Incubating Pokhara’s business ecosystem

Thanks to the year-round pleasant weather and its geography as a valley with lakes nestled below mountains, Pokhara has been synonymous with tourism.

But in the last few years, it has diversified its appeal. Pokhara is now home to upcoming universities and colleges that attract both domestic and foreign students. It has a growing manufacturing and service economy, a thriving construction industry and a slew of venues for adventure sports.

It has an international cricket stadium, to which the Annapurnas provide a postcard-perfect backdrop. Soon, a spanking new airport will connect Pokhara directly to cities outside Nepal. In these days of global connectivity, can it also be a hub for young Nepali innovators and entrepreneurs?

That was the question when I worked as a Pokhara University faculty two years ago. The university wanted to start a business incubation centre for its students, and was looking for ways to make it a successful undertaking by first making sure that the faculty was ready.

Ecosystem before the species: Donor-funded micro and small business development programs have been training Nepali chicken farmers, beauty-parlour owners and the like at least since the late 1970s. Few of these showed success beyond the end of the public funding cycle.

One reason was that the past generations of small-business development work did not focus on building up and strengthening the ecosystem for entrepreneurs to first survive and then thrive. They used public funds to train individuals--often in batches and for days on end. But they did not see their role in improving the business environment under which the entrepreneurs struggled and laboured for little gains.

These days, universities, municipalities and other public-serving institutions need to add the task of building an entrepreneurial ecosystem to their to-do list. They can provide space with low or no rent for initial years, basic infrastructure such as the internet, electricity and water, subsidies for advising and mentoring services, seed funds to help the entrepreneurs start accessing other services that they need, and a network of local investors.

Public institutions now know that paying for training services alone is not enough. They need to attract, work with and retain entrepreneurs akin to the federal government’s effort to attract and work with foreign investors. And much like in nature, where the right combination of water, oxygen and temperature helps species to grow and evolve to complexity, entrepreneurs flock to areas where the public institutions have first put in the basic elements of the entrepreneurial ecosystem in place.

With its inviting weather and amenities, and its tourism-honed customer-service orientation, Pokhara should stand ready to strengthen its own ecosystem for domestic and foreign entrepreneurs.

Can-do mindset over business jargon: Universities and public institutions are averse to taking risks. They aim to minimise failures. But entrepreneurship is all about learning from mistakes and failures so that success can eventually be maximised.

If public institutions see entrepreneurship training as an exercise in creating ‘safe to experiment’ and ‘safe to fail many times and get back up’ spaces for students and innovators around their campus and the city, that resultant mindset alone would pay for several years’ worth of pricey MBA fees.

Because of high upfront costs of starting a business, most Nepali entrepreneurs dare not fail. As such, they start small, take no risk, and remain small for years--hardly growing beyond the cottage-industry category.

If a progressive city like Pokhara defrays the upfront cost of starting and running a business, say, for the first two years, a number of firms could potentially grow to scale, providing hundreds of jobs and other spillover benefits that would more than make up for the initial loss of the rental and income tax receipts.

Without the ever-present worry to pay the government from the first month of starting their business, entrepreneurs would learn to calibrate risks and initial energy to maximise success, and not just play safe and remain small by design.

Investments over grants: Both grants and investments are important for the growth of an entrepreneurial culture. But Nepali public institutions tend to give grants to individuals (especially in agriculture), but tell them to seek high-interest loans for basic infrastructure upgrades, when it should be the other way around.

Pokhara’s public institutions can pay for the basic infrastructure (cold storage facilities, work-machines, etc), while encouraging entrepreneurs to seek equity investments by convincing those with money.

More than public institutions, private investors have a better sense when it comes to deciding who to fund and who to let go. If public institutions pay for basic infrastructure while enabling private investors to bet on entrepreneurial teams, then this blend of public and private money minimises entrepreneurs’ start-up risks while their potential for success gets recognised. This is where Kathmandu has failed, and the opportunity is for Pokhara to take.

In 2015, Korea’s Ministry of Science and Technology paid for the Nepal Innovation Technology & Entrepreneurship Centre that got its start at Pokhara University, which will soon be handed over to the PU faculty. My conversation with the faculty two years ago was about how to run the Centre for its students.

The level of ambition could be much higher: how to start and run a few such Centres across Pokhara to help innovators–students and others--launch and scale up their own businesses that take advantage of Pokhara’s hitherto untapped potential as a destination for entrepreneurs.

Ashutosh Tiwari, founder at SAFAL Partners, writes this monthly column CrossCurrent in Nepali Times focussing on entrepreneurship, management, public policies and development as if Nepalis mattered.