Startups, which denote firms or companies in their first stage of operation, are flourishing across the globe while the trend of creating 'unicorns' – companies worth more than US$ 1 billion – has been shifted to the developing countries such as India and China. Now famous and hyper-successful companies like Facebook, Wordpress, WhatsApp, Uber, Airbnb and Netflix had begun as startups. These multi-billion dollar companies have revolutionised the way people use and perceive about the information technology, transport, hospitality and entertainment. Startups help expand economy by creating jobs and self-employment, promoting innovation in business and industries and producing the goods and services that are in demand. Since they stimulate competition among the producers and products, entrepreneurs become more innovative, creative and risk taking. Many often, they challenge the traditional ways of business as well as simplify them while, at the same time, adding speed and lowering cost.
India has 108 unicorns by May this year and they have a combined valuation of US$340.8 billion. Paytm, Ola Cabs, Flipkart, Zomato, CRED, BigBasket, FirstCry and Nykaa are among the successful startups in India. In 2021, India witnessed the rise of 44 unicorns in a year. Likewise, China, has 316 unicorns and more than 70,000 startups. Bangladesh and Pakistan are also facilitating the growth of startups to give impetus to the job creation and economic growth. Nepal's largest ride sharing enterprise Pathao is a Bangladeshi company that began as a startup, and is one of the fastest growing tech-startup in Asia. It has been seen that the startups thrive in the countries with multiple opportunities for business and entrepreneurship.
Policy confusion
However, this trend is yet to evolve in Nepal. There are many of business opportunities here, people's purchasing power has gone up significantly in recent years, increasing inflow of remittance has promoted consumerism and internet service has reached to the most parts of the country. It's not that Nepal doesn't have successful startups, companies like e-Sewa, Foodmandu, Urban Girl, Khalti, Khalisisi and CloudFactory are successful examples that are inspiring hundreds of thousands of youth from across the country to take up their own innovative ways to conduct business. But they were sprung and grown at the sole initiatives of the entrepreneur with occasional support from the private sector firms and venture capitals. The government is blamed for not playing a supportive role in their initiatives. The startups like Tootle, a ride-sharing, is facing various obstacles to run its business. Policy confusion and continuous harassment has stunted the growth of the company. Despite this, about 500 startups have been moving up on the path of success.
Eight years ago, in his budget for the Fiscal Year 2015/16, then Finance Minister Dr. Ram Sharan Mahat had announced a startup fund of Rs. 500 million with the aim of cultivating the culture of entrepreneurship and promoting fresh ideas by bankrolling promising startup initiatives in the country. Many thought then that the government was going to make some significant interventions in developing startups and small and medium enterprises while the authorities expected contribution from the private sector and other stakeholders like the Non-Resident Nepalis in that drive. The private sector had suggested creating criteria and working procedure to utilise the fund. Even after eight years, the country doesn't have a dedicated start-up policy to define startups although the government implemented the Startup Enterprise Loan Fund Procedure five months ago.
Initiatives for startups in Nepal have been ping-ponged among the different agencies such as the National Planning Commission, Ministry of Finance and Ministry of Industry, Commerce and Supplies. Budgets of the past five years had announced financial, technical and policy support to startups but none could be implemented. Had they been executed, they would have supported not only the startups but also many small and medium enterprises which experienced a severe blow during the coronavirus pandemic. Implementation of support programmes would certainly motivate the SMEs that are operating informally without getting registered at the concerned agencies. It will help in creating jobs and making positive contributions to the local as well as national economy. This initiative could also discourage the brain drain the country is recently witnessing.
For the current FY 2023/24, the government has allocated Rs. 1.25 billion to support and develop startup enterprises by creating an ecosystem to promote innovation and entrepreneurship. The budget has also a provision for the establishment of an incubation centre in Kathmandu. Since the government has also announced to celebrate this year as the 'Youth Entrepreneurship Promotion Year', and pledged easy access of startups and SMEs to finance, a strong collaboration should be forged between the private sector and government to realise this plan. In yet another positive development, the government approved the Startup Enterprise Loan Fund Procedure, and Department of Industry called applications for the startup financing and short-listed 173 enterprises for the facility. If they could get the financing facility, it would be the first successful programme implemented by the government.
Access to finance
Likewise, the government has finalised the draft of the National Startup Enterprise Policy, 2023 which is in the final stage to get the approval from the Cabinet. The policy has clearly defined the startup business, their eligibility criteria to avail the government and other facilities and major areas for startup development. The Securities Board of Nepal (SEBON) has also taken some important initiative such as opening SME Platform at the Nepal Stock Exchange to allow trading of shares of SMEs. However, its implementation of this facility has been delayed. The capital market regulator has also begun to give license to venture capital and private equity firms. Private sector organisations like Federation of Nepalese Chambers of Commerce and Industry and Confederation of Nepalese Industries as well as companies like Nabil Bank have been implementing startup support programmes and extending financial as well as mentoring support for their development.
Access to finance, technology transfer, training and mentoring are crucial for the startup development. Another area of urgent attention is the exit policy. The private sector has long been demanding an easy exit policy that would shut the business whenever they wanted and without any hassle. Therefore, there should not be further delay on part of the government to devise exit policy and roll out other important schemes to boost startups, which hold huge potential to expand economy in recession.
Published in The Rising Nepal daily on 11 August 2023.
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