Sreypeou Chaing is Managing Partner of CSP & Associates and Legal Advisor with Cambodia Startup Advisers. In this interview with Asia Law Portal, she details the current startup environment in Cambodia, including what venture capital investors should be thinking about when investing in Cambodian startups, the work of Cambodia Startup Advisors, and the changing competitive climate for law firms in the country, including the impact of legal tech.
What is Cambodia Startup Advisors?
Cambodia Startup Advisers is an alliance of legal, tax and intellectual property advisory firms, serving the 360-degree needs of tech startups in Cambodia. Over our years of practice, we have each been advising entrepreneurs and investors in their affairs in Cambodia. We saw that few firms were reaching out to the burgeoning startup scene, leaving founders in a difficult position. That is why we came together last year to found the Cambodia Startup Advisors, tailoring our respective services to local technology startups and their founders. It is still early days, but we believe in getting in on the ground floor.
What is the current startup environment in Cambodia?
In three words – young, vibrant and promising. Starting from essentially zero five years ago, a real ecosystem of tech startups has come alive in Phnom Penh, and in the major provincial cities as well. With a number of accelerators, government and philanthropic support programs, pitch events and domestic VC and angel investors, things are on the move.
I think the government and private sector both understand that to keep up in the world, the country needs to make the most of technology. Despite rapid economic growth of 7% over the last decades, that success is at risk due to automation of low-skilled labor.
Demographically, the population is very young, with a large digitally-native generation coming of age with very different experiences, skills and expectations from their parents. That’s an opportunity, but also a risk if the challenge is not met.
Under the rubric of the Strategic Framework for the Digital Economy, the Royal Government has been taking a broad look and taking concrete steps to digitizing the economy. In the past months the government has established an investment fund for startups, adopted a law on e-commerce, and granted certain tax advantages for the ICT sector, with the National Bank looking to launch a digital currency scheme soon. In short, the government is very supportive and wants to see startups succeed.
You are Managing Partner of CSP & Associates – what are the key challenges and opportunities for law firms operating in Cambodia?
The opportunity for a commercial law firm is to be a crucial part of one of the fastest growing economies in the world, as firms adapt to an increasingly formal, law-based business environment. The challenge is navigating how the laws and regulations are currently implemented in practice in such a way as to achieve the client’s goals.
As the legal framework is still very uneven and incomplete, with important laws on data protection or e-commerce waiting implementation, there is still quite a bit of leeway in interpreting what is permissible, as well as hopefully steering the law and practice in a helpful direction.
How has legal technology changed the Cambodian legal industry?
Digital technology has greatly accelerated the pace and broadened the practice of law. In today’s world, clients expect work to be done much faster and to recommend solutions to their broader business objectives, not just to provide the correct legal answer.
E-government is slowly but surely taking hold, and greatly simplifies, accelerates and reduces the cost of certain areas of our practice. For instance, trademark filing has gone online – you used to have to print out the application, drive a across the city to the Ministry of Commerce, wait for the right person and file it; now all that can be done with a few clicks. Similarly with incorporation and paying taxes, though there are still gaps in what is possible.
Frankly speaking, I think most firms are not yet making use of legal tech. As far as I’ve seen, there are few offerings specifically tailored to Cambodia. There are many business concepts that have yet to be brought here, including in the legal tech sector.
What primary legal considerations should venture capital and other investors be thinking about when considering operating in Cambodia?
Making sure their investment structure, and the business they are investing in, is in full legal and tax compliance. Getting straight answers and sorting any problems out during due-diligence is crucial to avoiding problems down the road.
Founders should be thinking from the start about building not just a profitably business, but an investible one. That means establishing a proper legal structure, employment contracts, protecting your IP, and so forth. It also means taking care of your capital stack such that you can raise money in subsequent rounds while leaving enough for the founders. We’ve seen startups that have raise modest sums from Angels in exchange for half their equity. That’s simply a startup killer. The investors should have known better, and the founders been more savvy, than to part with so much so soon.