Colombo — Sri Lanka has the technical talent to build globally competitive AI-driven startups, but its ecosystem remains “stuck at a prototype level,” constrained by limited venture capital, outdated investment models, and weak policy support, according to industry leaders at the National AI Expo 2025.
During a panel titled ‘Scaling AI in Startups and SMEs’, experts warned that promising startups are often forced to relocate abroad to scale because of the lack of funding pathways at home. Speakers included Heminda Jayaweera (CEO, TRACE Expert City), Indika De Zoysa (ICT policy advisor), Thurupathan Vijayakumar (AI professional), Ravin Tharinda Piyasiri (Sri Lanka Telecom), and Ishari Siriwardane (SLT Mobitel).
The Talent vs. Scale Gap
Jayaweera noted that Sri Lanka’s issue is not a lack of knowledge but a lack of executional “know-how.”
“Everybody knows how a bicycle works. But if I ask, can you make 1,000 bicycles? Very few people can. That’s the difference between knowledge and know-how. We are in that know-how issue,” he explained.
Missing Financial Infrastructure
Speakers highlighted the absence of mature investment mechanisms like SAFE agreements and phantom shares, which are common in global startup markets. While a “fund of funds” model is under discussion to stimulate local venture capital, its absence leaves startups starved of early-stage and growth capital.
Vijayakumar stressed the impact on valuations:
“When you are struggling to find Series A or B funding, you are going to lose 80 percent of your valuation. That’s where aggressive VC funding should be there from day one. That’s what we are missing.”
Regulatory and Policy Roadblocks
De Zoysa described the situation as existential:
“It is a life-and-death situation. We do it or we die.”
He cited examples of companies with international patents and certifications unable to market products locally due to regulatory delays. He also emphasized that broader digital adoption—including basic ERP systems—is critical for enabling AI integration, given that more than half the economy still lags in digitization.
Call for Collaboration and Policy Reform
Panelists called for a cohesive ecosystem linking government, academia, and industry. This includes reforming procurement laws to allow startups to work with government, policies to attract foreign investors, and fostering early-stage team collaboration among founders.
“You need to have that team structured at a very early stage,” Jayaweera urged, emphasizing collective action over individual ideas.
A $15 Billion Opportunity
Despite the obstacles, panelists agreed Sri Lanka could achieve a US$15 billion digital economy, but only if rapid improvements in funding, regulatory frameworks, and collaboration are made.
