I recently wrote about whether the startup ecosystem in Laos was ready for a unicorn. This time we turn our attention to Cambodia today and explore if it’s ecosystem is ripe for the exponential growth as recently seen in Indonesia and Singapore.

Adopting a top-down approach, we will briefly analyse Cambodia’s macroeconomy before exploring deeper if the population is ready for the tech boom. Lastly, we will dive in to explore whether the ecosystem is strong enough to cultivate and support this growth.

Rocketing economic growth

According to World Bank statistics, Cambodia’s economy is spearheading the economic boom in the region with an average GDP growth rate of eight per cent between 1998 and 2018, making it one of the fastest-growing economies worldwide. As a result, Cambodia reached a lower-middle-income status in 2015 and the government aspires to attain upper-middle-income status by 2030.

All these statistics paint the picture of a booming economy ready to take on the powerhouses of the region and startups will play a key role in the transformation.

However, these macro indicators only represent the economy as a whole. Therefore, we will need to explore deeper if the anticipated tech boom can be supported by Cambodians.

Also Read: How student entrepreneurs can tap into the fintech ecosystem in Cambodia

Tech-savvy demographic

With a staggering 47 per cent of the population aged under 25, Cambodia’s greatest asset lies in its youthful population. Combined with a mobile and internet penetration rate of 120 per cent and 84 per cent respectively, it is safe to say tech-savviness resides among the top traits of the population. Instrumental to this growth? Cheap data plans.

With 4G data plans starting at US$1 for 10GB, it is small wonder why seemingly everyone in Cambodia utilises a smartphone. With access to the internet and its wide outreach, the sky is the limit for Cambodia as it looks to technology to drive its next phase of growth.

Deep diving into the ecosystem

Thus far, the Cambodian economy (economic growth fuelling increased business prospects and investors) and its population (high digital penetration resulting in citizens being constantly exposed to new technologies) look ready to support the growth of tech startups in the Kingdom.

However, the key to producing successful startups is the ecosystem in place to support entrepreneurs in the uncertain road to create a company. Given the novelty of ideas startups look to solve, it is paramount to have the right community providing advice and resources for them to navigate through the notoriously plentiful difficulties in their journey.

At this juncture, given the young demographic and high mobile usage statistics, the majority would have the view that Cambodians are youthful, tech-savvy and open to change.

However, we have missed the fact that the key consumers with the highest spending power in the economy are middle-aged career professionals that grew up before the tech boom swept across the country. Therefore, it is often opined that the Cambodian consumer market is not receptive to new ideas that startups propose.

Also Read: Will Laos be home to a unicorn someday?

What’s stopping them

BookMeBus founder, Chea Langda, certainly shares this view. BookMeBus was conceptualised in 2015 as a ticketing platform which allows travellers to book their bus tickets within Cambodia and across the borders of neighbouring countries. Chea shares specifically that there is a very little trust given to online platforms by locals and they often worry online products might not be authentic.

More than this, they have a stigma that buying things through an agent is always more expensive and full of scam. This myopic fixation has led consumers to forgo the pain points BookMeBus solves, convenience and cost-savings. Thus, consumers fail to fully value the service and utilise it.

He subsequently shared that while it would be difficult to change existing mind-sets, public marketing campaigns will go some way to reduce such concerns. Therefore, it is paramount that this key demographic would be receptive to new online solutions as startups, even with a great product and market fit, can only go so far without customers to generate substantial revenue to fuel future growth.

Another hurdle faced by startups penetrating the Cambodian market is the high unbanked population. Statistics have shown that 78 per cent of the population is unbanked and less than 15 per cent utilise mobile banking services. Therefore, it has been tough for B2C tech startups to provide the optimal consumer experience with both exorbitant payment processing fees and limited digital payment outreach hampering their overall service.

However, similar to how successful entrepreneurs view difficulties as opportunities, this problem looks ripe for fintech startups offering digital payments to enter the fray and solve it. Given the success of digital payments in Indonesia, it is not surprising that more than 50 new startups have entered to capture what could be a future goldmine.

Mentorship

The scarcity of mentors is a by-product of the relatively young startup ecosystem present in the Kingdom. Due to a lack of entrepreneurs with experience in the field of building and scaling a startup successfully, budding founders have few mentors to turn to for advice in times of need.

Also Read: Cambodia’s Muuve scores funding from Ooctane to take its food delivery service to new cities

Given that research has shown that mentorship is one of the most important needs for a startup to succeed, the fact that over 50 per cent of founders have zero or very infrequent mentorship, is chilling. The uncertain environment that startups operate in due to the novelty of the problems they solve makes it even more important for mentors to be present in the ecosystem to provide experienced guidance for these young entrepreneurs, where more than 80 per cent reported to be working on their first startup project.

Support

Despite the above-mentioned challenges faced by the ecosystem, there have been steps in the right direction to nurture startups in Cambodia. Corporate giants such as Axiata, Toyota and Grab have sponsored incubator-like programmes and hackathons in a bid to provide young entrepreneurs with the platform to pitch their ideas and resources to assist in the implementation of their business ideas.

Regulatory frameworks in the Kingdom have also assisted in priming the ecosystem for growth. Over the last three years, the government has introduced significant policy initiatives aimed at propelling the tech sector and startup ecosystem to the next level. In its five-year national development plan announced in 2018, an initial vision of Cambodia’s digital economy was panned out.

The National Entrepreneurship Fund, with an aggregate capital of US$5 Million, was launched in 2019 and took government funding dedicated to the tech startup ecosystem to US$12 Million. Therefore, by virtue of the amount of resources poured in the build-up the ecosystem, it is clear that policymakers view startups as the next key driver for economic growth in the country.

Eyes on Cambodia

Overall, despite the young startup ecosystem in Cambodia being inexperienced and local consumers taking time to warm to new technologies, I do believe it is ripped and ready to usher in a new era of growth. The ecosystem has been receiving increased government support, both financially and in the way of policies.

Furthermore, the increased attention from others in the region has led to the creation of a conducive environment for investors to enter and boost the confidence of budding entrepreneurs to take the leap and create startups that would ultimately fuel Cambodia’s economic growth.

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