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Not all investments come in the form of angels

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Not all investments come in the form of angels

Cambodia, a young and budding country poised to take all the necessary steps in becoming a business hub – especially in the small and medium-sized enterprises (SMEs) industry – is now latching on to a novel idea; angel investing.

While investment firms have been a mainstay in the Kingdom for the past decade, “organised networks of angel networks are beginning to gain interest and traction,” said Laura Smitheman, COO and co-founder of Impact Hub Phnom Penh, and mentor of startup-support investment initiative EPIC.

She continued that angel investors provide a potential solution to the ‘financing gap’ which poses a problem in a country lacking access to a network of advisers, funding, and a supportive ecosystem for aspiring entrepreneurs and startup businesses.

“The ‘financing gap’ is the gap between what investment funds are looking to invest – often $250,000 to $500,000 – and the amount many start-ups are actually ready for, which is about $20,000 to $50,000,” Smitheman explained.

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Veteran businessman Kuy Vat on EMI and angel investing. Hong Menea

This gave rise to the recent Mekong Angel Investor Network (MAIN) visiting Phnom Penh to talent-scout startups possessing enough long-term potential to invest in.

MAIN has swooped away with two firm commitments, BookMeBus (bookmebus.com) – a local online transport company currently selling hassle-free and on-the-go bus tickets to the middle-class through its website and mobile app – along with the two-year-old, 200-member Cambodian Investors’ Club (CiC).

One of the angels’ chosen ones, 27-year old CEO and founder of bookmebus.com, Langda Chea, said: “The investors, who had come three months before our pitch to them, came back again in August, and were shocked at the $38,000 revenue that we were earning monthly, and that made them want to invest in us.”

While already a normalcy in many countries, booking bus tickets online is a debut idea in Cambodia, with Chea admitting that it had taken crowd-funding from friends and family, who pitched in $20,000, for him to start his business.

MAIN had ploughed $15,000 into bookmebus.com, an amount that Chea said would go into hiring educated, likeminded employees adequate enough to take on the job of expanding such a newfangled business.

“Our vision is to cover all locations in Cambodia where people can also book boat, train and air tickets. There are many challenges, because we are the change-makers who are changing the way people are purchasing tickets here,” Chea elaborated.

Since May 2015 when they only sold five to 10 tickets a day, bookmebus.com now sells an average of 100 tickets daily, and has covered 50 percent of the 60 bus operators in Cambodia.

Explaining the terms of the new financing, Chea said it works on a convertible note basis.

“During the term, if they like our progress, they can convert it to equity. If they don’t, they take back all the money and we pay interest on top of that. We, as the startup can also do that – if a particular angel investor is not being very active or helpful with us, we can get back the amount of money that particular angel has invested in us.”

On the other end of the compass, veteran businessman Kuy Vat, chairman of CiC – the other company invested in by MAIN – and founder of local eatery chain Park Café, noted that he had begun his F&B career back in 2004, and not without any struggles.

Investment firm Emerging Market Investment (EMI) entered the Cambodian business market some time after the 2008 global financial crisis, paving the way for an investment partnership after one year of talks.

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bookmebus.com founder and CEO; 27-year-old Langda Chea. Athena Zelandonii

Having both feet planted in different types of investment firms, Vat, when questioned on how different EMI and angel investing is, said, “Angel investors are more about individual funds. An emerging market consultancy is a company fund. On which is better, it depends on the startup itself. In EMI’s case, they would prefer investing in a company that already has some establishment. Angel investors only see potential and then they invest in that.”

Declining to disclose how much MAIN had invested in CiC, he said that what CiC stands to gain from this angel investment is the peer-to-peer lending that it can provide to the company. “It is more of providing loans to members of the CiC – a secure access to stable financing for the 60 to 70 percent of SMEs in our company.”

Smitheman echoed Vat, saying, “Investment firms are for later stage startups and not only provide capital and support, but also structured technical and managerial advice. They should be seen as fellow shareholders in the business.”

While pioneer businesses have no problem with attaining investments from various means, startups in Cambodia have to tread with more prudence, especially with a rapidly growing number of entrepreneurs fighting to impact their community through socio-business innovations.

In CEO Chea’s canny words: “My message for the other startups is to open up their mind, don’t think of losing shares. The number of shares is not important, but the value is. Let’s say I own 50 percent of the shares now but it is worth only $10,000. But in the next two years I can own 10 percent of something worth $100,000. It is vital to not be short-sighted.”

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