As 2022 approaches to an end, “Rise of the Capital Market and Venture Capital in Cambodia” was a well-fit topic to conclude the year as the forum explored the flourishing private equity and venture capital markets in the Kingdom.
At this first annual Capital Markets Forum by AmCham last Thursday, two panel discussions offered a good glimpse into the current landscape of startup investment as well as the entrepreneurs’ perspectives.
Before the panelists lined up, Stephen Higgins, of Mekong Strategic Partners (MSP), gave his take on “How Investors Decide Whether to Invest in a Start-up”. During his 20-minute talk, the MSP managing partner said among his company’s investment portfolios, Nham24 is an example of having a strong founding team.
Nham24, founded in 2016 by seasoned professional Chann Borima, has grown remarkably. Right after Cambodia went through the pandemic, the CEO told Kiripost in an interview last November, “As with any other business, the Covid-19 crisis took us by surprise, and we had to adapt quickly. Although it was very unfortunate that we have had to go through this pandemic, we were lucky enough to have the time to prepare,” Borima said.
He added that you “need to be bold despite the uncertainties”.

Cambodia’s Startup Investment Gap
A VC is not looking for just an idea
Also a board member of International School of Phnom Penh (ISPP), Higgins said, “The most important thing is that we're investing in the team. The only idea is if you don't have confidence right in between we're not going to do this. We will ask a lot of questions because we need to validate the idea from the team.”
“We want to see tractions to demonstrate proof of concept. Evidence showing that the new capital will help scale the business faster,” said the MSP founder in the talk.
While there is an internal checklist, Higgins said, “You tend to have a lot of discussions, you get to know each other, and, again, the founding team is really important. Is it ready for us to invest in? Sometimes we may say potentially this is good but it's not quite there yet?”
Before any deal, he said, “We look at who the competitors are, long-term value of customers.”
Speaking of his company, Higgins said, “MSP is one of the biggest investors in the equity markets here in Cambodia. We also run what is probably the most successful venture capital funds here on behalf of Smart Axiata that so far has been exceptionally successful.”
In 2018, Smart Axiata Digital Innovation Fund (SADIF), acquired a minority stake in Nham24, which is now one of Cambodia's startup success stories. SADIF’s 5 Million USD digital venture capital fund is managed by investment and advisory firm MSP.
Yet, Higgins warned, “If you want safety, you invest in a term deposit.”
Really high risk and potentially higher return
Investing in startups potentially you can get enormous returns. But there is a lot of failure.
You may have a great idea, but are you able to demonstrate that you can win customers over. As we put more money into the business, is that able to generate more sales?
“A lot of the investments on average will fail. We don't know which ones, so we need to make sure that each one will be investing in a really attractive risk reward return.”
Investors need big returns from individual investments to make up for the ones that fail. Incremental growth is not appealing.
He continued that the last factor is the level of control. “As an early stage investor, we don't want to just hand over money and sit back for five years and come back to see how you've done it. We want to make sure that we have a very active role in the business, while recognizing that the founder that once came up with the idea they're the secret to exceeding long-term.”
Stressing the importance of startup ideas and the founder, Higgins told the audience that, “You tend to have a lot of discussions, you get to know each other and again the founding team is really important. It takes time to get to know them. Ask around if we do an initial deal review. Do we think this makes sense? Is it ready for us to invest in and we say yes or no.”
He concluded, “We’re investing in the team and the idea. If we don’t believe in it, we won’t invest.”