Sat, June 22, 2024

‘Entrepreneurship is like raising a kid’

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Dr Ubin Pokharel Chairman, BRP Group Dr Ubin Pokharel’s journey from being a medical doctor to a venture capitalist is an interesting one. Not only does he have a medical degree from Kathmandu University but also a Master’s degree in Public Health specialising in Epidemiology from the University of South Florida which looks into the causation and transmission of diseases. “My medical training is focused in the field of oncology and after completing my medical degree in Nepal, I worked at Mahidol University in Bangkok to focus on stem cell origin of cancer, especially on brain tumours,” he shares. After having worked for almost two years in Bangkok, Pokharel decided to return and started U&B Hospital in Kathmandu to focus on advanced cancer treatment. “I later sold this hospital to a medical college which was starting up for nearly double the return which marked my first journey into the venture capital world where I believed I had the capacity of creating something from scratch and upselling its value,” he reveals. It was in 2011 that he moved to the United States but he mentions that during his time in Nepal, he had come to admire the potential in big data in the medical field, especially cancer research. “I believe this tool was equally if not more powerful in finding solutions to cancer compared to traditional translational research. I was fortunate enough to meet Prof Anna Guiliano at Moffitt Cancer Centre who is a leading authority in the field of cancer vaccines,” he says, adding he feels he has been fortunate to work in her lab on cancer vaccines, focusing on human papillomavirus and cervical cancer. Dr Pokharel states that after his endeavours in the field of cancer research and after two successful exits from two startups in Nepal during this time, the first is the hospital and the second a paramedical college which he had opened in Nepal which was sold to another medical college for a 1.5x exit, he decided that venture capital was the path he wanted to take forward. “UB Ventures LLC was a company set up to carry out this endeavour from the US in 2012. I believed venture capitalism would not only give me financial gains if done correctly but also allow me to create much more impact on health disparities, inequalities and disease cure since I would be able to back founders who have diverse knowledge and expertise,” he elaborates. Pokharel mentions his first investment as a venture capitalist was in Boston-based Octet Research which is focused on using advanced data analytics to clinical trials. “My second move was to invest in Dox Health which is personalising exercise so that individuals are given quantitative goals to meet,” he says. The third investment that Pokharel made was in a health tech firm ESR Tech which is focused on creating custom-based Electronic Medical Record (EMR) systems to cater to small medical practices. It was in 2019 that Pokharel moved back to Nepal after the untimely demise of his father after a prolonged battle with pulmonary fibrosis to take care of BRP Group and has been involved with the same ever since along with managing the VC firm in Boston in collaboration with the team based out of the US. In this issue of Business 360, Pokharel speaks about the businesses that he has been overseeing and about venture capitalism and its benefits to an economy like Nepal.

Could you please elaborate on the businesses that you are involved in over the years?

We are involved in different business verticals spanning from healthcare, education, information technology, financial sector and real estate as part of BRP Group which was established by my late father Dr Babu Ram Pokharel in 1980. He began by focusing on education and later expanded into other sectors. We are expanding the group to newer business verticals. We have a business incubator called Satin Leaf Investment that not only provides capital financing to young startups but also provides logistical support to companies to scale up. It is in collaboration with a seed stage venture capital (VC) fund based out of Boston that focuses on innovative investments in healthcare and financial services. We are affiliated with or have a technical collaboration with US based companies for most of our companies working in Nepal. We are also very bullish on the potential of the tourism sector in Nepal and have recently set up a travel company which will complement the unique travel tech product we are developing through our IT company called Assabet Technologies. Growth has been steady over the years, Covid 19 has impacted it but it is gradually coming back to shape. New business opportunities usually require a period of incubation and we are going through the same for a lot of our newer business verticals. Nepal goes through a period of economic slowdown and bullishness in a cyclical fashion and our industries especially those focused on real estate mirror the cyclicity. But business verticals in healthcare, education and information technology have seen a significant growth trajectory in the past few years.

What are the plus points and challenges taking forward a business legacy?

It is a mixed bag for sure. On one hand it is very fulfilling to be carrying the business legacy forward knowing that you are playing a part in making sure the dreams of my late father be realised. On the other hand, you are always under pressure to perform and bear a certain level of comparison with whoever started the business to protect, preserve and grow the business and its legacy. You are compared on every move you make which makes pivoting into new business verticals and business ideas difficult to get off the ground.

How would you describe the term ‘venture capital’ in layman terms and how important is it for an economy?

Venture capital is akin to fuel on startup engines. Venture capital simply means a capital contribution to fuel the business ideas of the founders. Most people have an assumption that venture capital is just an investment made into companies which are usually pre-revenue. While this financial capital contribution is certainly a part of the process, there is also a component of human capital contribution into the mix. It is simply the combination of financial and mentoring support that is provided to companies and founders which are nascent entrepreneurs, in order to help them grow and scale. In the US, startups have led to much more dynamic new industry being created and jobs creation and job growth. Innovation empowers people’s lives. Look at Nepal and the digital payment scene, a product envisioned by a startup has changed the way we transact, be it in Kathmandu or a remote village or food delivery app that has changed the way we order and consume food. In India, startups especially in the tech sectors have paved the way for bringing massive revenue to the country; startups contribute a great percentage of Indian gross domestic product, especially in the IT and software sector. Venture capital backed startups allow bigger and mature companies to be relevant and competitive by acquiring these new budding startups. It allows for better resource utilisation for the educated workforce in countries like ours where there is a challenge for such a workforce.

How would you describe the scope of venture capital in Nepal?

Financing has always been a difficult nut to crack in Nepal with banks having a network based, stringent collateral-based financing requirement, something most startups can’t fork out. Venture capital will be the only source of financing for most of these companies. VC funds in Nepal can drive innovation and bring positive changes to people’s lives by backing these innovative startups. Besides, entrepreneurship is something that is not very common in the Nepali curriculum, be it at school level or college. While entrepreneurship is very much something you ‘do and learn’, venture capital firms and incubators can provide these young startups with the right resources to be able to fully take advantage of the entrepreneurial spirit and ideas which can improve the odds of success in their favour.

Compared to other developed countries where venture capital is already an established concept, how would you project the growth of this concept in Nepal?

Venture capital is a budding field in Nepal. We have about five-seven funds working in Nepal and NPEA (Nepal Private Equity Association) as an umbrella organisation looking after these funds. We have seen these funds make some real contribution to the startup scene in Nepal by investing and promoting companies whose products and services are used by many on a day-to-day basis. We believe the trend will continue in Nepal. Once we have more clarity on different exit opportunities that present themselves in Nepal, we will see new funds coming up and the existing funds raising subsequent larger rounds from their limited partnerships LP’s which will allow for more frequent investments into Nepali startups and investment in bigger ticket sizes that can support scalability needs of these startups.

From your experience, what are the major difficulties in establishing and operating a business in Nepal?

Nepal has always been a country with limitless opportunities but limited execution potential. We Nepalis have a trader mindset in general; we are happier with a quick gain rather than waiting a few years to reap a massive gain. There’s also a lack of entrepreneurial mind-set in our country; entrepreneurship is not a career choice for most college graduates, most parents are rather happy with their kids choosing a traditional career rather than starting on their own which also hinders new business opportunities. There is a lack of political stability in the country and then, there’s deep-rooted corruption. Venture capital funds in Nepal still have a banking mind-set who are focused more on capital preservation and capital growth rather than drive innovation. We need more people in Nepal who have had some experience in the entrepreneurial world, who have seen it and done it, to start or be involved in the VC circle so that their invaluable first-hand experience in driving the startup and the difficulties behind it could be passed onto the next generation of entrepreneurs.

Are there any global business practices that Nepal needs to adopt in the immediate future?

Ease of doing business has to be improved massively. Most places in the world have a paperless system which Nepal needs to implement and make the corporate world a nimble place to operate. We need to abolish the syndicate-based system and attract foreign investment in a number of closed sectors, streamline the foreign direct investment (FDI) process, and have a one-door policy. There are multilayer and bureaucratic processes involved at the moment even for a simple task that makes it frustrating for someone to do business in Nepal. We need to identify what our unique selling proposition (USP) is. India started as a tech hub, China as a manufacturing hub, Japan as advanced electronics, Germany as engineering, US as innovation. How about Nepal’s tourism… agriculture… IT? We will need to define a collective USP for our country and there should be a massive push to make sure that is realised. The government has to take a leadership role in this aided by the private sector.

What do you think is hampering economic growth in the country?

Definitely, these two points -political instability and lack of central governance have been a chronic Achilles heel that has dampened most of our growth. The other could be deep rooted systemic corruption. Quick buck chasing trader’s mindset which favours short-term gains over long-term capital appreciation has also limited our ability to build and market value-added innovative technologies and ideas.

How would you describe the ‘doing business’ climate in Nepal when compared to developed nations?

Compare to Rwanda, a country that was devastated by a massive genocide not that long ago, and has implemented ease of doing business policy labelled as ‘SMART regulations’ that are Streamlined, Meaningful, Adaptable, Relevant and Transparent. We need to implement something similar in the national policy that attracts, retains and provides growth opportunities to startups or mature businesses alike. Mature businesses and business houses need to take startups seriously. Good that the FNCCI has led the initiative and set up a startup cell. And also good that business houses in Nepal have started investment in young startups. We have seen a push by mature legacy businesses to either invest or acquire startups in order to be relevant in an ever-changing business landscape worldwide. Universities, globally, have been where innovation or innovative ideas have been really born. Most of the successful startups we use these days are translational products from universities. We need universities in Nepal to follow a similar suit and inspire creative out-of-the-box entrepreneurial thinking in Nepal. We, at Satin Leaf Investment in Nepal, want to really hit home on this idea and we have already started discussions with a few faculties here in Nepal where we would be the incubator for their startup idea.

While the startup culture is gradually gaining strength, most startups close down in a very short period of time. What do you attribute this to?

Startups are hard. Even in a mature startup market like the US, about 90% of startups fail. For every Elon Musk, we read in the news, there are nine others that don’t make it and are never covered by stories so, innately startups are primed to fail and the ones that make it are the outliers. Even in Nepal, for every eSewa we hear, there are 10 other eSewas that are never covered by the news. Startups need to pivot if they want to be relevant in the market. In India, Byju’s, a massive online EdTech startup, which has raised billions of dollars in venture funding, pivoted into a brick-and-mortar tuition centre to be relevant in the post-pandemic world. So, if you are not on your toes and make pivots, you become irrelevant. Entrepreneurship is like raising a kid. If you want the kid to be a teen in six months, you will fail and give up. It takes a massive amount of patience to see your venture grow. Right mindset, that is, understanding the world will judge you by the outcome but you should be able to judge yourself on the process will allow you to be patient in your judgement of the growth of the startup and improve your odds of not giving up midway. There is a lack of exit opportunities for startups and VC funds in Nepal. Most startups get funded once with no clarity on where they will be getting larger Series B, Series C investments that are required for scalability. VC funds have no clarity either, apart from founder buyback which becomes unsustainable for business which is in the scaling up process. We will need to encourage more services companies to list in the market through the IPO process, encouraging regional players and VC funds to make subsequent larger investments into these innovative ideas and also encourage business houses in Nepal to either merge or acquire these young companies by providing them with enough government-backed incentives. Only when we have a properly defined spectrum of entry and exit for both start-ups and VC funds will we have a thriving startup ecosystem in our country. We have seen some encouraging signs though with some infrastructure-related projects that are backed by VC funds listing in the stock market and providing an exit opportunity for the founders and the VC funds.

What advice do you have for budding entrepreneurs?

Do not come to the entrepreneurship world for the glitz and glamour but come for a lot of heartbreaks and persistence. While success is a possible outcome, most of the startups fail and you should be ready to fail if you want to come to this field. Success in this field is like what Winston Churchill said ‘walking from one failure to another without any loss of enthusiasm’. You need to be prepared to fail multiple times before you can taste success. Patience is the key to success. Judge yourself on the basis of your efforts and processes rather than judging based on outcomes. Having the right mindset and surrounding yourself with the best set of people, be it co-founders or investors, who share a common vision is a key to improving the chance of success in this field. Another piece of advice would be to bootstrap your startup as much as you can. Bootstrapping gives you the freedom to design the course of your startup on your own and make necessary pivots if and when necessary. Think about raising a round from venture funds only when you have a working prototype ready, have made some revenue with the products, that is, there are few people or companies using your product and you know how to scale the product. Raising a fund too early can be a hindrance to business growth and freedom since you will be doing most of the work as per the directions of the fund and not your own.

Anything you would like to add…

We at Satin Leaf Investment want to reshape the venture capital industry in Nepal. We would be more of a partner to the young entrepreneurs and startups rather than an investor in the company. We want to focus more on the human capital contribution side of the venture capital equation compared to the financial capital contribution side. We are planning to tie up with relative departments in Nepali universities and help them translate their R&D ideas into successful business ventures. We plan to house around 2-3 companies in our business incubator each year and provide them with all the ancillary support they need like legal, accounting, payroll, HR, training, mentoring, finding product market fit and subsequent fund raise, so that the entrepreneurs can focus on what they do best, dream and make this world a better place. READ ALSO:
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MAY 2024

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