Former refugee bets on Cambodia’s early-stage startups

PHNOM PENH — The chairman of Cambodia’s largest logistics group has raised $55 million to invest in the country’s growing stable of early-stage start-ups.

Rithy Sear, a former Cambodian refugee who founded Worldbridge Group after working for the United Nations in the 1990s, will deploy the funds through a new venture capital firm to be called Ooctane.

The firm, which will be a subsidiary of WorldBridge, marks a significant step up in venture funding for the country’s growing number of entrepreneurs who still struggle to find development funding, according to Sear.

Although not the first venture capital firm in Cambodia, Ooctane’s resources will be at least 11 times greater than the $5 million fund launched last year by Smart Axiata, a Cambodian telecommunications company.

Sear is investing $5 million of his own money into Ooctane’s first fund, and has so far raised an additional $50 million from other high net worth Cambodians.

Sear says Ooctane will be as much about advice as financial support.

Investments will range from $5,000 to $25,000, and will be made in startups focusing on fintech, logistics and property, which Sear says will create synergies with WorldBridge.

“They can come to us for financing, administration, registration,” said Sear, who said he will also act as a coach.

In November, Sear plans to open a co working space that will act as an incubator.

Sear was born in Phnom Penh in 1970, five years before the Khmer Rouge captured Cambodia’s capital, overthrew the government and began evacuating the country’s large cities.

He spent time in a refugee camp in Indonesia. Sear was a young man when he began working at the camp for the United Nations High Commissioner for Refugees. He continued working for the U.N. and later held a logistics role at the U.N. Transitional Authority in Cambodia.

When the U.N. left Cambodia after 1992, Sear dipped into his savings to start a logistics business that initially provided removal services to U.N. and embassy staffs.

His company eventually expanded into a range of other businesses. Its real estate arm is currently developing a luxury condominium with Oxley Holdings of Singapore. It is also building a training facility for small and midsize enterprises.

“Lots of startup people do not have access to financial institutions,” since borrowers in emerging markets typically need to put up a lot of collateral, Sear said. “And what is the problem when you do business? [It is having] no financial support.”

According to Sear, the hardships his generation went through have given Cambodians of his age a sense of perspective that perhaps many younger Khmer lack. “In business, you need a lot of life experience to be flexible,” he said. “What they [younger Cambodians] need is coaching.”

Sim Chankiriroth, CEO of fintech startup BanhJi, is pleased that Ooctane wants to nurture early-stage startups. “There are a lot of [Cambodian entrepreneurs] in the growth stage of developing ideas,” he said. “But nobody is funding pre-revenue startups.”

Ooctane’s initial $5 million fund will run for 10 years, taking stakes in the startups it invests in. Sear said that, currently, the only viable exit option for Cambodian startups is to sell stakes when they grow in value. The country’s initial public offering route runs through the barren Cambodia Securities Exchange, which has five listings.

The Smart Axiata Digital Innovation Fund’s four beneficiaries include Morakot Technologies, a provider of low-cost banking systems for microfinance institutions, and Joonaak Delivery, which handles logistics for online stores.

Cambodian startups typically emerge from co-working spaces. The government has also been encouraging young businesses by sponsoring initiatives like the Cambodia ICT Awards.

Now there is enough of a scene to attract venture capital.

Cambodia’s technology field “will eventually grow,” said Bora Kem of Mekong Strategic Partners, an investment management company that backs the Smart Axiata fund. And “there will be bigger and bigger opportunities for funds and startups.”

According to Kem, Cambodia is home to about 200 tech-related startups, a number that is expected to double in the next three years.

Kem added that Cambodian corporations in traditional industries are also starting to realize the importance of innovation and digitization.

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