Experts' View November 2014

  24 min 14 sec to read

Young Innovations: Innovating and Empowering Tech Entrepreneurship
Bibhusan Bista, CEO, Young Innovations
Bibhusan Bista
CEO, Young Innovations
Technology sector is all about innovation. Coming up with new ideas only is not just enough for tech entrepreneurs. To sustain growth they must constantly innovate themselves. Young Innovations, a Nepali tech startup is worth mentioning in this context. The company founded in 2007 is currently engaged in data mining, open data, transparency and accountability of public data, mobile application and software system development projects especially related to the development sector. Collaborating with national and international partners, Young Innovations has accomplished various successful projects. Some of its notable works include the award winning Development Check, Aidstream, OpenNepal and FightVAW. Beside these projects, the company has also been actively supporting tech startups through programmes like 'Hackathon' and events like startup weekends. It has also teamed up with Ncell in Ncell App Camp, a program that encourages and promotes young programmers to develop mobile apps. 
‘‘Startups need to come up with their own organic business model’’
How did your business idea germinate?
Before starting Young Innovation, I used to work in Canada-based International Development Research Center (IDRC). Before that I worked as a software programmer in Nepal and was also involved in teaching. During that time I was active in grooming my students in a new technology project. Doing so, I teamed up with my students and started the business. Albeit having big potential of using technology in the development sector, I noticed that there was a considerable gap. So we decided to start a software services provider company to carter to the needs of development agencies. We planned to make the development sector as our niche market and came up with software solutions in various areas such as data mining and mobile technology. Our primary customer base was multilateral agencies and institutions such as The World Bank and United Nations.
What are the projects you are currently working on?
Presently we are engaged in three major projects primarily. We are working on developing a mobile and web-based system to monitor the integrity of infrastructure development works for a project called Development Check in partnership with a British NGO, Integrity Action. The project has been rolled out to 12 countries and has received Google's award for being 'The most innovative project based in UK' in 2013. Another is a project with the World Bank that will in reporting incidences of Violence Against Women (VAW). Using this system, victims can report through mobile and telephone and the report is then sent to organizations working on VAW and respond to such cases. Similarly, we are engaged in open data project known as Open Contracting Portal in Nepal in collaboration with the World Bank and other institutions. The objective of this project is mining data of public contracts and visualizing them in a central portal system. Likewise, we have also started an initiative called Open Nepal in collaboration with our British partners. This project intends to make government data more transparent to the general public. Apart from these major projects, we involved in various other commercial and development projects.
How did you manage investment capital to start the business?
We did not seek large capital investment during the starting phase. As service providers, getting access to the market was more important for us and we focused on it. We managed initial investments from our personal savings and other resources.
Did you get help from government or other institutions?
We received a lot of support especially from the World Bank and other development agencies. As I came from international development work background, I informed my connections about the new venture. In 2009, when Young Innovations came into full operation, they supported me in small scale programs. They had trust in us and wanted to work with us. That kind of endorsement was necessary for us because it helped us to approach to international clients. Talking about the government support, we didn't get any direct help from the government. 
What problems did you face while starting the business?
It was very difficult for us to convince the people. We found that it is easier to convince foreigners than Nepalis. In earlier years we were referred to Nepali clients by our clients in the US. However, things have been changing lately as our presence has expanded and more people know us compared to earlier years.
What are the turning points for your company?
We started with generic services. We did every kind of projects we could find. But later we began to develop our niche and that was our turning point. We avoid doing every kind of projects and started to focus on specific areas such as mobile applications, data and projects related to development agencies. During the course of time we realized that only developing software is not sufficient for us. We began to understand the real world context and dynamics for developing specific software. For that we hired thematic experts who research the dynamics for developing particular software. Now we not only develop software but also provide institutionalize software solutions. That helps our clients to add value to their context. We provide our partners with holistic support. 
What is the annual turnover of Young Innovation?
In terms of revenue we are earning Rs 30-40 million annually. We are not earning significant profit but the income is helping us to sustain our growth. 
What projects are you coming up with in the near future?
A project called Open Data for Local Governance is in the pipeline and we expect to roll out in February 2015. This pilot project would be first of its kind in the world to make government data more accessible to the public and to ensure transparency and accountability. We are planning to roll out the system that we have developed in VAW program throughout the country coordinating with national agencies. Likewise, the Development Check project will also be implemented in full phase. Along with this, our product in foreign aid transparency known as the Aid Stream- which is already being used in 20 countries- will deepen its penetration by expanding its user base. 
What difficulties are Nepali startups facing? Are you satisfied with the government's recent initiatives?
The ecosystem here carries a general feeling that the startups do not know anything about business. Whereas, in advanced markets startups are received in a positive connotation. Lack of proper network is another difficulty for Nepali startups. Not everyone will come visit our office and website to know more about us. For example, in US, prospective clients, investors and corporates come to meet startups and have interactions so that they can link up opportunities for them. Previously there was a total vacuum for the Nepali startups in terms of such activities. But we can see some positive undertakings on a regular basis in the recent days.
Despite the announcement of establishing startup fund in this fiscal year’s budget and establishment of Youth Employment Fund earlier, the government has not been able to create conducive environment for the startups. Similarly, associations such as CAN also are not seen able to felicitate IT companies. They are just doing their exhibitions the way they did 15 years ago. Software and IT companies are focused on high growth. We need to identify the needs of entrepreneurs in different sectors. For example, a software solutions provider needs internet connectivity of 10 Mpbs speed. Our requirements are more related to infrastructure than investment. 
Policies should also be streamlined regarding the transfer of money so that we can easily bring the income we earn outside the country and also can make payments for various purchases such as servers, equipment and other services. To take the Nepali IT industry one step forward, the government needs to start discussions industry stakeholders and their business needs. We can provide checklist of IT industry requirements such as infrastructure development, payment gateway, information security and intellectual property rights. Addressing these concerns will boost the growth of IT entrepreneurship. Globally we are witnessing a trend of new companies following the suit of Apple, Google and AliBaba. In advanced markets the ecosystem is supportive to the aspirations of entrepreneurs. Unfortunately, Nepal lacks such environment where one can emerge as a role model company. 
What is Young Innovation doing to support Nepali tech startups?
Young Innovation has taken various initiatives to support tech startups. We are conducting 'Hakathon' events where individuals can come up with their new ideas to show their smartness by developing applications and programs along with other products under the stretch of 1-2 days. Similarly, we are also supporting startup weekends and other events. Currently we have been collaborating with NCELL in NCELL App Camp. The competitive program is all about incubating and supporting app developers who come up with new ideas. The winners of the program will receive cash prizes as seed funds to start their business initiatives. If all goes fine, we have planned to continue the flagship program for the next five years. At personal level, I have been felicitating programs related to rural employment, entrepreneurship and environment.
Startups often do not get bank loans easily. How can their financing problems be solved?
In 2009, when our company was in initial stage of operations, I approached some banks for business loan. I did not want to use my personal property so I produced business contracts and requested them to lend us some money. However, seeing us as a very young company, they refused to provide loans without deposits or collaterals.
If BFIs really want to promote entrepreneurs and startups, they need to have mechanisms to identify the right business venture. Revenue in IT sector rises by a minimum of 100 folds each year. We have preferences and requirements different than other business sectors. So, assessment process of the IT and other sectors should be different. They need to treat sector specific entrepreneurs separately.
The success rate of the startups is seen relatively low. What should the startups do to sustain their growth?
Persistence is the most important thing to sustain the growth of startups. They should continue to show their passion all the time. Vertical focus is also needed for a sustainable growth. We should keep in mind that Nepal is not Silicon Valley or Bangalore. So startups need to come up with their own organic business model rather than copying successful global products and trends. They should identify their market first whether it is B2B (business to business) or B2C (business to consumer). I think in Nepali context, the period to effectively measure growth rate of startups is after two years of their inception. 
(By Sanjeev Sharma)
“BIP creates favourable environment for innovative entrepreneurs”
Pawan Kumar Timalsena, Director, Department of Cottage and Small Industries
Pawan Kumar Timalsena
Department of Cottage and Small Industries
What is the DoCSI doing for the start-up companies?
Business Incubation Programme (BIP) at the Department of Cottage and Small Industries (DoCSI) under Ministry of Industrytargeted at start-up enterprises has been operating since 2062/63. This program provides inputs necessary for making successful businessperson. It helps in developing creative, competent and capable businesses and entrepreneurs by providing favourable environment, logistic facilities and related information. So far, DoCSI has produced 14 entrepreneurs and 20 are currently being nourished under its incubation programme.
What are the major challenges they are facing?
The start-up businesses are facing challenges such as of lack of specialised mentor, financial support and physical facilities like communication, resource centre, library, laboratory, etc.
How is the BIP facilitating fresh entrepreneurs?
BIP has tried to create favourable environment for innovative and aspiring entrepreneurs. This includes physical facilities and mentorship services on different aspects of management and production such as productivity enhancement, quality management, accounting, marketing and intellectual property rights. Similarly, it also organises various exposure visits, provides exhibition stalls and also creates opportunities for interaction and business networking.
What are your suggestions for start-ups to sustain their growth?
The start-ups should: a) Continue their presence and active participation in the program. b) Establish and run the proposed business according to their business plan. c) Share and interact with other entrepreneur and peers and d) adopt advanced technology and techniques to grow the business.
How is the government helping the start-up businesses?
It has been helping the BIP graduates with support on credit facilities, tariff facilities, registration of intellectual property and also to operate and enhance their businesses.
What is the major area of focus by Nepali start-up companies?
The graduates of our programme are mainly focused on agro-forestry based business because there is a wide scope of starting business in this sector. Similarly, young entrepreneurs are attracted towards the IT industry because this sector is growing fast and it is easy to set up as it is mostly in the virtual world and the IT business is global right from the beginning. 
(By Gaurav Aryal)
Biruwa Ventures: Supporting Startups through Business Incubation and Mentoring
Vidhan Rana, Founder-Managing Partner, Biruwa Ventures
Vidhan Rana
Founder-Managing Partner
Biruwa Ventures
Nepali startup ecosystem is in its initial phase. The business environment is not generally favorable for new entrepreneurs who aspire to start their own business. Those who come up with new ideas often face hurdles in areas of investment, business promotion and proper infrastructure. Facing such problems, many entrepreneurs drop out from their businesses which they have earlier hoped to become successful ventures.  Biruwa Ventures, Nepal's first privately run business incubation center has taken initiative to cater to the needs of such startup companies. 
Founded by two US returnees Bidhan Rana and Abhinab Basnyat in 2011, Biruwa Ventures helps and mentors young Nepali entrepreneurs to start and grow their business ideas. The company provides supportive environment to driven young individuals and gives them a platform to share and nurture their ideas fostering their entrepreneurial spirit. It provides the startups with office and parking space, continuous electricity supply, telecommunication and high speed internet connectivity. "We also provide business consulting services like legal registration / compliance, business planning, feasibility studies, market research, internal controls, risk assessment and more to support the growth of businesses," informs Rana. According to him, the company also provides free mentoring sessions to entrepreneurs to help answer basic questions on starting and growing a business. Apart from this, Biruwa Ventures also helps startups to get investments by connecting entrepreneurs with various funding sources.  
‘‘Startup businesses should always focus on creating a strong team to sustain their growth’’
What is the situation of startups in Nepal?
Situation is looking positive as the startup ecosystem is improved by leaps and bounds in the last five years. Large number of young college graduates are opting to start a business rather than taking a job and there are a number of role models and mentors available in the market to guide these young enterprises. 
What are the major challenges that they are facing?
Securing financing to launch a business venture is one of the major challenges for startups in Nepal today. As financial institutions are very reluctant to provide loans to startups without collateral, these businesses have to rely on either bootstrapping or loans from friends / family to move the business forward. Even when business does work out, securing funding to expand the business can remain a challenge. 
Political instability posses another major challenge for startups. As the constitution of the country is still being debated, entrepreneurs find it difficult to plan for the future of their business. In a more secured political environment, entrepreneurs can better predict the course of their business and thus have a higher likelihood of success. 
What is Biruwa Ventures doing to help the startups?
Biruwa provides business support services to entrepreneurs who are starting up or are looking to scale up their venture. We provide serviced office spaces so that entrepreneurs do not have to spend time finding and setting up their office. This service helps entrepreneur save both time and money. We also provide business consulting services like legal registration / compliance, business planning, feasibility studies, market research, internal controls, risk assessment, and more to support the growth of businesses. Biruwa also provide free mentoring sessions to entrepreneurs to help answer basic questions regarding starting and growing a business. 
How are you assisting the startups in terms of their investment and funding?
Biruwa isn’t currently providing direct funding but can help link up with other investors if the business idea is promising. In most cases, finding investors for idea or early stage ventures is extremely challenging. Therefore, we recommend that entrepreneurs build some sort of track record before approaching investors. 
What is the success rate of startup companies in Nepal?
This information is hard to come by. Even, in developed economies like the United States, business survival rate is quite low. Some statistics show that only half of the businesses survive after the first five years. Our guess is that the survival rate is lower in Nepal. 
The other question is how we can classify a startup as a success. As private companies do not disclose their financial position, it is hard to tell whether a startup is financially successful or not.
What should the startups do to sustain their growth?
Startup businesses should always focus on creating a strong team to sustain their growth. Without a strong team, even businesses with strong potential are at risk of failure. 
For sustained growth, businesses should also keep a close eye on changes in the market as small change in the market condition can completely disrupt a business. 
Has the government done anything to help the startups? What specific policies are required to support them?
Though the government has recently started paying attention to startups and young entrepreneurs there is much more that the government can do to help them. Firstly, there needs to be changes in the government curriculum so that entrepreneurship is taught even in the schools. Government should also ease regulations so that it is easier to start a business and should also make compliance and taxation easy to understand for entrepreneurs. 
As financing is a major hurdle government should come up with funds to support loan guarantee schemes, which will encourage banks to become more flexible in terms of providing non-collateralized loans to young entrepreneurs. 
Government should also encourage CTVET to provide more technical training focused on entrepreneurs and provide basic business training programs to graduates of technical programs. 
Why Nepali startups are mainly focused in technology sector?
IT businesses are easier to launch because they require less capital. As IT products can be easily sold outside Nepal, it also opens up a much larger market and thus looks very lucrative. 
The other reason young entrepreneurs are attracted to this sector is because they are numerous success stories both domestically and internationally. IT entrepreneurs have dreams that they can emulate the success of entrepreneurs like Mark Zuckerberg of Facebook and Naveen Selvadurai of Foursquare. 
(By Sanjeev Sharma)
Dolma Impact Fund: Impact through Growth Capital
Bidhyabaridhi Sigdel, Investment Director, Dolma Impact Fund
Bidhyabaridhi Sigdel
Investment Director 
Dolma Impact Fund
Startups face various hurdles during their growth. After reaching a certain level, they may face obstacles such as lack of capital and other expertise. This is likely to stop or slow them down from developing into full business ventures. Dolma Impact Fund, an international private equity fund is actively helping such companies. It provides growth capital to small and medium enterprises. The fund is a part of the Dolma Development Fund (DDF), a charity founded in 2003 by a former British investment banker Tim Gocher which supports Nepali youths in education and sustainable economic development of rural Nepal. The success of DDF led to the launch of Dolma Impact Fund in 2013 with the support from the United Kingdom Department for International Development (DFID). The Dolma Impact Fund aims to generate jobs and private sector-led economic growth. 
Unlike other venture capital funds, Dolma Impact Fund helps those organizations which have raised their status from being a startup and are unable to grow or expand their businesses due to lack of capital. "We do not provide seed capital to entrepreneurs to start new businesses. We join hands with the business ventures that have maneuvered from just being a startup, proved that they can succeed, with risk participating growth capital when the entrepreneurs have exhausted  themselves in raising necessary resources for taking the business forward to the next level," says Bidhyabaridhi Sigdel, Investment Director at Dolma Impact Fund. According to Sigdel, the fund is currently focusing on the energy sector alongside healthcare, education, agriculture, financial inclusion, water, ecotourism and financial solutions. 
‘‘We are advocating for better governance standards and better regulations for businesses to flourish’’
What is the situation of startups in Nepal?
Though startups are still in struggling stage in Nepal, entrepreneurial ecosystem has seen some positive development compared to the economic growth and state of development of the country. Now we are seeing new and unique businesses, which involve brilliant choice of timing and products.
What are the major challenges that they are facing?
First and foremost, it is the aptitude to take the risk of startup. Nepalis are culturally risk-averse people, very few would want to come up and take risk of an uncertain outcome given a choice with a traditional business setup. Secondly, we lack the risk capital required for such business. Access to capital is limited, which again triggers the risk aspect of a startup.  Third, all other resources (human resources, technical support, access to market) being limited would be allocated towards the conventional running enterprise than to startup. 
What should the startups do to sustain their growth?
Perseverance is the word. The results may be slow and frustrating, that does not mean the entrepreneur has failed. Entrepreneurs should constantly innovate their business in terms of maximising the revenues, reducing the costs and penetrating into bigger markets. In any startup, the entrepreneur should be flexible enough with the choice of resources, so they should always be forward looking and full of optimism in the performance of the business. 
What is Dolma Impact Fund doing to help the startups?
Dolma Impact Fund through its affiliates and associates is working in Nepal to make it more private sector friendly, where businesses can thrive and give competitive and comparative returns and results to risk capital. We are advocating for better governance standards in public offices, better regulations for businesses to flourish. On the other hand, we would join hands with the business ventures that have manoeuvred the business from just being a startup, proved themselves that they can succeed, with risk participating growth capital when the entrepreneur has exhausted himself in raising the necessary resources for taking the business forward to the next level of growth.
 What is the success rate of startup companies in Nepal?
To be honest, we do not have a mechanism or a database, which actually gives us how many new businesses were started and how many have shut their doors. But we can see a number of new businesses coming up as we assess the private sectors through various sectors.
 Has the government done anything to help the startups?
They have announced an Rs 500 million venture capital fund, which is yet to take shape. This means the government has seen the potential in startups and is willing to help. Even though, this is the right step ahead in supporting the startups but there is a lot to be done is terms of access to capital, allocation of space and resources and most important a sort of insurance and incentive to the entrepreneur for taking the risk.
Why Nepali startups are mainly focused in technology sector?
The startups are focused in technology sector as it is asset light, requiring minimum investment. However, at the same time entrepreneurs in technology are fairly competitive with world in terms of cost and skills required. Even if we see the global trend, technology has become the next big thing, business has seen tremendous growth from a startup in a nick of time.  
(By Sanjeev Sharma)

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