The Malaysian Prime Minister, Najib Razak, arrived in Sri Lanka recently on a three-day state visit, which coincided with the commemoration of 60 years of diplomatic ties between Malaysia and Sri Lanka. There were extensive discussions held on enhancing co-operation between Malaysia and Sri Lanka in a number of sectors.

One particularly significant event the Prime Minister attended was the launch of Dialog Axiata’s Digital Innovation Fund – which also includes Malaysian investment.

The Prime Minister of Malaysia at Dialog Axiata. Image courtesy the Ministry of Foreign Affairs Malaysia.

The Digital Innovation Fund is the first venture capital fund that will focus on exclusively financially supporting Sri Lankan digital startups. The fund will be initiated and anchored by Dialog, but managed by BOV Capital – a fund management firm that specializes in investing in tech companies.

The prime focus of the Digital Innovation Fund will be on investing in startups with strong business models, that have proven product-market fit, have the ability to expand in Sri Lanka, as well as having the potential to become ‘market shaping digital business’ in the country and beyond. The fund will have LKR 2.3 Bn that can be deployed for Sri Lankan startups with high potential. Most of the fund will be invested in early-stage companies, with each investment ranging from LKR 50 Mn to LKR 200 Mn per company. Twenty percent of the total fund will be set aside for startups in their seed stage, especially for those companies looking for investments below LKR 40 Mn. Candidates will be selected through a systematic evaluation process.

It’s not just financing, however, that the fund will provide. There will also be support through mentoring, knowledge sharing, and business development. Startups will get insight into business processes leveraging the Smart Axiata Digital Innovation Fund, a similar venture capital fund that was set up to support incubation programmes in Cambodia.

At the launch event, General Partners of Dialog Axiata Digital Innovation Fund, Rajan Anandan (Google VP, SE Asia, and India) and Prajeeth Balasubramaniam (Co-founder, Chairman at Blue Ocean Ventures) said that “the Digital Innovation Fund will provide much-needed risk capital and business building support to Sri Lanka’s digital startups. Our first fund, BOV Capital 1, focused on B2B tech startups keen on expanding regionally, and the Dialog Axiata Digital Innovation Fund will now look at digital ventures that are focusing on the domestic market. We are very excited about the partnership with Dialog Axiata.”

Digital businesses are a great way to expand the Sri Lankan tech industry regionally. There are fewer barriers to entry, and geography is not as much a restriction as it is for more hardware related businesses. Small, medium, and large-scale companies will all have access to this fund which will give the Sri Lankan ecosystem a much-needed injection of financial support.

The first startups to get funding from Digital Innovation Fund were Roar Media, as a digital first content company, and Insureme, an online insurance brokering company.

The Digital Innovation Fund will give Sri Lanka’s tech ecosystem a significant boost. The funds will provide ample opportunity for early-stage companies to scale quickly, and give seed stage companies a chance to stabilize. The new year is set to be a good one for the startup industry.

Cover Image courtesy Daily News
The Dialog Axiata Digital Innovation Fund was ceremoniously launched by the Right Honourable Dato’ Sri Mohd Najib bin Tun Abdul Razak, Prime Minister of Malaysia while (R-L) Hon. Dato’ Sri Mustapa Mohamad, Minister of International Trade and Industry of Malaysia, Tan Sri Jamaludin Ibrahim, President and Group CEO of Axiata, Supun Weerasinghe, Group Chief Executive, Dialog Axiata PLC, Hon. Harin Fernando MP, Minister of Telecommunications and Digital Infrastructure, Rajan Anandan, General Partner, BOV Capital, and Prajeeth Balasubramaniam, General Partner, BOV Capital look on.