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November 2017 Cover Story

Published on: 2017-11-13 11:16:36     127 times read    0  Comments
Nepal Startup Ecosystem : Is it the Next Growth Engine for Nepal?

While the startup scene in Nepal has made some headway, experts at this year’s NewBiz Conclave and Awards agreed it needs more encouragement from all stakeholders.

--BY SANJEEV SHARMA

What does it take to become a successful entrepreneur? How can a small venture starting from scratch take centre-stage in the world of business? How can young people realise their ideas in business to bring innovative solutions and positive changes to society? What sort of government help is needed to create a vibrant environment for startups? And, can the startup ecosystem be the next engine of economic growth for Nepal? These are probably some of the defining questions stakeholders of the Nepali startup scene including the aspiring youth, mentors, investors and government officials are trying to answer.

While the Nepali startup scene is still at a nascent stage, the growing number of startup companies in the country has led people to discuss the development of entrepreneurship over the last few years. And to give the discourse a new direction, New Business Age Pvt Ltd on September 22 organised the 4th NewBiz Conclave and Awards 2017 at Hotel Soaltee Crowne Plaza where participants energetically raised and discussed various issues surrounding the development of the Nepali startup ecosystem. Titled ‘Nepal Startup Ecosystem’, the event’s conclave and the interaction session highlighted the ways to create an environment conducive for young entrepreneurs to make their dreams a reality.

Why is a vibrant startup ecosystem necessary?
Special Guest of the event, Minister of State for Finance Udaya Shamsher Rana, stressed on the need to create a viable space for business for the young minds.“While we talk about the ways to attract FDI and how big Nepali business houses can engage in other big business ventures, it has become important to create space for startup companies led by innovative young entrepreneurs,” he said. According to him, developing entrepreneurship is imperative to the economic development of the nation. 

Chief Guest of the event Dr Swornim Wagle, Vice-chairman of the National Planning Commission (NPC) emphasized that it was important to share views and talk about the development of the startup ecosystem. “What makes me happy today is we are now in a position to talk about Nepali startups. I think, the ecosystem is taking hold and slowly expanding. The reason discourse is very important is we have wrapped up the big political issues and politicos and major political parties now talk about the country’s economic leap,” he said, adding, “Everyone is talking about the economic ambitions for 2030 when we expect Nepal to become a vibrant middle-income country where the majority of citizens will be enterprise-friendly and know the value of entrepreneurship, wealth and job creation, so on and so forth.”Oscar Kneppers, Founder of the Amsterdam-based accelerator programme Rockstart Impact focused on the role of stakeholders building the ecosystem. “It is really important to talk about the role of the government, financial institutions and people who build the startup ecosystem. And, it is indeed great to listen from young entrepreneurs like Aayushi who build businesses,” he said.“It is important for us to determine what to do every day and how we can learn to help build the ecosystem,” Kneppers added. 

Similarly, in the interactive session moderated by Sujeev Shakya, Founder and CEO of the management and consulting firm The Beed, panelists energetically outlined to each other the problems faced by budding entrepreneurs and the prospects of developing a viable startup ecosystem in Nepal. “The perception about startups among the youths has been changing significantly,” remarked Aayushi KC, founder of Khalisisi. Khalisisi is a new venture which started operations in 2016 in the areas of waste management and recycling. It is basically a web platform which connects individuals and organisations to the garbage collectors. Fed up with the inappropriate management of waste and recyclable materials in Nepal, KC came up with an idea to start such a business when she saw the effectiveness of waste management while visiting a relative in the United States. 

In the panel discussion, Sunil KC, CEO of NMB Bank expressed his optimism about the growing startup scene. “A lot of success stories of Nepali startups have come out in the last few years. Many youths have returned to start businesses here which will be very positive for the banking industry,” he said. 

Meanwhile, Sohan Babu Khatri, Founder and CEO of Three H Management pointed out how it was important to have an entrepreneurial mindset to build the ecosystem. “All startup stakeholders should have an entrepreneurial mind for the entrepreneurial ecosystem to head towards the right path. The entrepreneurial mindset relies on effectual logic rather than any predictive model or causal logic,” he said.  According to him, the true spirit of entrepreneurship lies in the firm belief of entrepreneurs that they can handle their venture in any situation as they don’t want to be controlled by predictive outcomes.

Likewise, Willem Grimminck, founder and Director of the Netherlands-based startup accelerator One to Watch talked about his own experience with the changing social entrepreneurship scene in Nepal. “Nepali youths are now able to talk to their parents about their interest in starting a startup venture. This has been one of the biggest changes in the overall startup scene since I came here six years ago,” he said.“When I looked to talk to entrepreneurs back then, I had a very few of them to share my ideas,” he added. 

The attraction towards entrepreneurship
Despite the odds due to the prolonged political instability, the word ‘entrepreneurship’ has become a catchphrase in Nepal over the last couple of years. As the clouds of political uncertainty have gradually begun to clear after the ongoing implementation of the new constitution, more young people are finding themselves in a position where they can enter the world of business. Fascinated by the growth of some of the world’s most influential companies, some of which started in garages or college dormitories, they have become attracted towards realising their idea of bringing products and services that are innovative and disruptive. 

Stories about the rise of global giants such as Samsung, Microsoft, Google, Facebook, Dell, Apple, Amazon, Wal-Mart, Alibaba, Starbucks and Infosys alongside the relative new companies including Xiaomi, Uber and Airbnb, among many others, have been sources of inspiration. Unlike traditional businesses that are engaged in similar activities in the areas of trading, manufacturing and service sector, startups are taking distinct approaches in different domains of business. For instance, IT has been a favourite area among the youth these days. Rising internet access, widening of mobile services and the increasing use of social media, among other factors, has helped them to come up with various types of IT related services and products like mobile apps, e-commerce and web solutions. Similarly, there are several startups engaged in a range of other activities like urban farming, biomedical waste management, clean drinking water, premium leather products, eco-friendly housing solutions, biotech,zero-emission brick production, and even unique services like surprise planning of personal events. 

Though the number of startup ventures seems to be growing dramatically in recent years, the official data about such companies is not available. Despite their unique business concepts, most startups run aground after a few years. It is believed that 90 percent of startups fail in Nepal. The success rate is somewhere between 5-10 percent at present. Speaking at the programme, State minister Rana came up with some interesting figures in this regard. “Official data of the last five years shows that 32 companies on an average are registered with various government offices daily in Nepal. Among them, only five are able to sustain themselves,” he informed. He suggested that young entrepreneurs and startups do more homework before actually starting a company. “They need to have knowledge about the associated risks, sources of finance, opportunities and the market,” he said. 

Social acceptance of entrepreneurship
Entrepreneurship in Nepal is generally viewed with skepticism and pessimism. As a traditionally agrarian economy, the average Nepali sees business as a risky proposition. “Nepalis are fond of the word jagir (job). Everyone loves jagirs that are stable and predictable occupations where you don’t have to do much and still receive a steady stream of income all through your life,” said NPC Vice-chairman Dr Wagle. He sees this particular mindset prevailing not only in the government service, but also in the private sector. “It is because we basically are risk-averse. This is a sharp contrast to what a startup ethos actually demands and requires. So, we need to take a leap from the mentality of jagir to entrepreneurship,” he stressed. State Minister Rana shared similar views. “It is important is to get over the rent seeking mindset, not taking risks and continue to do what our ancestors have done for ages,” he said. 

According to Khalisisi founder KC, the traditional mindset of the guardians in Nepal has been an obstructing factor for aspiring youths.“Even in this modern age, parents don’t want their children to start their own business ventures. Our society still considers failure as a major shortcoming of individuals, and this is one of the main reasons parents hesitate to allow their children to choose their own paths,” she said. 

Supporting the startups
Over the last 5-6 years, startups in Nepal have been receiving some sort of support through business accelerators. At present, organisations like the Rocktart Impact, One to Watch, Anterprerana, NEXT Launchpad Program, Enterprise Business Accelerator Program and Slush Global Impact Accelerator are the leading accelerators here. They have been providing mentorship and other types of guidance to young people who have already launched businesses but do not have proper know-how to tackle problems and grasp the opportunities required to smoothly run their organisations. Also, startup weekend events are being conducted on a frequent basis with the support from large private sector organisations like NCELL .The government’s activity in this regard has been inert. The Business Incubation Program (BIP)which operates under the Department of Cottage and Small Industries has not been much active since its launch in 2014.

Despite the support, access to finance has been the major obstructing factor for most startups. Generally starting with a small amount of money as seed capital,the lack of funds holds these companies back from moving ahead. Unable to find additional money, most of the ventures shut down after a few years. Alternative financing sources like venture capitals, impact funds, private equity (PE) funds, special purpose vehicles (SPVs), challenge funds and crowdfunding can come to the rescue in such situations. Nonetheless, the lack of a legal framework has prevented such funds from properly supporting the needy startups. The government has not been able to finalise the National Startup Policy which was drafted earlier this year. The proposed policy is thought to be elemental to the development of the startup ecosystem as it has incorporated various provisions including the arrangement of alternative financing for the startups, among other things. 

Celebrating Business Excellence
The fourth edition of the NewBiz Conclave and Awards saw awards going to the 24 best companies in Nepal, and a special recognition to a startup company and Lifetime Achievement Award to an individual. Companies were awarded in 10 different main categories and 14 sub-categories. The Best Managed Hydropower Company, Best Managed Housing Company and Best Startup Company were the three additions to this year’s awards. But the category of the Best Managed Micro-finance Company was not included due to the unavailability of crucial data to evaluate performance.

 

Award Winners 2017

  • Best Managed Company - Sipradi Trading Pvt. Ltd.
  • Best Managed Joint Venture Company - Unilever Nepal Ltd.
  • Best Managed Commercial Bank - Nabil Bank Ltd.
  • Best Managed Commercial Bank 1st Runner up - Nepal Investment Bank
  • Best Managed Commercial Bank 2nd Runner up - Nepal SBI Bank
  • Best Managed Commercial Bank 3rd  Runner up - Standard Chartered Bank 
  • Best Managed Commercial Bank 4th Runner up - Everest Bank 
  • Best Managed Development Bank - Gandaki Development Bank Ltd.
  • Best Managed Development Bank 1st Runner up - Kailash Development Bank Ltd.
  • Best Managed Development Bank 2nd Runner up - Muktinath Development Bank Ltd.
  • Best Managed Finance Company - ICFC Finance Company Ltd.
  • Best Managed Finance Company 1st Runner up - Guheshwori Marchant Banking & Finance
  • Best Managed Finance Company 2nd Runner up - United Finance Company Ltd.
  • Best Managed Life Insurance Company - Nepal Life Insurance Company (NLIC)
  • Best Managed Life Insurance Company 1st Runner up - National Life Insurance Company Ltd. 
  • Best Managed Life Ins Company 2nd Runner up - Life Insurance Corporation (Nepal) Ltd. (LICN)
  • Best Managed General Insurance Company - Shikhar Insurance Company Ltd.
  • Best Managed General Insurance Company 1st Runner up - Neco Insurance Company Ltd.
  • Best Managed General Insurance Company 2nd Runner up - Prudential Insurance Company Ltd.
  • Best Managed Hydro Power Company - Sanima Mai Hydropower Company
  • Best Managed Housing Company - CE Construction
  • Best Managed Housing Company 1st Runner up - Sunrise Homes
  • Best Managed Housing Company  2nd Runner up - Greenhill City
  • Best Start Up Company - Urban Girl Inc.
  • A Special Recognition - Waste Services Pvt. Ltd., Pokhara
  • Lifetime Achievement in Business Leadership - Mr Prem Bahadur Shrestha, Panchakanya Group

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