sTARTUPS | ENTREPENEURSHIP | INNOVATION | SEED FUND | ALTERNATIVE INVESTMENT | Business policy
Reality TV show Shark Tank India, was a riveting experience for everyday Indian viewers and entrepreneurs alike. It gave budding Indian entrepreneurs an opportunity to seek funding for their business ideas from a panel of potential investors, known as “sharks”. The “sharks” were of the opinion that the show would help promote startups in India. The change was already in the air even before the Shark Tank came to India, however.
Indians, long known for harbouring ambitions to become bureaucrats or engineers, have become more enterprising. Over 310,000 new businesses were registered in the last two years in India, around 80% increase from the previous two. Still, Shark Tank could add fuel to the already blazing fire, with the first season receiving 85,000 applications and a second season around the corner.
Similar story echoes in Nepal. It saw more than 83,000 new business registrations in 2021, up from 48,000 or so in 2020. This reflects a growing fondness among Nepalis to start their own business.
Given the age-old relationship between Nepal and India — culturally and economically and linguistically — there are reasons to believe that Shark Tank India, also watched by thousands of Nepalis, would educate potential Nepali entrepreneurs and inspire them to pursue careers in business.
One study shows that successful international reality TV shows, like “Shark Tank”, spark entrepreneurship around the world. A survey found that 30% of participants in Britain thought about starting their own business after watching Dragon’s Den, the British version of the Shark Tank.
In Nepal, formal education is poor and few quality business schools are present. People could learn business jargon and learn about necessary business skills (and even business ideas) from the show, helping them start a business.
Audiences get acquainted with business realities mixed with infotainment. When entrepreneurs explain their products and prototypes, viewers find the right context to understand different jargons like fund-raising, prototype, white-labelling, term sheets, total addressable market (TAM), sales split and equity and debt financing, which frequently pop up in the show.
The sharks then evaluate the ideas, which are usually presented as solutions to existing problems, for business viability and scalability. Evaluation metrics include innovation, team composition and expertise, sales numbers and potential in domestic and global markets. They even look if their products and processes are patentable.
In one of the pitches, four young founders of Thinkerbell Labs – an edutech firm – presented Anne, a self learning and remote enabled Braille literary device that would solve the problem of education for children of age 4 to 15 with special needs. There are such two million children in India alone, with needs across the globe, the founders shared.
Although Thinkerbell had already signed a $1.7 million deal with a US contractor, the price point of $1,000 for each product didn’t impress the sharks. Yet the product not only garnered a keen interest from the majority of the sharks, but also sparked a bidding war.
The initial ask was INR three million for 0.5% equity at a company valuation of 600 million, but closed at 10.5 million for 3% equity with three investors sharing 1% each.
Other ideas that made it to the show range from livestock healthtech, agritech and sustainable clothing to modular utility electric vehicles, all of which can find applicability and demand and even inception in Nepal given the right push.
For many Nepalis audience, the show will become a window to understanding the Indian startup scene, and Nepal’s too.
Mukesh Yadav, an engineering student, says: “I watch Shark Tank, and my friends watch, too. It not only entertains people, but also helps them come up with business ideas, and some even get inspired to build a company.”
A must-watch for Nepali planners
Shark Tank may kick start dormant entrepreneurial spirit in Nepali enterprising hopefuls, but it is likely to be met with fierce challenges such as Nepal’s anti-business climate — plagued by red tape, rent seeking and inferior infrastructure. This is where Nepali politicians at all levels, bureaucrats, planners and lawmakers should work on.
Entrepreneurship promotes economic growth. For that to happen there's plenty of reforms needed. But first planners must understand how businesses think, and what they need to thrive in difficult markets and possible economic consequences of persisting status-quo.
First, start with entry barriers. Politicians can make it easy for the would-be entrepreneurs by removing burdensome administrative procedures. Second, a shorter time for starting a business. It takes 22.5 days to start a business in Nepal, compared with an average of 14.5 days in South Asia. Third, reduce costs of doing business. Costs of doing business are more than double than that of South Asia’s average.
Next is firms having a hard time securing access to finance. Getting bank financing is difficult due to fixed assets collateral requirements. Although the government has promised business seed funds, it is yet to be implemented.
Despite the financing gaps, the minimum foreign investment threshold was raised to NRs 50 million in 2019 from the existing five million. Many considered it as impractical for startups (The new budget program has revised the threshold to Rs 20 million now).
Nepal’s large young population, which presents a unique economic opportunity, is another reason why these decision makers should be more bothered and careful in policy selection.
The young gen are adaptable with new tech, are data savvy and also possess entrepreneurial zeal. But hurdles to doing business, and weak economy combined with rising inflation, poor bureaucracy, and ineffective institutions have instead harboured pessimism.
Painful experiences of long and unmanaged queues at government offices for passports, driving licences, and even payments of taxes and registering businesses are other reasons that have exacerbated this frustration.
To motivate the young workforce, planners must identify and create reasons for them to stay back, which of course includes reforms in ease of doing business. Skilling them to bridge the existing skill gaps is another way to create a win-win situation for the young workforce and businesses alike. They must realise that the demographic advantage will soon begin to close in.
The idea behind the show, as one judge puts it, is to capitalise the startups early on and help them scale up. Besides, the judges give guidance to the founders, and get a chunk of the businesses in return.
Like Indian companies, Nepali ones, too, face the problem of scaling up. The impediments are rather complex — infrastructure gaps (poor road connectivity, unreliable power supply and inefficient supply chain), weak bureaucratic competence and structural problems (prevalence of business cartels and import dependency which limit the domestic market size and innovation).
On top of all these, businesses face recurring crises in the supply of credit, energy and raw materials such as fertilisers which usually culminate into increased prices for businesses and consumers.
Left unaddressed for years, one problem has fed the other and snowballed into much bigger challenges for businesses and the economy. Given all this tsunami of challenges, hopeful entrepreneurs realise that turning their ideas into a business and then scaling up is a daunting task.
But along with the show comes not only business ideas.
First, successful candidates passionately share their ways to building a company and knowledge on business and challenges facing firms. These suggestions can come handy for decision makers to get an understanding of whether the businesses are likely to succeed given the country’s specific institutional characteristics influencing entrepreneurial growth, and what actual reforms and behavioral changes are needed.
Second, Nepal’s economic reliance on India is well known and the show provides insight into how India’s entrepreneurial ecosystem led by its private sector and young pool of talents is progressing. This gives reasons to believe that Nepal’s economic relationship with India will skew further if Nepal’s decision makers continue with their passivity.
For Nepal to unleash its startup potential, politicians and bureaucrats must first ask what factors are choking its growth, beginning with their own roles and responsibilities.
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