Harrison White
Cambodia’s leading start-up ecosystem forum Give a Day has discussed how Entrepreneurial Support Organizations (ESO) can connect social impact startups to crowd funding or non-Governmental grants through better collaboration across the ecosystem.
Cambodia’s ESO community, broadly defined as groups that support, train, and fund entrepreneurs is still in the nascent stage with many new organizations launched to help nature and develop the sector.
The June event was the fifth of 10 planned workshops designed to improve Cambodia’s entrepreneurial support organizations network held at Sunway Hotel in Phnom Penh with development partners aiming to better connect the local start-up ecosystem.
To read more about the Give a Day initiative click here.
David Shelters Entrepreneur-in-Residence, Mekong Strategic Partners delivered the keynote addressing how social impact startups should push for more donations or reward-based crowd funding for investment.
“Cambodia has many social impact startups that may not be fully ready or able to meet the requirements of formal funding and hence ESOs can connect these startups with donations through crowd funding or grants from NGOs,” Shelters explained.
Crowd funding for Cambodia startups
Shelters identified a funding gap between the pre-seed funding currently offered by NGO funding programs and public grants such as offered by Khmer Enterprise and the seed-level institutional equity investors that require a specific level of traction before investing.
This funding gap is in the $50-$100k ticket size that would typically be filled by angel investors, investor-led incubator programs and crowd funding platforms, he said.
Shelters explained the launch of equity and debt-based crowd funding platforms to support high-growth startups will require regulatory approval for compliance with securities and bank lending laws respectively and may take some time to execute the proper legislation.
“While formalizing these arrangements with local regulators would take some time it would be important for aspiring crowdfunding platforms to be formally recognized and would assist in next step and can be an excellent funding source to fill the cited $50-100K funding gap,” he added.
To read more about women entrepreneurs in Cambodia challenges to access finance click here.
“Donation and reward-based crowdfunding platforms in support of social impact startups do not generally fall under these laws and thus require less time to draft the necessary guidelines,” he said.
“It would be advisable for the local startup community to commence advocacy for both types of crowd funding investment,” he added.
Connecting investors and social impact groups
In addition, to formalizing the crowdfunding platforms Shelters also discussed the development of a new informal group of Non-Governmental Organizations and investors that are planning regular meetings to swap notes on startups they have come across.
“As investors, we often meet founding teams we like and have great potential, however, they have not attained sufficient traction for us to make an investment decision,” he said.
“We would like to refer them to NGOs that may have suitable funding programs for them so they acquire sufficient runway to achieve such traction and hence are helping NGOs in two ways,” he added.
The ESO community would aim to assist in the evaluation of what startups are funding grade and serve as a channel to promote their funding programs.
During the events group discussion session, attendees spoke about the importance of properly defining startups outlining bringing new ideas to market, scalability, and clear exit strategies as the key points of difference in comparison to Small and Medium Enterprises.
Common success factors were listed as strength of founding team, innovative solutions to problem identification, and access to strong mentors. Gaps in the market included a lack of research data, connecting platforms as well as clear startup definitions were top gaps that needed to be addressed.
Developing the local start-up community is considered key for Cambodia to achieve its aims to reach upper-middle-income status (GNI per capita between $4,036 and $12,475) by 2030.
For ESOs that offer direct funding to startups and want to join the group please can contact Sabine Joukes at sjoukes@pactworld.org.
For investors, particularly angels looking for deal flow, can contact David at ds@mekongstrategic.com.
