Sri Lanka’s startup ecosystem has been identified as an integral pillar of not just the Government’s vision for a digital economy, but also overall economic growth.
According to the StartupBlink Ecosystem Index, Sri Lanka’s startup ecosystem grew 47.2% in 2025, ranking 68th globally, with 316 startups and over $ 4.02 million in total startup funding. From 2021 to 2023, it generated $ 252 million in Ecosystem Value, driven by Fintech, Govtech, and Agtech and New Food.
In an interview with The Sunday Morning Business, 3H Innovations and Jendo Innovations Co-Founder and Director and Technologically Re-Awakening Culture of Excellence (TRACE) Executive Director Heminda Jayaweera discussed the progress within the ecosystem and highlighted the concerted efforts required to address systemic challenges and develop Sri Lanka as a startup hub in South Asia.
In this light, he elaborated on how Disrupt Asia, Sri Lanka’s premier startup conference and innovation festival scheduled for 17–20 September, is aimed at accelerating growth and innovation in the country’s startup ecosystem.
Following are excerpts:
What is the current state of the innovation and startup ecosystem in Sri Lanka, and could you elaborate on Disrupt Asia and how it supports innovators and startups?
Disrupt Asia is Sri Lanka’s premier startup and innovation event, spearheaded by the Information and Communication Technology Agency (ICTA), Ministry of Digital Economy, and Ministry of Industry and Entrepreneurship Development alongside significant private sector participation.
Disrupt Asia was initiated 7–8 years ago and ran continuously until 2019, when it was halted due to the Covid-19 pandemic and other subsequent challenges. We are now restarting the event and it’s shaping up to be better than ever. It’s a true public-private partnership with many private sector organisations actively taking the initiative beyond simply offering support.
The goal of Disrupt Asia is to address the missing pieces in Sri Lanka’s startup/innovation ecosystem and to bridge the gap. This isn’t just a one-time event but an ongoing effort, with several events in between till the next event.
This means events will be continued even after the main conference, with plans to visit India, the Middle East, and Berlin. Hence, this is a consolidated effort to address the major issues identified in the ecosystem. For example, lack of investor interest remains a significant challenge in our ecosystem. In order to address this, Disrupt Asia is bringing over 50 investors to the event through partners.
However, attracting investors is only part of the solution, as investable startups are also required alongside. To that end, Disrupt Asia is also cultivating and accelerating the growth of approximately 60 startups with the potential for global scale.
This year’s Disrupt Asia is a four-day event. The first day features a venture engine, which is an investor pitching event, followed by the main conference at Cinnamon Life on 18 September, the Innovation Festival (which is a public event) on 19 September at TRACE Expert City, and a sundown investor event in the south on 20 September. Disrupt Asia is the premier event for Sri Lankan innovation as part of the broader Digital Economy Month.
Further, the event is named ‘Disrupt Asia’ since it’s not limited to Sri Lanka and the goal is to attract foreign startups to establish themselves here, using Sri Lanka as a neutral hub for expansion into South Asia.
Sri Lanka is one of the best locations for European or American startups looking to build a footprint in the region, and thus we are promoting this idea by inviting a few startups from abroad to see the opportunities in the country. It’s a two-way street, not limited only to showcasing local talent but also attracting international expertise by showing the country’s potential, and will eventually help build our ecosystem.
With this year’s plan to launch a $ 50 million fund of funds at Disrupt Asia, how do you see this changing the funding landscape for Sri Lankan startups, especially in early-stage financing?
The idea of a Venture Capital (VC) fund has been discussed for years, but it never came to fruition due to a lack of legal and regulatory frameworks and, more recently, economic challenges. With investor confidence returning, the present is ideal.
However, some of the issues that have held the country back, such as a lack of proper rules for establishing VC firms (like the limited liability partnership model) still exist. In fact, most VCs that work with Sri Lanka are based in other countries like Singapore.
The $ 50 million fund of funds is this year’s target, but as we work to establish it, we are also focused on resolving these regulatory and legal issues. We are in discussion with the relevant ministries, including the Treasury, as we plan to include Government support in the fund.
Even a small-scale Government contribution makes a significant difference, as it signals official endorsement, which is highly appealing to foreign investors. This is a model that has worked in many other countries, like Singapore and Malaysia, as they have developed their economies.
In relation to regional peers, startup funding in Sri Lanka is relatively small. What steps can bridge this gap and attract more venture capital into the country?
A startup’s initial funding typically comes from the founders’ own money or bootstrapping. The next step often involves seeking risky capital from close friends and family. Following that, angel investors (those who invest their own money) provide early-stage capital.
Sri Lanka has a considerable amount of angel investors, but the real challenge is at the next level of investment, when a startup needs to scale up quickly after building a prototype and acquiring its first customers. This is where VC is needed.
The typical VC model involves a general partner who raises money from various investors (partners) and then distributes it across many startups, hoping that one will eventually become a unicorn. The model actually accepts that about 90% of the investments may fail, but the one or two big successes will more than cover the losses and bring profit to the firm.
However, currently this model is not in the works in Sri Lanka due to issues like double taxation and various issues in the transaction models. Moreover, passing regulations for VC funds is not enough. Sri Lanka also needs a strong ecosystem with a large number of credible and tech-oriented potential startups. The entire ecosystem must be built together for the model to succeed.
Hence, Disrupt Asia’s initiatives are not limited to attracting investors or starting a fund. The event also extends to supporting all aspects of the ecosystem, including attracting foreign startups and experts to help fill in the missing pieces and eventually establish a hub in Sri Lanka. The ideal model for Sri Lanka to attract more Foreign Direct Investments (FDIs) should focus on an ecosystem with deep tech startups, scalable beyond Sri Lanka.
Commercialisation of university and institutional research has been rather weak in Sri Lanka. What mechanisms could help translate more Research and Development (R&D) into market-ready products?
To create globally scalable, deep-tech breakthrough startups, it is essential to establish a strong R&D support system. We have recognised that Sri Lanka’s R&D sector has many problems, and the effectiveness of transforming good research into innovations by universities and research institutes is questionable at times. This is a significant missing piece in the country’s ecosystem.
As an organisation, TRACE identified this early on and in order to address this, we recently started our own research fund. This is a non-equity grant model, a first for a private sector fund in Sri Lanka, aimed at supporting researchers, R&D institutes, universities, and even startups, and we plan to fund top-tier projects.
The goal is not just to support pure research but to encourage researchers to take their work to the next level as well, making it productive and marketable. This can lead to new startup ideas that can then receive seed funding, followed by equity-based and later-stage VC. TRACE is building this entire pipeline as an organisation, with the support of the Ministry of Digital Economy and the ICTA.
Moreover, TRACE is also focusing on creating good transfer models in all the universities and is already supporting universities to operate effective Technology Transfer Offices (TTOs). Sri Lanka requires very well-managed and well-distributed TTOs in every organisation.
Furthermore, we identified that relying on me-too products is not a viable strategy for Sri Lanka, given the country’s population. While these types of products might succeed in a large market like India or China, a country with 20 million people needs to focus on building innovations that can go beyond its borders.
Throughout history, many countries of a similar size have developed by creating globally scalable, intellectual property-oriented technologies in fields like medical technology, Artificial Intelligence (AI), agritech, and fintech.
In terms of investor sentiment towards startups in general, do you see a significant transformation, especially in tech startups?
I would say investor sentiment is still very limited. Sri Lanka isn’t known for its tech startups, and my definition of ‘tech’ goes beyond IT to include fields like bio tech, soil tech, med tech, material tech, etc. Sri Lanka has not really promoted tech startups effectively, even within the country.
The Sri Lankan ecosystem is working to build that investor confidence and the Disrupt Asia event, with over 50 global investors attending, is a key part of that effort. Currently, investor sentiment is low and Sri Lanka is not on the investor radar, which is what we are trying to change.
This month’s event, along with a series of planned events in other tech ecosystems like India, the Middle East, East Asia, and Europe, is designed to build momentum and show investors that Sri Lanka has a lot to offer. There are tech startups, expertise, and know-how, and we also wish to attract people from outside to make Sri Lanka a tech and innovation hub.
Looking beyond funding, what are the key gaps in infrastructure, talent, or policy that must be addressed for Sri Lanka to be seen as a notable innovation hub in South Asia?
There are many gaps that need to be addressed. Firstly, as mentioned, Sri Lanka needs a proper venture capital model to attract investors in the financial aspect.
Secondly, it is required to establish a strong model for the commercialisation of R&D. Researchers should have the necessary support and funding from universities and other institutes to turn their work into commercial products. This requires policy/regulatory changes within those institutions, even though the legal framework may already be in place.
Thirdly, the country needs improved market access support for Sri Lankan startups to help them expand beyond borders.
Another crucial area is improving the Ease of Doing Business Index, curbing bottlenecks and red tape. It should be much smoother for both local and foreign organisations to initiate and operate a business in Sri Lanka, as Sri Lanka is placed as one of the lowest in this index at present. The process to establish business in Sri Lanka, especially for research- and technology-based businesses, should be easier, perhaps through a one-window model.
Furthermore, Sri Lanka also needs an improved process for attracting and retaining foreign experts. For this, initiatives like the digital nomad visa are required, which, despite having been legally introduced, still lacks a proper process. This is essential for bringing in tech professionals with the know-how to help build the ecosystem.
Additionally, Sri Lanka’s Customs laws must be reformed, as they often create cumbersome and sometimes impossible processes for startups to import necessary components.
Furthermore, the Government should provide better support for local innovators. It’s not about tax holidays but about ensuring that a locally invented product is not at a tax disadvantage compared to a similar imported one. Regulatory bodies must be more progressive and supportive of local innovation rather than acting as a barrier.
Sri Lanka must move forward as a digital economy, especially when it comes to transactions. This will enable many other parts of the ecosystem to thrive and the proposed digital ID project is an absolute necessity for the country to move forward.
Lastly, in terms of the talent pipeline, Sri Lanka’s current education system is geared towards creating professionals, but it doesn’t adequately support innovators and entrepreneurs.
We need a more student-centric education policy that instills entrepreneurship skills in everyone. These skills, like problem-solving, efficiency, and initiative, are valuable not just for entrepreneurs but for everyone. A progressive education reform is necessary to create a new generation of innovators, entrepreneurs, and problem-solvers.