype. Could you walk us through how you decide which startup to invest in and what is that ‘X-factor’ that you seek?
Draper: Most of the time when I invest, I’m always looking for big markets, innovative technologies, good people and all that. But when I meet with the entrepreneur, I always ask, ‘why are you doing this?’ because the life of an entrepreneur is difficult. Then I ask myself, ‘what if this entrepreneur succeeds beyond their wildest dreams?’ ‘is that a world I want to live in?’ and if it is, it’s much more likely that we’ll fund them.
There is a level of risk when doing so, but every venture capitalist on the planet constantly thinks about all the risks. There are risks anytime you start a business, so you might as well start something that matters, and so I tend to look more at ‘what if it works’ than what could go wrong.
What are your impressions of Sri Lanka’s startups, having seen some of them, and what advice would you like to share with any budding entrepreneurs trying to make it in Sri Lanka?
Draper: Although I like to go completely blind into Meet the Draper’s, I went around Hatch and met ten or fifteen entrepreneurs, and they are high quality. I went into the Draper startup house today, and there are a bunch of entrepreneurs there, and they’re very excited too.
The ones I’ve met have been quite good, but I think Sri Lanka needs to be bolder. It’s almost as if they’re embarrassed to be entrepreneurs. They should be bold, proud and practical rather than be concerned about what anybody will think of them. Because as an entrepreneur, you’re going to be out there; you have to put up with whatever the press or the social environment says about you until you prove that this is the way the world should go.
I think Sri Lanka would benefit from some of the teachings of Draper University, where we have started to create more heroes in the world and take them through an arc. You start with the biggest problems in the world to you and what solutions you have for those problems. How do you productize those solutions, or how do you create a service to create those solutions? And then how do you make money creating those products for those solutions? How do you distribute that product out in the world? You start with a big problem, and eventually, you will be solving the problem for the whole world. But you have to make money, or you’re not doing anybody any favours. You become a part of the problem if you’re not making money. So, I encourage people to make sure that their business is making money as fast as possible unless the strategy is to build the distribution first and then make money.
But in any case, you want your entrepreneurs to solve big problems they care about because it isn’t all about the money; it is really about the mission. One of the great ironies of life is that it’s the missionaries that make money, but mercenaries don’t, at least as entrepreneurs, they don’t.
What potential do you see for Sri Lanka as a startup destination?
Gnanam: There is so much opportunity. Everyone should jump on this bus because this is probably the only bus currently moving.
Sri Lanka’s startups have been resilient, and they are the future businesses of Sri Lanka. Local talent working with a global mindset. We have a massive opportunity to find solutions for problems in our markets, which we can take to the entire world. We have many problems to solve, but we can turn those problems into opportunities, which is what startups do.
We also have a tremendous opportunity to connect with the South Asian region because we have friendly relations with all neighbouring nations. You could say Sri Lanka is the Switzerland of South Asia, which allows us to market ourselves as a hub to connect to the South Asian region.
We’ve been taking hit after hit even before covid, and people’s perception of Sri Lanka from the outside isn’t the best. But as we band together, especially startups, it brings hope and excitement about future possibilities, which is why we should take this opportunity to change the narrative of what Sri Lanka is in the eyes of the global market, which we aim to do.
Although we are small, I think that small can be beautiful, and our programme celebrates that, saying yes, we’re small, but this is a great market to come and build your product. Talent is available and reasonably priced, and we can connect to the rest of South Asia, a much bigger market. Larger companies like Dialog have been doing this in Sri Lanka, and I think we need to take that opportunity and do the same for startups. I’m confident that our local talent has the right mindset, being perseverant and resilient in the last few years, which I think are some of the qualities that will take us to the world.