September 16, 2016

Can Laos Create a Startup Economy?

Alongside the ASEAN summit, a different group descended on Laos:  angel investors.
By Ai Vuong, The Diplomat Magazine, September 12, 2016

Last week, the usually sleepy capital of Vientiane was awoken amidst the commotion and hustle bustle of the 29th ASEAN Summit. Within four days, the Lao People’s Democratic Republic had hosted a flurry of official meetings, negotiations, and historic agreements, such as President Barack Obama’s pledge of $90 million to remove unexploded ordnance.

It was a historic week for Laos, a landlocked country often dwarfed by its more dynamic neighbors Vietnam, Cambodia, and Thailand. At the ASEAN Summit, Chinese Premier Li Keqiang pushed to advance China’s Belt and Road Initiative. This initiative to build the Silk Road Economic Belt and the 21st Century Maritime Silk Road intends to connect Asia, Europe, and Africa along ancient trade routes, and could broaden China-Lao ties in the future.

While there has been much attention on the diplomatic and economic fronts, Vientiane was also subject to scrutiny from a different group of people: international angel investors.

Part of a new network called the Mekong Angel Investors Network (MAIN), ten angel investors from Europe, the United States, Australia, and Vietnam descended on the capital city in search of entrepreneurs and startups. This would be the second delegation that has come to the region; a different set of investors launched the Cambodian and Vietnam chapter of MAIN in June 2016. Within four months, these delegations have attracted the attention of Australian Prime Minister Malcolm Turnbull, who announced the MAIN Lao Chapter launch on September 7.

These current and future investors are coming to Southeast Asia to look for opportunities: the ASEAN region is growing faster than any other region in the world. Myanmar and Cambodia’s economies are expected to grow at 7 percent while Vietnam and the Philippines will expand at 6.1 percent and 6.3 percent. According to the IMF, the rest of the world economy lags behind at only 3.2 percent growth.

Laos, actively working to be removed from the list of Least Developed Countries by 2020, has also grown at 7 percent this year.

Despite Laos’ promising growth, however, the startup opportunities that the investors found in Vientiane were still scant, to say the least.

Compared to nearby Thailand and Vietnam, the Lao startup ecosystem is still lacking key players and components, including the absence of incubators, accelerators, and angel and venture capital investors, according to a survey by MBI: The Mekong Business Initiative, a project of the Asian Development Bank and the Government of Australia, a partner of the angel investors network.

Most notably, Laos has a dearth of startups — and even fewer startups with founders who have the ability to pitch in English. Two notable exceptions harness mobile technology to deliver services: Foxpress and Book Delivery.

Foxpress sought to address Laos’ lack of infrastructure and payment models by delivering packages directly from seller to buyer utilizing motorbike drivers. Book Delivery, on the other hand, confronted Laos’ lack of access to education. Every week the team crossed the border to Thailand and bought Thai-language books back to Lao citizens. According to the founders, reading options in the Lao language are severely limited; Thai, however, is closely related.

Both Foxpress and Book Delivery are relatively new and founded by first-time entrepreneurs, all of whom are under 23 years old. Furthermore, in their pitches to investors, both startups were concerned about their small market of only 6.9 million people.

Although angel investing by definition means seeking companies that are extremely high risk, the investors found little opportunity to financially commit to these startups in Laos.

“What we realized was that these startups aren’t necessarily at the stage of investing,” noted Steve Landman of Lotus Impact Fund and a co-founder of MAIN, “but rather of advising and refining their business model.”

New York investor David Beatty, also a co-founder of MAIN, encouraged these startups to look outside of their own local marketplace and think regionally and globally. He also reflected that the entrepreneur path is a lonely one, and without a thriving ecosystem on which to rely, that path becomes even more insurmountable.

“What we look to do is to influence and inspire,” said Beatty.

Executive Director of MBI Dominic Mellor echoes Beatty’s sentiments: “For us, it’s not just about the investments, but about transferring knowledge and expanding networks.”

Laos’ young entrepreneurs are looking to the MAIN investors for more than just funding, but rather mentorship and connections from years of building and exiting businesses. All of the investors conducted one-on-one workshops with the startups, which measured up to hours of invaluable counsel.

In their time with the startups, the investors still mined for other opportunities within the nascent ecosystem. One of the biggest observations they gleaned was that the most impactful and profitable solutions may not lie in technology, given that only 19.9 percent of the Lao population are subscribed to internet services.

“In my opinion, there’s more potential in low tech, agriculture, education, tourism, and hospitality,” assesses Landman, “because the Lao startup ecosystem still needs so much, such as English and ways to encourage creative thinking.”

Another MAIN member who previously invested in Cambodian startup Book Me Bus, an online platform for purchasing bus tickets, remarked that she may have to look for low-tech startups in Lao. An app or web-based solution is not applicable when a majority of the population does not use devices.

The ecosystem itself still needs much support in order to thrive, such as access to cheaper and faster internet. In addition, there is little to no media specific for startups or ways to disseminate information to the public regarding the startup life cycle.

However, despite the many gaps remaining in the ecosystem, local entrepreneurs remain optimistic. Nana Souannavong of Toh Lao, the first coworking space in Laos, is positive that the “Lao startup ecosystem has big potential to thrive because there are still a number of opportunities and things that have not been done to solve problems yet.”

Fresh off the momentum of the ASEAN summits and the encouragement of international investors, these Lao entrepreneurs are gearing themselves to activate Laos’ stirring startup ecosystem. Perhaps in a few months time, emerging startups will be ready to pitch groundbreaking ideas to the next round of investors sure to be coming through Laos.

Ai Vuong is a communications consultant and freelance writer. She graduated with an MPA, specializing in International Development from NYU. She has previously been published in The Diplomat and The Huffington Post.

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