In 2013, when Tech in Asia last had a closer look at startups in Cambodia, we found a small but tight-knit community, and a handful of promising startups and digital businesses.

Barcamps were – and still are – attracting thousands of participants. Startup Weekends have been held regularly in Cambodia since 2011, and there were a number of co-working spaces in Phnom Penh and Siem Reap. Cambodia’s startup scene also already had its own publication, Geeks in Cambodia, which offers content in both Khmer and English.

But despite the visible enthusiasm, local startups with sustainable business models and growth are still rare in 2015.

Tech in Asia spoke with two experienced observers of the Cambodian startup ecosystem – Adrienne Ravez, editor of Geeks in Cambodia, and Chris Brown, initiator of Phnom Penh’s first co-working space Colab and co-founder of two tech companies, Aruna Technologies and Mango Maps. We discussed factors that are still holding Cambodia’s tech scene back, as well as opportunities ahead.

Demographic and cultural barriers

One of Cambodia’s serious disadvantages from an entrepreneurial perspective is its relatively small population. With just a little over 15 million people, Cambodia’s domestic market is tiny – compare that to Vietnam’s 90 million, Thailand’s 65 million, not to mention Indonesia’s 250 million people.

An additional barrier is the Cambodian language, Khmer. Creating content in the local language is complicated: try finding a keyboard that allows easy typing of Khmer characters.

“To be successful, Cambodian entrepreneurs have to look beyond Cambodian borders from the start. In this sense, it’s similar to Singapore,” says Brown. But unlike Singaporean entrepreneurs, who grow up in an English speaking environment, Cambodians have to first overcome language barriers in order to be able to address international markets.

Tech scene funding through development funding

Cambodia’s GDP has been steadily growing, but still ranks low compared to its Southeast Asian neighbors. Cambodia is famous for its high “NGO-density” – a lot of development aid money has poured into the country since the 1990s.

Recently, development aid funds have become active in the world of tech. Phnom Penh has two “tech incubators” whose DNA is rooted in aid work, not entrepreneurship: The Development Innovations program funded by USAID has been going since 2014, and Impact Hub opened in April 2015.

It’s still too early to say whether these programs will give rise to scalable social enterprises with long-lasting impact.

Brown remains sceptical, because these programs lack the entrepreneurial experience regular startup incubation and acceleration programs normally bring in.

Ravez is more optimistic because she sees a niche in Cambodia for social entrepreneurship. In her eyes, a social impact oriented approach could work better in the Cambodian context than a Western approach to startup breeding.

Surging smartphone penetration and decent connectivity

The rapid growth of social media use in the past few years has been a favourable development. While only 670,000 Cambodian users were reported to be on social media in 2012 in an analysis by digital agency We are Social, that figure is now at 2.4 million.

This tremendous growth is possible because cheap smartphones and cheap data plans are readily available. According to Brown, it’s common to buy data plans that bundle popular social services for unlimited use. He says that global chat apps like Facebook, Whatsapp, and Line are popular in Cambodia. “It’s at a price everyone can afford, even people in rural areas,” he adds.

And the prices really are low. One of the mobile phone carriers in Cambodia, Cellcard, offers 1GB of data for as little as US$1. Compare that to Indonesia, where a 600MB package from Telkomsel would cost US$3.4.

Brown says the low prices are the result of fierce competition among the mobile phone carriers in Cambodia.

“They are still fighting it out,” Brown explains. “There aren’t yet two or three dominant players who each own their piece of the market.” He does expect consolidations to happen and, eventually, an equilibrium to be reached, but until then, data is given out at bargain prices.

The tough competition is also an explanation for why Cambodian telcos are not as actively involved in building and investing in startups, as they are, for example, in Indonesia.

3G coverage is fairly good throughout the country, according to Brown, but mobile payments, like elsewhere in the region, are still a bottleneck.

Bootstrapping it

An advantage Cambodia has over other countries is that it is fairly easy to set up a company there, even for foreigners.

Ravez says a foreigner can set up a business entity within a month. In Indonesia, by contrast, setting up a foreign-owned company can easily take half a year.

This, combined with a relatively low cost of living has led to quite a number of startups founded by foreigners in Cambodia. Brown is one of them.

He sees a lot of potential in Cambodian talent, and believes starting up in Cambodia has the additional advantage that there’s little competition over the best talent. According to Brown, employees in Cambodia tend to stay on for a long time, so it makes sense to invest in training. “Elsewhere, like in Singapore, the regional headquarters of big tech companies swoop up talent. There’s a high turnover.”

3D print model of the Angkor temples, by 3D printing startup Archub

A matter of perspective

The socio-economic reality of Cambodia does make it particularly hard for entrepreneurs to build successful startups, so it’s no surprise that growth is still slow. Much respect goes out to those who push to find their local niche, or take up competition with the global market.

Most of the Cambodian startups that Tech in Asia mentioned in 2013 are still in business. Game developers Osja were able to secure funding from local content platform Sabay.

Some promising recent startup additions are Khmer Smart Keyboard, a group building an app to finally make Khmer text input faster, and Archub, which brings 3D-printing services to Cambodia.

Interestingly, after one failed attempt in 2012, Rocket Internet is back in Cambodia. It just launched Cambodian versions of two new ventures; ecommerce marketplace Kaymu and jobs site Everjobs.

Brown still believes Cambodian entrepreneurs need to be able to look beyond their own country if they want success on the long run. This inward perspective when it comes to devising business concepts is, in Brown’s eyes, the main factor holding back Cambodian entrepreneurs. It’s also one that can be overcome. “The talent is there, the perspective is just a matter of the mind,” he says.