Nepal | July 08, 2020

Startups in Nepal: Youth hold the key

Kalsoom Lakhani & Meenah Tariq
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Young Nepalis want to be agents of change, and by improving the regulatory and enabling environment for them, Nepal can continue to move forward in growing its entrepreneurial ecosystem to create jobs and drive economic growth

Illustration: Ratna Sagar Shrestha/THT

Nepal is a country that has grappled with natural disasters and political instability over the past decade. But it’s also a nation in recovery. The potential and optimism for Nepal’s future was tangible upon our recent visit to Kathmandu in March, and there’s no greater manifestation of that hope than in the nascent but growing entrepreneurial scene in the country’s capital.

Invest2Innovate (i2i) was established six years ago to support startup communities in growth markets like Nepal. Our goal at i2i is to see opportunity in some of the world’s most overlooked countries, and to work to unleash that potential. While investors might overlook Nepal thanks to its relatively small population of 29 million and a low GDP per capita, we see opportunity in the fact that 70 per cent of Nepal’s population is under 35 years old. In other words, there are a tremendous number of young people who can be catalysed to solve Nepal’s greatest problems through business. Nepal may have challenges, but amid those problems there is great potential for change.

i2i has operated and supported young entrepreneurs in Pakistan since 2011, and in our visit to Nepal, we saw many similarities between the two countries, both in the market potential and the barriers hampering the startup ecosystem.

Despite this tremendous growth, however, regulatory barriers still threaten to stunt the potential of this space.

Over just five days in Kathmandu, thanks to the generosity and support of the US Embassy, we were able to meet with and interview a number of leaders in Nepal’s startup environment, from entrepreneurs and investors to government officials and incubation managers. The most common challenges listed by these stakeholders include Nepal’s brain drain issue, access to capital, the flow of money in and out of Nepal, as well as other regulatory barriers which inhibit innovation and the growth of the entrepreneurial ecosystem.

Among the 70 per cent of Nepal’s 35 or younger crowd, many aspire to leave Nepal for education and job opportunities abroad. This “brain drain” issue not only results in a smaller pool of young people launching businesses, but also a smaller pool of human capital from which startups can recruit staff. Among the stakeholders we met, this human capital issue was the most-cited challenge to entrepreneurship in Nepal. In order to tackle this challenge, government incentives for startups – including tax breaks and the enabling of e-commerce payment platforms – could entice young people to stay in Nepal. Moreover, as more incubators, accelerators, and entrepreneurship competitions are set up in Kathmandu, it is critical that government red tape is reduced or removed to provide a solid foundation from which the ecosystem can grow.

While the brain drain issue is certainly a challenge, we did meet several entrepreneurs and technology industry leaders who had gone abroad to work or study for a number of years, but then returned to Nepal to launch and build businesses. Entrepreneurs like Avishek Malla of SunFarmer Nepal, Dibesh Karmacharya of Center for Molecular Dynamics Nepal, and Sajal Pradhan of Best Paani, are all great examples of young people who returned home, bringing with them global exposure and skillsets, and who are creating local jobs as a result. Therefore, while it is important to provide opportunities for young people to stay in Nepal, it is equally important to incentivise more Nepalis abroad to come home and to contribute to their economy and the country’s future.

Another pressing challenge facing the Nepali entrepreneurship space is the issue of money; specifically, the flow of money into and out of Nepal. In all of our interviews, the flow of money particularly out of the country proved to be an enormous barrier for young entrepreneurs seeking to raise foreign capital, pay for services to boost their businesses, and access customers abroad. Compared with industries like handicrafts and agriculture, where the flow of goods is a challenge for Nepal’s landlocked economy, a technology-based business or service depends on a different kind of infrastructure – digital infrastructure.

However, given that most internet-based businesses rely on social media platforms like Facebook for marketing and customer acquisition, the fact that Nepalis cannot even pay for ads on this marketing channel in the current regulatory environment is a critical barrier to growth.  Improving the regulations around payments and the flow of money would facilitate the ability of Nepali startups to connect with international customers, whether just across the border or on the other side of the world.

Even in just a week-long trip to Kathmandu, we could see the tremendous economic opportunity in Nepal.

Young Nepalis want to be agents of change in their country, and by improving the regulatory and enabling environment for these young entrepreneurs, investors, and support organisations, Nepal can continue to move forward in growing its entrepreneurial ecosystem to create jobs, drive economic growth, and allow for success stories to emerge from this market.

Lakhani is founder/CEO & Tariq is accelerator and strategy head of Invest2Innovate


A version of this article appears in print on May 21, 2018 of The Himalayan Times.

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