NEHUB Spark Week 2017 Day 4 “Through the Investors’ Eyes”
The Fourth day of Spark Week 2017 was held at Rockstart Impact, Lalitpur. If the business idea is good, all investors are attracted towards it. Yet, investors won’t spend their resources if they don’t see what they need. Either it is VC, an angel, a Private Equity company or any financial institution have their common criteria they look for before considering to invest in any of the idea/company. The talks will also focus on the key steps in creating a killer pitch deck and ways to lure investors towards them. The panelists of the session were: Niraj Khanal, Antarprerana | Merina Ranjit, Chaudary Foundation | Bhushan Shah, Nepal Agribusiness Innovation Centre | and the Moderator of the session was Tyler Mc Mahon, SmartPaani
TALKING POINTS and KEY TAKEAWAYS:
Mr. Bhushan Shah
Stating that what one intends to do and how one sets out in life is quite disconnected from what actually happens, Mr Shah shared how his career evolved from banking sector to private sector, development sector and as a consultant to finally working as the CEO at NABIC. He talked about companies who had received fundings but they’d want support post-investment to ensure that their business moves along in the intended path and they are able to not just receive funding but also payback the investors. He talked about the challenges faced by agriculture sector in terms of investment. He expressed how agriculture is not seen as an important sector in Nepal, it’s rather viewed as a risky sector. Banks see it as a sector that needs to be there not because of business opportunities but because of the regulatory imposition that has made it mandatory for commercial banks to have 10% investment on agricultural sector. He stated that there are challenges in supply chains including lack of quality products and problems related to knowledge and skill of farmers. At the enterprise level, technical and managerial skills are not upto the mark and there is lack of entrepreneurial culture. There are many disincentives for people to take risks and to be compensated for the risk through profits or business that they generate due to policy distortion, vested interests and many such factors. On the market side, there is disconnectedness and lack of understanding of international demands.
Mr. Merina Ranjit
Ms. Ranjit shared how Chaudhary Foundation started in Nepal as a birth child of Mr Binod Chaudhary when the need to address social issues was realized. Chaudhary Foundation runs an incubation center where they handhold businesses right from the concept phase and invest on them. Unlike other incubation centers, they do not have a centre in Kathmandu. They started off in rural setting as rural Nepal has lots of social issues. Nepal, particularly in the western part, has a grant-driven society. Changing the mindsets of the people is one of the biggest challenges. She shared an example of a training they conducted in Jumla for aspiring entrepreneurs where majority of the trainees didn’t show up for the the rest of the training when they found out that they weren’t there to distribute grants and the trainees were not getting stipend. She expressed her views on the challenges in social business from the investor’s’ perspective particularly in terms of policy as investors are not allowed to take dividend unless the business is run by ultra poor people. She concluded by clarifying the concept of social enterprise stated that creating jobs only does not make any business a social enterprise, it needs to actually address the existing social issues.
Mr. Niraj Khanal
Mr Khanal started off with his journey sharing how he started from NGO background, started his first venture, Yatra and co-founded One to Watch before co-founding Antarprerana. Finding entrepreneurs was difficult during the initial stages. The investor’s perspective was not installed from the early stage of the company. He touched upon the positive aspects of entrepreneurship from the investor’s’ perspective. He believes that the kind of ecosystem that has been developing in Nepal is itself a success. There are many organizations being established to promote entrepreneurship development, People are coming up with their own domain. He stated that Antarprerana provides the services businesses look for including investment, network building and international exposure. He shared some of the challenges starting with investment in early stages of startups. It ensures no guarantee as they look for character and not collateral. He put forth an example of a company which they were going to invest in. Right before signing the final term sheet, they were informed that the company was being shut down. Another major challenge they face is the post-investment challenge. When the businesses receive funding, they think their job is done. There are some drawbacks even on the investors’ side. There’s tendency among some investors to feel like they can control over a company once they’ve invested in it.
Key takeaways from the session
1. Investment in Nepal is a challenging sector as an investor, both domestically and internationally, as well as an entrepreneur.
2. The real work of starting up a business begins when one has received the funding.
3. Since there’s a ceiling on FDI, there’s always a debate on the size of investment. FDI policies have not been encouraging SMEs to grow in Nepal.
4. Entrepreneurial mindset has been developing gradually and to foster this, financial institutions need to provide investments.