Yangon Angels could give start-ups wings

The Yangon Angels – investors and entrepreneurs that make up a new, informal funding network based out of Myanmar’s most populous city – refuse to be “Yes” men.

At least, that’s what it seemed like after one member, Charles Kathrein of Singapore-based Kathrein Ventures, called the valuations that four start-ups claimed in their investment pitches overblown at an early December Yangon Angels practice session and Ooredoo-sponsored meal.

Urged to be brutally honest, Mr Kathrein made remarks that seemed hard to say, but were most likely harder to hear on the start-ups’ side. “All of them have a false sense of value,” he said.

But his comments were met with appreciation.“Thank you for your feedback,” someone said.

Feedback seem part of the group’s raison d’être. Its formation comes down to Myanmar’s need for experts and investors to evaluate and guide budding businesses, as well as to consider putting up money – at least US$10,000 annually, in each Angels’ case – in exchange for slices of local start-ups.

The team behind Ooredoo’s entrepreneurial arm and incubator Ideabox Myanmar – including

Australian incubator Pollenizer – also started Yangon Angels, according to Pollenizer co-founder Phil Morle.

He describes Yangon Angels as something his company sets up, then sets free when it is in the neighbourhood.

“We kind of do it as a hobby while we’re in a market,” he said, noting Pollenizer is involved with an Australian networking organisation called Innovation Bay and a Manila Angels group, which Mr Morle co-founded in the Philippines. “We want this to be Myanmar-led, Myanmar-run … I’m facilitating the start and then I’ll be backing out.”

The Yangon Angels consist of 25 foreign funders as well as on-the-ground Myanmar entrepreneurs and investors – “very successful local businesspeople who … know the local market very, very well,” Mr Morle said. “This is an opportunity for these two groups to come together and learn from each other.” The tight-knit group grows only if a member refers someone to join.

Angel meetings in Yangon have resulted from a system Mr Morle has prototyped and tweaked elsewhere. “We’ve learned that private, highly curated encounters between entrepreneurs who are very, very good at what they’re doing and angels who are actually interested and investing are a massively valuable part of the ecosystem,” he said.

The group will grow past Ideabox, though the December 3 dinner – which Mr Morle called a practice session with familiar, invited start-ups – saw pitches from three of its incubatees.

He also said Yangon Angels is independent and doesn’t favour any programs over others, and in the future, the “standard model” for events will involve businesses submitting video pitches and the Angels picking four companies to present their ideas, just like in Australia and the Philippines.

In investment, money from angels can come after “family, friends and fools”, Mr Morle said. Internet start-ups looking for funding tend to be worth up to about $2 million, and seek financing in exchange for roughly one-fifth of their business, he explained.

Start-ups need a leg up between the three F’s and the big leagues, prompting Angels to swoop in.

“The Yangon Angels is basically the bridge,” Mr Kathrein said. “Angels get in early, put in a little bit of money, take a little bit of equity, do some mentoring, some nurturing, some coaching and frankly, sometimes [put] a big boot where it needs to go to bring them to the stage where they’re investment-ready.”

Angels look out for business ideas grounded in reality with the potential to grow wings. Mr Kathrein said his firm seeks “real” start-ups and passionate, dauntless founders, while Mr Morle said start-up starters can make or break an investor’s decision to contribute cash. “You’re looking for an entrepreneur that has an unreasonable belief in a future for what they’ve imagined,” he said. “They will absolutely see it happen and do anything it takes to get it there, so that’s the key thing.”

Investors also have an eye for what’s fresh and unique. One angel, Ko Zaw Steven Htut of Myanmar’s Net, prioritises potential for far-reaching success in start-ups.

“Most projects are still copycats of other successful business models abroad,” Ko Zaw Steven Htut said. “I want something that could explode, that could go global as a Myanmar brand to become an international brand.”

Though Myanmar’s market remains open for the most part, a thrush of international companies have arrived on the wing of intermittent reforms, with more businesses due to come. German start-up incubator Rocket Internet has made a run at the domestic internet business. Known the world over for taking tried-and-true online models and applying them to other markets through local copycat companies, the company – and others foreign entrants – represents a threat to fledgling start-ups.

Yangon Angels wants to get Myanmar start-ups into fighting shape for upcoming business battles. “We’re about helping local people build their competitive force … and there’s certainly the talent here to do it.” Mr Morle said.

Ko Zaw Steven Htut said investment is still relatively new in Myanmar, and the Angels’ role will amount mainly to mentorship. He confirmed the group has not yet decided to invest in any start-ups. At this month’s dinner, the network filled out and returned feedback forms based on pitches, asked questions and raised concerns.

Angel investment puts potential funders on high, in a position to make judgments about a company’s future. To see if a start-up is ready for takeoff, these financiers kick tires and run checks, which can involve questions and comments like those from Mr Kathrein.

“We sort out the survivors from the pretenders,” Mr Kathrein said.

And Mr Morle said an investor he knew that put entrepreneurs through the ringer did so because he seriously considered investing his money. Putting money where mouths are requires serious consideration.

“[Buddha taught] you have to think before you believe,” Ko Zaw Steven Htut said. “You yourself have to read, research and think, work it out in your head to believe [something].”


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