Despite some progress seen in recent years, particularly due to startups in the country, Nepal has not been able to foster an environment where innovative minds can come up front and take the country’s economy to the next level. The Global Innovation Index indicates this as Nepal ranked 108 in 2018 out of 126 countries. While it is a jump up for Nepal from its 128th spot in the index in 2013, much still needs to be done in order to make innovation and entrepreneurship the major drivers of Nepal’s economic growth.
Axel Schultze is the founder and chairman of the Switzerland-based World Innovations Forum (WIF). Currently, the organisation has investors, entrepreneurs and enablers from over 27 nations. The vision of the organisation is to build self-propelled economies through entrepreneurship and innovation. Starting from the now-defunct Rockwell International, Schultze later became an entrepreneur and spent three decades in Silicon Valley, establishing and nurturing successful tech companies such as Computer 2000, Infinigate and Blue Roads, among others. Also a published author, he was named one of the globally most influential startup influencers in 2015. In early 2019, Schultze co-founded WIF in Lucern, Switzerland. Recently, he was in Nepal to organise workshops for startups and the business community in association with the Mandikhatar, Kathmandu-based Global Academy of Tourism and Hospitality Education (GATE). In an interview with Ashim Neupane of New Business Age, Schultze talked about the importance of developing innovation and entrepreneurship, the plans of WIF in Nepal and the market potential of Nepali startups, among other topics. Excerpts:
What was the idea behind establishing the World Innovations Forum?
The World Innovation Forum (WIF) is a non-profit organisation based in Switzerland. The motive of the organisation is to increase entrepreneurship throughout the world, creating new jobs and reducing poverty. We think the developed countries have an important role in promoting entrepreneurship. While initiating WIF, we also had an argument with the Swiss government because the people in the bureaucracy thought our organisation a commerce business rather than a NGO. We argued that there are startups in Switzerland which are very advanced in artificial intelligence (AI) technologies.
We asked if the government knew how many startups in Switzerland have been purchased by international companies. Economically, there is no benefit for the country because there is no export and no tax coming in. We also explained the ‘Economic Model of Innovation’ to the Swiss government. Basically, WIF helps people in the policy levels to understand the paradigm of innovation. It is because prosperity is based on innovation.
WIF has mentioned alleviation of poverty through innovation as one of its key goals. Could you elaborate on this objective of your organisation?
Innovation is integrally tied to the history of mankind. From tools made of stones and wood to equipment made from metals and plastic, innovation has indeed remained as the key driver to increase productivity which has ultimately helped to make the lives of people better. From the prehistoric Stone Age to the modern day Information Age, mankind has been always driven by its quest to engage in new things. The next age will be the Innovation Age and will see huge developments in IT, artificial intelligence, biotechnology and medicine etc, which will significantly impact the lives of people.
WIF firmly believes that we can completely alleviate poverty if we can find ways to help people to innovate. This idea came when I researched how the developed countries have been driven by innovators. For instance, the seeds of industrialisation were sown in the mid and late 19th century Germany when small groups of people started to build cars and machines. The expansion of industrial activities gradually changed the fate of Germany which was actually a poor and fragmented country back then. Silicon Valley, the IT powerhouse of the world situated at San Jose, California, is another example. It began to develop when a small team of innovators created a startup called Fair child Semiconductor, from where today’s largest chip manufactures Intel and AMD came out along with several other IT companies.
Ramesses II, seen as the most powerful Pharaoh King of Egypt, developed harbours and marketplaces during his reign in 1279-1213 BC in order to collect taxes more effectively and to a have better maritime patrol and sea connectivity. Although the purpose to build harbours and marketplaces was not about creativity and innovation, this actually strengthened the economy of ancient Egypt and changed the lives of people living there.
From ancient Greece, Mesopotamia, the Roman Empire to the British Empire, this innovation has played a key role in the making of history. Every major country in their point of time had some people who went crazy to build things that led to their prosperity.
The low level of innovation in Nepal is often blamed on the country’s status as a landlocked nation. Do you agree?
Theoretically, a nation like Nepal is more suited to become a top country in the future in terms of innovation. I don’t think being landlocked hinders Nepal to become an innovative country. This actually can drive the Himalayan nation towards ingenuity to find ways to increase its connectivity with the rest of the world.
In today’s world, having unique products is really important for countries to foster innovation and become competitive. Now-a-days, many people say that the time of United States is over and China will become dominant in innovation and competitiveness. However, I actually have a different opinion on this, at least right now, because there is not a single unique product coming out from China. I would like to bet more on a country like Vietnam.
How is WIF working to promote entrepreneurship and innovation in developing countries like Nepal?
Together with the Global Academy of Tourism and Hospitality Education (GATE), WIF will start the Entrepreneurs Academy in Nepal, where students, startups and young entrepreneurs can come to share ideas. We have set up the academy worldwide and have a curriculum for training. We will search for someone who can train the startups and business minds. The academy will help people who have little knowledge about business and entrepreneurship. We will also start an accelerator programme in Nepal. Besides, we will also help educate startups on branding, marketing, and the use of social media for networking and marketing.
What do you think about the startup ecosystem in Nepal?
Nepali startups are above par when compared to their peers in other countries. Of course, the startups here need proper guidance and support from the investors, but the innovative ideas brought by the youth in Nepal are amazing.
In addition, Nepali startups have access to over 1.5 billion English speaking people across the world. There is not much of a language barrier for Nepali startups, which is a huge advantage for them. The ability to communicate and share ideas with foreign companies and investors is a great asset.
I find that startups in Nepal are always ready for experimentation and are curious and eager to learn. The limitation for startups here is the availability of capital, which I am hopeful, will be solved within a couple of years. We want to see Nepali startup companies listed in the stock exchange. By issuing IPOs, companies can raise enough capital to compete in the market.
Nepali youths have a lot of potential and capability. However, they need to understand that it takes time to succeed and should always have the attitude of losing something in order to gain something.
There are several opportunities for innovation and investment in Nepal. We decided to come to Nepal to learn what is happening here. We are trying to show Nepali startups how things work in other countries. I also met with the Vice Chancellor of Kathmandu University and came to know there are more than 50,000 students, which is actually a big asset for the country.
How can Nepali startups work to compete in both global and local markets?
Globally, new ideas and innovations come up every day. Startups with innovative ideas have succeeded all over the world. Startups in Nepal should develop unique and innovative products that can compete in the global arena. It’s not like startups here lack innovation, but the startup community needs to come out with unique products to disrupt the market. Having said that, the priority of the startups should be the domestic market in the initial stages. After succeeding domestically, startups can expand to foreign markets with quality products and services.
For instance, the market for beauty products is growing at a rapid rate globally. The whole of Asia is obsessed with beauty products at present. Nevertheless, many companies have failed to create their brand which has hindered their growth. I have found that a couple of startups in Nepal are producing beauty products. We need to support them to create their brands. With the growth in demand for such products in the international market, the startups may feel challenges related to capital and the positioning of brands.
It is not that WIF looks to support hundreds and thousands of startups that exist across the world at present. We try to support a small number of them in all countries wherever possible and make them more innovative and creative. We were blown away by the innovative ideas presented by startups in countries including Ghana, Nigeria and Kenya. Currently, there are over 50 Nepali startups with big potential to enter the international market. If they are assisted in terms of capital, these companies can grow in both domestic and international markets.
The WIF website states that ‘roughly 90% of startups don’t make it.’ What are the reasons behind such an alarming failure rate?
Startups don’t research well enough to understand the needs of the market. Someone with an innovative idea talks to some of their friends and starts a business, which may fail at any time because not enough thought and research has been put into it. Moreover, in Asian countries, startups have mainly failed on the branding side.
The inventor of the jet engine was French. During a session, I asked the participants, “Who invented the jet engine?” Nobody had the right answer. It’s because the French inventor failed to brand his product. At that time, companies like Boeing purchased jet engines, and they branded their aircraft. Understanding the value of the brand is critical in this era. If startup companies do not give ample attention to branding, then they will fall behind other companies who copy their ideas. I always say, if your products are copied by others in the market, then it’s a really good thing, because you can only be a market leader when you have followers. But if you don’t have a brand, those copying your concepts will be the market leaders. So, branding is the key to success, no matter how big or small a company is.
A startup can also fail when there is only one individual as the company’s founder with expertise in a particular sector. For example, if the founder is an engineer, then there is a very minimal chance for the company to grow. It is because he/she might not have proper business ideas. On the other hand, the startup is also likely to fail if there is an absence of innovative engineering minds in the company.
Some three decades ago, there was not a single founder in many Silicon Valley companies who was good enough to take their company to the top. The investors of those companies collaborated with the professionals who had expertise in specific sectors. This led to an increase in the success rate of the companies from 10 percent to 20 percent.
Underestimating the importance of capitalisation is also a reason behind the failure of startup companies. It has also happened in our own accelerator teams. We have seen that if the startups are providing too much equity, too early, it will start a different phenomenon during their growth where it might be difficult for them to receive investments from venture capital investors.
How are infrastructure and innovation interlinked? Where should the government focus in terms of infrastructure development?
Having adequate infrastructure is a prerequisite for innovation and entrepreneurship in today’s world. It creates an environment where people can realise their ideas and enables them to constantly think new things. Infrastructure provides a base for a country to step to the next level. In this respect, Nepal really needs to focus on developing its infrastructures.
However, the people in the government need to be aware that receiving any investment is always about infrastructure development in the country rather than innovation. They need to see if investment in infrastructure can foster innovation in the country or not.
After arriving here, I had to send an email to the finance minister, but wasn’t able to do so on time because of the poor internet connectivity. Basically, foreign investors look for infrastructure before making their investment decisions. It is because businesses find it hard to sustain and achieve growth in the market in a place which lacks basic infrastructures in transport, web connectivity and energy. It is also important for startups as well because innovation takes longer to succeed. In recent years, the government of Nepal has prioritised the development of the hydropower sector, which is indeed a good step in infrastructural development.