Myanmar-based startup incubator Phandeeyar Accelerator, which has so far been making investments from its own balance sheet, is for the first time in talks to raise external money for its permanent capital vehicle to clock investments in early-stage tech ventures, its CEO Jes Kaliebe Petersen told DealStreetAsia in a chat.
Phandeeyar, which means ‘Creative place,’ has so far funded 17 local startups since its inception in 2015. Going forward, it expects to raise as much as $1-2 million from limited partners (LPs) to invest over the next few years.
“We invest at an early stage, and ticket sizes are generally smaller here than they are in other countries in the region. So, we don’t need, for example, $10 million before we can start making investments,” explained Petersen. “That gives us a lot of flexibility to do the investments. But at the same time, we also have a mission to expand the ecosystem and engage more investors to commit to the startups that we support,” he added.
Even as it is a permanent capital vehicle, it’s open for limited partners to participate. For the uninitiated, a permanent capital vehicle or PCV, as its commonly called, is an investment entity created for managing permanent capital, wherein the time frame is not specified.
Phandeeyar’s portfolio includes early-stage tech companies such as RecyGlo, a recycling solutions provider that operates in Myanmar and Malaysia, freelancer platform Chate Sat and logistics startup Kone Si, which have raised capital from other investors after the accelerator put in money.
In total, over half of Phandeeyar’s portfolio firms have raised follow-on funding.
Even as the firm has not made any exits since these are just the early years of investment, Petersen revealed that the book IRR has been more than 22 per cent.
“We’re pretty happy with that,” he said.
A local chapter of the Founder Institute franchise that’s the world’s premier idea-stage accelerator, Phandeeyar invests in Myanmar startups as a venture capitalist with a special focus to create social impact, which, say experts, is important for a young ecosystem like Myanmar.
“Our goals are primarily focused on growing the pool of tech talents, providing skills to people who are either very early on the career or are looking to increasingly contribute to the tech ecosystem,” said Phandeeyar Accelerator director Joao Dutra.
How would you describe Phandeeyar’s role in early-stage tech landscape in Myanmar?
Phandeeyar is the first investor in tech startups in Myanmar. We have invested in 17 startups over the last four years. Our participation is usually the first [external] investment that startups get. Other investors like Seed Myanmar of Vulpes Investment, Trust Venture Partners, Emerging Markets Entrepreneurs and Nest Tech from Vietnam come around later. We also have a few angel investors who have backed our startups.
What are the opportunities for investors from this small community?
We’re in a digital leapfrog that Myanmar is going through. In addition, there are many industries without a dominant player. There is a lot of space in many sectors for entrepreneurs that want to build a scalable business model, especially those leveraging the use of smartphones. Even as tech talents are not easy to find, there are strong talents in some startups, which are the biggest opportunities for investors. So, investors need to be diligent in finding the ones who have tech talents that can bring ideas into execution. There are a lot of business models from other countries that can be replicated here, but the challenge is always execution, considering that there is still a shortage of investment.
Do people want to work for a startup?
What we see in our programmes is an increasing number of people joining our pipeline building activities that include our startup challenge – the biggest startup competition in the country. The first edition in 2015 had around 80 people, then it increased to around 100 in 2017, 200 in 2018 and 330 people in 2019. This is very encouraging for us. We also see a lot of people outside of Yangon excited to learn about startups.
There are successful founders who bring their experience in certain domains to build their startups. That said, there is still a lot of competition with the big telcos and banks in terms of high salaries or benefits package. A lot of students have had to spend a lot of time convincing the parents that startup is a legit path. There are still some challenges in terms of social norms. The programmes that Phandeeyar runs may be the trigger for the next few years that people will actually start their businesses.
What roles are set out for Phandeeyar in pushing the ecosystem forward?
We have a number of roles. Our goals are primarily focused on growing the pool of tech talent, providing skills to people who are either very early on the career or are looking to increasingly contribute to the tech ecosystem. So, we conduct training to churn out tech talent who can start a startup and grow their existing businesses using technology. Expanding the pool of early-stage entrepreneurs, even if they’re not ready to absorb investments from other investors, is an important metric for us. And of course, another goal for us is to expand our pipeline and portfolio.
I have no doubt that five years down the line, the tech community in Myanmar would have grown exponentially. There will be companies growing to a size where they can compete regionally.
How about participation from corporates?
We have been in good partnership with telcos such as Ooredoo and Telenor. We have got requests from corporates to run hackathons for them, as well as from a bank to train their staff so they can become intrapreneurs. And even as it’s very nascent, we do see interest from corporates in setting up their own innovation hubs. Myanmar’s economy is gradually opening up to the global market in many sectors. So, with more external companies coming in the country, local companies need to innovate to remain competitive. It happens globally. Setting up their own “Phandeeyar” is a good way of keeping them competitive.