Ajay Shrestha talks about startups in Nepal, and highlights the growing entrepreneurial ecosystem and possibilities for exemplary future for startups here.
“Having a mentor is always a good idea”
How is the situation of startups in general?
Entrepreneurship itself is a buzzword these days. The concept of startup recently begun in Nepal. Entrepreneurship awards, entrepreneurship loans, entrepreneurial opportunity, venture capital, private equity are some words we frequently get to hear. When we observe in developed countries, even the CEOs of big companies start their own venture. However in Nepal, the idea of startup is not clear. Even entrepreneurs who start companies have no idea about what it is.
Meanwhile, with rising number of people with entrepreneurial vibe, the importance of startup is growing. The main problem is infrastructure, lack of proper regulation in investment industry and lack of ideas among the startups. Gradually, programs helping startups are being developed and people are appreciating them.
In Nepal, startups are very energetic in the beginning but after a time course of 5-6 months, their energy goes down because, Entrepreneurship is not as easy as seen in the beginning, many lose their interest with time. However, with proper infrastructure development, entrepreneurship will be developed in next few years.
Lately, startups have come to understand the concept and importance of mentors. I have noticed startups getting more open about their plans and seeking help from seniors in the field. They are becoming more aware about incubation and acceleration programs and even participating in entrepreneurship programs.
Startups have started thinking globally and do not limit themselves to just Nepal. I have seen startups accessing foreign funds to raise capital, which is a positive orientation to have.
What are the weaknesses of startup companies?
Companies want to grow but most don’t want to share the equity of the company. So entrepreneurs here should understand that sharing equity is an opportunity to grow.
Unwillingness to open up is one of the problems Nepali startups have. They are hesitant to share information about their business models, partners and vision with the mentors and investors. Most of them are pre-occupied with a notion that the people around them will copy their ideas. When lack of openness exists, the resources will be limited for the startups.
Understanding the internal management and starting strong is an inevitable ingredient for successful businesses. Nevertheless, startups in Nepal lack adequate knowledge about general financial and accounting terms. Most of them are unable to interpret financial statements and this becomes a matter of concern for investors. They also don’t have proper HR policy guidelines and are just focused on their operations and bringing revenue.
What are the challenges that Nepali entrepreneurs are facing?
Although entrepreneurs with the capability of competing in the global market are emerging, they have to face a lot of hurdles here.
A lot of hassles are involved while starting or closing a company. If concepts like dormant companies are introduced, then when companies do not work well then, they can close it down conveniently. This would be a very important proposition for startups.
Every company needs to be registered with physical space which can be quite discouraging for entrepreneurs who can provide their services and products without physical inventory. Permitting businesses without physical space will help entrepreneurs start their business without much capital.
The inconvenient and incomplete laws and regulations of capital market poses as another challenge. We have no clear policies and assurances for return on investment when the investors exit from a company. Having no mechanism for such an exit makes it unfavorable for the local, foreign and even NRN’s to invest in the startups.
Bringing national startup programs, introducing provision of zero taxation for one or two years of establishment of company can be ways to encourage startup vibes in Nepal.
Which companies are there currently supporting or helping startups in Nepal?
Enterprise Nepal Business Accelerator Program managed by True North Associates is one business accelerator operated by the private sector in Nepal but there is another accelerator named Rockstart Impact Nepal. There are more accelerators in the pipeline. There are some other consulting companies too, which are helping the startups by providing them with services such as preparation of investment proposal, business valuation and others.
Few entrepreneurial organizations are organizing startup programs. Nepalese Young Entrepreneur’s Forum (NYEF), Entrepreneurs’ Organization, Nepal Entrepreneurs’ Hub etcetera work for the enhancement of startups. Global Student Entrepreneur Awards is encouraging the students who own and operate profit business while attending college. Besides this, there are few colleges and business consulting service providers working to develop startups.
More about, Enterprise Nepal Business Accelerator Program.
Our accelerator provided mentorship to five companies among which three got investment and we are working for the rest. It provided 12-week mentorship based programs to a small number of selected companies looking to grow their businesses and attract new investors. The program gave companies an opportunity to work with industry experts to reassess their business models, re-align their vision and objectives, plan their finances, get legal consultation, and ultimately, develop internal resources to target a high level of growth. For the first eight weeks of the program, companies’ worked extensively with experienced mentors to fine-tune their business models, study relevant market segments, and build strong financial plan. This has helped the founders to explore and grow.
We are bringing investors and mentors into one network to help newly set-up Nepali companies build better products, raise funds and move to the next level of business growth.
How was your experience with the participating companies in your first batch?
It took some time for startups to open themselves up. Gradually we were able to build trust among ourselves and openly discuss their businesses in a months’ time. The accelerator program provided a platform for established entrepreneurs’ to share their knowledge with the participating companies.
Though they were not sure of getting a concrete result, they came and learned with us. In the process of seeking good investors, one of the participating companies got an investment of 50,000 USD during the program itself.
What outcomes are you expecting from them?
We expect them to regularly correspond with the investors we introduced them to in the program and utilize the investment according to their investment plans. As this batch has set some good tone for the upcoming batches, we hope to get some good companies in the future.
Does the Nepali market demand more mentorship to deal with increasing startups?
In businesses, problems you’ve never thought of can arise. So, if you have a mentor, entrepreneurs will get a chance to learn and avoid repeating the same mistakes.
When I first entered into the business sector, I myself did all the research and in 2-3 years I was able to grasp some essentials, while there was more to experience and learn. Mentorship can help with all that and save time.
At this point of time, there are more than 100 startups in Nepal. Most are on their own and are unaware or even unwilling to connect to mentors. We need more incubator and accelerator programs to generate the spark of entrepreneurship in Nepal.
Message to startups and business service providers.
Startup is complicated and risky; problems are obvious in the process of exploring. But there should be a right team to address their weaknesses and enhance their strengths.
We have been able to help because our team has had the experience of a startup once too.
The requirement analysis for different startups should be done carefully according to their necessity. Some might be requiring legal consulting, financial consulting, while others might be seeking investment or even proposal or partner.
In Nepal, if you ask about investment in startups with the big investors, they will not have an idea about startups. So, Enterprise is not just about helping and investing into a company but it is about starting a new culture of investment in Nepal and we want to be part of the increasing entrepreneurial vibe in the market.