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Startups discuss local challenges

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Individuals work at the co-working space of Saint Blanquet & Associates in Phnom Penh in June 2015. Kimberley McCosker

Startups discuss local challenges

Cambodian startups currently face several regulatory challenges in pursuing growth and profitability, according to three of the Kingdom’s most successful startup founders who shared their experiences over the weekend with the hope to inspire increased innovation and entrepreneurship.

A key outtake from the event organised by the Cambodians in Tech group was that business registration is an important step for any successful company but that given the local costs, registration should usually be avoided until a startup becomes sustainable.

Chea Langda, founder of online bus ticketing platform BookMeBus, said it was important for startups to test their ideas and develop a sound business model before taking on the financial risk of registering.

“It is very important for startups, before they start spending money, to prove their idea first,” he said, adding that registration not only involves paying an initial fee but also recurring taxes that could weigh heavily on thin margins.

The founder of BookMeBus, which started as a self-funded venture, added that outside investment was key for the future growth of a company. During the process of identifying potential partners, Langda explained that not all investors were equally suitable.

“There are many investors approaching BookMeBus and they all have large amounts of money, but not all of them are the right investors,” he said. “Some investors are really big but they have a different vision [for the company].”

Sok Sopheamonkol, co-founder and CEO of technology outsourcing firm Codingate, added that profitability should be a priority before taking on the financial burden that comes with registration.

“If you are not making any money with your business to cover yourself, why should you take the risk of registering? If you register, you have to pay taxes, so you will be losing money and also paying taxes,” he said. “That would be very challenging.”

However, when startups gain momentum and start seeing growth, business registration becomes much more important because most investors will only invest in legally established companies, he explained.

“Registering a business is very important and I would suggest if you are able to register from the beginning then even better, because it can create a lot of opportunities,” he said. “[After that] getting funded becomes possible, but if you are not legally registered it is very challenging.”

He noted that entrepreneurs should only start looking for investors once they have created a detailed plan of how to spend and develop, adding “when you do a pitch to investors, don’t let them ask all the questions. You have to ask a lot of questions because you have to choose the investors as well”.

Khmerload, a local viral news digital platform, chose to register in Singapore in order to facilitate investment due to the lack of regulatory clarity in Cambodia, according to the company’s co-founder and chief information officer, In Visal. He noted that previously, the company felt little incentive to register due to the costs it would face.

“I think you should undergo the registration process when you think it makes sense to register,” he said. “Because at the beginning, startups have nothing. They have limited budgets, they have limited human resources and they do not want to have so many things on their mind.”

After receiving their first major investment from Silicon Valley-based 500 Startups last month, Visal emphasised the need for entrepreneurs to be conscious of how much of their company is offered to investors.

“It would be great that you didn’t have to give a too big percentage of your company, maybe under 10 percent, because then you retain the power to control your company,” he said.

Khmerload officially registered under the parent company Mediaload in Singapore in November 2016 and expanded to Myanmar last August where it is seeing most of its growth. Visal said the ability to expand across the region is one of the biggest draws for investors looking to the Cambodian market.

“If [a startup] is in Cambodia alone, maybe they will not be very interested because Cambodia is a small market,” he said.

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