The Silicon Valley vibe started spreading in Mongolia since about 2010. Before that, names like Google, Amazon, and Intuit always sounded way too distant and foreign to talk much about. However, now one can bump into armies of energetic young entrepreneurs at events, such as, Startup Weekend, Startup Grind, and Startup Next at IT Park, a state run incubator, in downtown Ulaanbaatar. The startup scene in Mongolia is starting to shine for investors.
- Capital: Ulaanbaatar – (1.3M)
- Country Population: - (3M)
- Driving industries - Mining, Livestock
- Mobile Subscribers – (1.6M)
At the moment, the only privately run incubator programs are part of an NGO called Startup Mongolia, which was established in 2011. A year ago the IT Park facility underwent a major renovation to support private initiatives hoping to foster the local entrepreneurial ecosystem. Successful co-working spaces like “Coffee House” which hosts about a dozen startups are showing continual growth. Startup Mongolia is on the cusp of launching Mongolia’s first Silicon Valley style co-working space in the center of Ulaanbaatar. 4 carefully selected companies will join its inaugural program.
Due to the country’s prodigious natural resources, over 95% of the foreign investment goes to the mining sector. A recent example of how large this investment category is in Mongolia, is the giant copper and gold mining development “Turquoise Hill” in the Gobi Desert. It attracted an $8B investment. Foreign investment comes primarily from the Japanese, Korean, and Chinese in sectors like telecom, banking, hotels and supermarkets.
Seed and Early Stage Venture Funds are only beginning to appear in the last three years. These funds usually operate as part of bigger financial and securities institutions or major group companies. They invest in about two to four startups per year. Recently however, individual angel investors have been making $5-$100K investments in tech companies. Angel’s seem to know the capital market is sparse as they usually take 30%-60% equity in startups from Mongolia. With investor equity shares almost 10x the Valley average it is not easy for startups to get favorable terms in this phase of the ecosystems development.
Over the past year, the economy has cooled down significantly due to its over dependence on mining. New regulations and legal frameworks seem to be slowing down potential investment activity, which is causing an economic downturn. Regardless of the red tape, there are still lots of investment opportunities in Mongolia. In addition to mining, technology, tourism, education, transportation, and food industries all offer big opportunities. The people are starting to realize this and strong technically based startup teams are forming fast here.
Our Startup Grind Chapter aims to tell the stories of those teams in order to help better connect and mentor the burgeoning startup community in Ulaanbaatar. Last December’s inaugural event had over 50 paid attendees.