From Crisis to Capability: A Review of Sri Lanka's Startup Ecosystem

Abeysinghe AMDDK; Swapan Kumar Majumdar

doi:10.69968/ijisem.2026v5i165-72

Authors

Abeysinghe AMDDK School Of Business and Management
Swapan Kumar Majumdar Lincoln University College, Petaling Jaya, Selangor D. E., 47301 Malaysia

DOI:

https://doi.org/10.69968/ijisem.2026v5i165-72

Keywords:

Startup Ecosystem, Economic Crisis, Entrepreneurial Resilience, Digital Transformation, Developing Economies, Sri Lanka

Abstract

Developing economies' startup ecosystems face significant challenges during economic crises, yet their adaptive mechanisms remain underexplored. This narrative review examines Sri Lanka's startup eco- system evolution during the 2019-2023 economic crisis—characterized by sovereign debt default, currency collapse, hyperinflation peaking at approximately 70% in September 2022 and severe resource shortages. Synthesizing 52 sources (31 peer-reviewed articles, 14 policy reports, 7 industry analyses) published between 2020-2025, we identify three primary adaptation mechanisms: digital transformation enabling global market access and foreign exchange generation; necessity-based entrepreneurship driving resource-constrained innovation; and institutional support networks (incubators, accelerators, diaspora connections) compensating for policy fragmentation. Fintech, aggrotech, health tech, and export-oriented digital services demonstrated notable resilience. However, long-term sustainability faces constraints including geographic concentration in Colombo, limited early-stage capital, policy fragmentation, and inadequate rural infrastructure. This review contributes to entrepreneurship literature by demonstrating how crisis conditions can catalyze strategic reorientation rather than merely destroying entrepreneurial capacity. For policymakers, priority areas include developing cohesive national startup policies, improving risk capital access, streamlining regulations, and decentralizing support infrastructure. Future research should examine long-term sustainability of crisis-induced adaptations, comparative analyses across similar economies, and sector-specific resilience patterns.

References

[1] A. Sreenivasan and M. Suresh, “Readiness of financial resilience in start-ups,” J. Saf. Sci. Resil., vol. 4, 2023, doi: 10.1016/j.jnlssr.2023.02.004.

[2] C. Wattegama, “Digital Economy of Sri Lanka: National Goals and Lessons from the South,” in Unitedd nations Conference on trade and Development, 2021.

[3] N. Y. K. Nawarathne and P. Neelawala, “Digital Entrepreneurship Ecosystem in Emerging Tourism Economies: Evidence from Sri Lanka,” SSRN e-library, 2025.

[4] P. Athukorala, “THE SRI LANKAN ECONOMY Hope, Despair, and Prospects,” Crawford Sch. Public Policy, 2023, doi: 10.4324/9781003300991-17.

[5] M. B. Fowzul, “The Solutions for the Economic Crisis in Sri Lanka: An Islamic Perspective,” MSI J. Econ. Bus. Manag., vol. 1, 2024.

[6] D. O. C. A. STATISTICS and M. O. E. P. A. P. IMPLEMENTATION, “MSMEs AND THE ECONOMIC CRISIS in Sri Lanka: Impact of Economic Crisis on MSMEs 2022 FINAL REPORT,” 2022.

[7] D. S. Behari, “AN ANALYSIS OF THE SRI LANKAN ECONOMY IN THE CONTEXT OF THE CRISIS,” J. Emerg. Technol. Innov. Res., vol. 11, no. 1, 2024.

[8] A. Gankandage and R. Jayathilaka, “Unveiling the challenges: exploring start-up hurdles faced by small and medium-sized enterprise entrepreneurs in Sri Lanka,” Humanit. Soc. Sci. Commun., 2025, doi: 10.1057/s41599-025-04775-2.

[9] V. Nagahawatte and J. Wijayanayake, “EVALUATING THE EFFICACY OF THE SOFTWARE STARTUP ECOSYSTEM IN SRI LANKA: THE ROLE OF ACCELERATORS, INCUBATORS, INVESTORS, AND GOVERNMENT,” in Proceeding of the 3rd Desk Research Conference, 2025.

[10] S. Kulasinghe, L. Han, T. Hoshino, A. Rathi, and D. Lambert, “Catalyzing Small and Medium-Sized Enterprise Venture Capital In Sri Lanka,” ASIAN Dev. BANK, 2018.

[11] S. B. D. . Ratnayake, “EXPLORATION OF CORPORATE LAW FOR STARTUP BUSINESS ORGANIZATIONS: A STUDY BASED ON STARTUP BUSINESS ORGANIZATIONS IN SRI LANKA,” J. Bus. Stud., vol. 11, no. 1, 2024.

[12] P. R. P. Bethmage, “Challenges And Opportunities For IT Startups/SMEs In Sri Lanka : Special Focus On COVID 19 Outbreak,” Glob. Sci. Journals, vol. 9, no. 3, 2021.

[13] P. R. Adikaranayake, A. N. Perera, A. I. Nilaweera, D. R. Fernando, and D. R. Wijayaratne, “Effects of Sri Lankan economic crisis on health, lifestyle and education of medical students in Faculty of Medicine, University of Colombo – an online survey,” BMC Med. Educ., vol. 25, 2025.

[14] H. A. K. N. S. Surangi, W. A. D. S. Wijetunge, and S. M. A. K. Samarakoon, “Reframing Support: Institutional Perspectives on Female Entrepreneurship Development in Sri Lanka,” SAGE Open, 2025, doi: 10.1177/21582440251396389.

[15] K. K. N. B. Adikaram and H. A. K. N. S. Surangi, “Creating opportunities in a challenging environment: experiential crisis learning behaviour of tourism SMEs in Sri Lanka,” Cogent Bus. Manag., vol. 11, no. 1, 2024, doi: 10.1080/23311975.2024.2314803.

[16] S. Shivany, S. Dilogini, K. Jegashini, and P. Pathmaraj, “The Emerging Digital Ecosystem of Online Marketing for Startups in the Covid-19 Era: Insights from Northern Province Sri Lanka,” J. Bus. Stud., vol. 08, no. 02, 2024.

[17] Y. Entrepreneurs, “Mapping Assessment of the Startup Ecosystem that supports Young Entrepreneurs, inclusive of Young Women and Youth with Disabilities, with a Focus on Digital Business and e-Commerce,” Int. labour Organ., 2024.

[18] C. B. of S. Lanka, “CCPI based headline inflation recorded at 69.8% on year-on-year basis in September 2022,” 2022, [Online]. Available: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_20220930_inflation_in_september_2022_ccpi_e.pdf

[19] S. De Klerk, F. Buick, and G. Ranasinghne, “Unlocking the power of youth: harnessing technology to break through market barriers,” J. Innov. Entrep., vol. 14, 2025.

[20] S. Genome, “The Global Startup Ecosystem Report 2024,” San Fr. Startup Genome, 2024.

[21] D. Lewis, R. Bowers, L. Heslop, and S. Tawfic, “From Ecosystems to Advicescapes: Business, Development and Advice in Sri Lanka and Bangladesh,” J. South Asian Dev., vol. 19, no. 3, 2024, doi: 10.1177/09731741241239120.

[22] S. S. Director, Impact of multiple crises on Sri Lanka’s micro, small and medium-sized enterprises. 2023.

[23] G. T. W. Sriyani, “Impact of Economic Crisis and Way Forward for the Survival of SMEs: A Sri Lankan Perspective,” Wayamba J. Manag., vol. 13, no. 2, 2022.

[24] O. Global, “Sustaining transformative growth in Sri Lanka 2025–2030,” 2025.

[25] S. Nagasena, “Navigating the risk management in Sri Lanka’s emerging FinTech Entities: A strategic evaluation,” Glob. Sci. J., vol. 12, no. 10, 2024.

[26] I. Koswatte and S. Joseph, “Crisis leadership towards entrepreneurial success: a Sri Lankan perspective,” Routledge Open Res., vol. 2, no. 21, 2024.

[27] P. (Dr. . C. Prabhat, “ECONOMIC CRISIS IN SRI LANKA’S: BATTLING FOR SURVIVAL AND SUISTANABLE ECONOMIC GROWTH,” Int. J. Nov. Res. Dev., vol. 8, no. 3, 2023.