Start-ups to see more M&A, less listings
Public listings have taken a beating owing to the ongoing economic crisis with some companies hitting the brakes on raising funding via this route.
For instance, start-up company, Roar Global, a media network that builds, operates, and invests in distinct media brands producing content and media solutions across the Asian region was to be listed when the investor pulled out this year.
“However we are looking at a buyout from a foreign party, perhaps next year,” Prajeeth Balasubramaniam, Chairman, Council for Start-ups of the Ceylon Chamber of Commerce told the Business Times. He said in hindsight it is probably a good thing that the listing didn’t happen since the valuations now could be doubled and the company can get a better deal.
Zigzag, an Online Women’s Clothing Store, was awaiting a public listing, which didn’t happen due to the economic crisis. Mr. Balasubramaniam said the company is now looking at a Merger and Acquisition (M&A). He said the company has also cottoned onto overseas expansion plans, probably in West Asia and Australia. Omak a start-up company in the food chain business, is planning to expand to Malaysia and Singapore. “This requires funding, and it is very slow under the current economic climate,” Mr. Balasubramanium added.
He said as it stands now, the valuation for companies may be smaller, but eventually, they hope to get better valuations for Sri Lankan entities.
However, he added that right now the challenges globally as well as locally are daunting but a smart investor looks into times like this to look for good investments. “This is mainly because we have solid tech talent,” he said, calling for a robust framework and structure for start-ups.
“This type of structure is important because why would any type of venture capitalists come to Sri Lanka and risk their capital in an asset class like start-ups, which is anyway of high risk and lose taxes in the process twice over., risking their capital, especially in a high risk asset class such as start-ups and lose taxes twice over and also invest?”
He said that in this backdrop, certain entities are trying to set up their main offices overseas to mitigate the challenges and get on with business.
Agrithmics (Pvt) Ltd, a company that digitally enables a variety of agriculture industries ranging from small-hold farms to their larger buyers and plantation companies, is in the initial stages of setting up its head office in Singapore.
“Agrithmics is a Sri Lankan entity. For future fundraising, we are exploring this option.
We build our tech from Sri Lanka. We want to explore other markets to mitigate the challenges that we are facing as a business now,” said CEO Agrithmics, Prashanth Premakumar. The company is also in the early stages of expanding into Bangladesh and Pakistan.
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