Thursday, August 28, 2014

One Eye On Nepal

A tech startup launched partly or fully by Nepalis that might manage to raise 100K or 200K from among Nepalis in the first round, also called seed round, or friends and family round, if it does good work positions itself to raise north of a million dollars in its second round from professional investors. But it would be hard, probably impossible, to raise a million dollars from among Nepalis.

There is a flip side to that coin. Say that tech startup does well and ends up with a valuation in the 100 million dollar range in five years. Interested Nepalis either invested in the first round or did not invest at all. Because round two onwards you have to be a licensed investor to invest. You can’t come into rounds two, three or four.

Granted a tech startup is high risk behavior. Bottom line, it could fail. You could lose your money as an investor. But I can’t think of a better vehicle than a tech startup to start tapping into the robust capital markets in this city, the finance capital of the world. And unless you are a successful entrepreneur, you have no moral standing to make any meaningful contribution to economic growth in Nepal. Lecturing goes only so far, you have to be in a position to make meaningful investments. In this era of globalization and the Internet one can hope to make major contributions to Nepal’s economic growth, even if it might be 10,000 miles away.

Let’s say you invest 5K in a tech startup that goes on from a million dollar valuation in round 1 to a 100 million dollar valuation in about five years. Your 5K just grew to half a million dollars. It can be argued that is retirement money. A 500,000 dollar trust fund could generate 50K every year forever. It could be set up that way. As in, your half million stays intact. And you are netting 50K a year forever. 50K a year is not fancy, but it can be if you were to choose to spend all your money in a country like Nepal.

By that token a 10K investment would bring you a million dollars in that startup. A 20K investment would bring you two million dollars. A two million dollar trust fund would bring you 200K every year. That is rich!

What if you invested 5K each into 10 startups and only one of them hit it big? Your 50K still became half a million.

By one count there are 30 millionaire Nepalis in Russia. Shesh Ghale is in Australia. No matter which way you look, Nepalis in America look to be in a bad shape. America should have minted more Nepali millionaires than any place else. But that has not happened because not enough Nepalis in this country have gone into entrepreneurship. I happen to think that is a shame.

In Russia you could have bought factories for cheap when the Soviet Union collapsed. In Australia I guess real estate and education were key. But in the American economy high tech is the way to go. Old economy companies make money but not wild money. The beauty of software is it allows you to cash on your old economy expertise. I believe many software companies like Uber and AirBnB are yet to be born, companies that will target major inefficiencies in the old economy at large scales. Both are multi-billion dollar companies.

Clean energy is another way to get on the cutting edge. Finally Nepal might start making some big moves in a few years. I think there is room to build multinational corporations that do business globally, but also are deeply engaged in Nepal’s hydro sector.

The other day I was at a rooftop party in Manhattan and I came across this guy who had a biotech background who was doing Big Data for some big bank. He was not cashing in on his biotech background, not yet. But just like there are intersections between software and biotech, there necessarily are intersections between clean energy and software.

Risk taking is the top quality entrepreneurs share. Risk taking is more important than smarts, more important than a great work ethic. Sometimes you simply have to jump in and let the chips fall where they may. No risk, no gain.

But to the ablest of entrepreneurs, it probably does not feel like risk taking. To those watching, it might look like risk taking. But the best of entrepreneurs move with the assurance of a sleep walker. Just like I think of New York City as not part of America, but a whole different country altogether, I think entrepreneurs are a whole different species.

Monday, August 25, 2014

Nitish, Bihar, And Development

English: Flag of Janata Dal (United) of India
English: Flag of Janata Dal (United) of India (Photo credit: Wikipedia)
Map of Bihar showing location of Bhimbandh Wil...
Map of Bihar showing location of Bhimbandh Wildlife Sanctuary (Photo credit: Wikipedia)
Lalu Prasad Yadav, at a political meeting in K...
Lalu Prasad Yadav, at a political meeting in Kesariya, Bihar, India. (Photo credit: Wikipedia)
Bihar has seen the emergence of a new alliance with Nitish, Lalu and the Congress coming together. The other of course is the BJP alliance with the likes of Ram Vilas Paswan that swept the recently held national elections.

Right now the two alliances are running neck and neck. That means it will be a close fight next year in Bihar, but it is advantage BJP. Right now Sushil Modi is running ahead. In Bihar it might be 50-50. But in Uttar Pradesh it will be a total sweep by the BJP also at the state level.

Bihar is one place that could give Modi something akin to an opposition. And Modi in Gujrat was known as a man who brooks no opposition. His China model is not only economic, it is also political. He does not like the idea of having much of an opposition. And so he is going to do all he can to put Bihar into Sushil Modi's lap. Sushil Modi is not a bad candidate. He was deputy to Nitish in Bihar's spectacular success story. So he can legitimately take some credit.

If Narendra Modi could sweep Bihar as merely a prime ministerial candidate, imagine what he could do as a performing PM. And I expect him to perform.

Nitish has a tall task before him that has been made tougher by Lalu's mandal-kamandal talk. You can not beat Narendra Modi with that. The way to beat Narendra Modi is with development talk. Laloo was spectacular as Railway Minister, Nitish was the top performing Chief Minister in the country. It is not like they don't have it. But they are not talking development. That is problematic. Right now Nitish is all set to lose the elections next year.

Maybe the real story here is that his break up with the BJP was a bad move. Nitish was the first person to call Narendra Modi a future PM. That was back in 2003, I think. Looks like somewhere along the way he switched his position but has refused to play the role.

He could talk all development all the time and give Narendra Modi a run for the money. But he is not doing it. Puzzles me.

For now Narendra Modi is the man to watch. His political goal seems to be to form BJP governments in enough states that he also ends up with a majority in India’s upper house. His organization people have major plans for the North East and the South. Having a tight grip on the Hindi heartland of Bihar and Uttar Pradesh would go a long way.

All indications are Modi is on his way to giving India growth rates greater than seven per cent. He wants to double the size of the Indian economy by 2020.

Forget Bihar, Modi also has major plans for Nepal. His visit to the country was well appreciated. It felt like he truly wanted a fresh start in a relationship that has always been great but greatly unproductive. If load shedding ends in Nepal within a year or two, you will have Modi to thank for it. He means business.

I still stay curious about Nitish, though. He might have to stop crying hoarse, ke majdoori nahin mili, I did not get my wages. Like Bill Clinton would say, all elections are about the future. The people of Bihar chose to put Modi in Delhi. I am not sure that was a bad choice, economically speaking.

But now Nitish has to make a strong development case for the next five years for Bihar, or make way for Sushil Modi. It is not going to be an easy fight. The two Modis might have to show all tricks up their sleeves to rope in Nitish, once and for all.

The junior Modi is sure determined. Laloo is his usual comic self. Nitish looks a little tired, a little betrayed. He has not taken the latest political debacle too well.

Double digit growth rates are my benchmark, for Modi in Delhi, for the next Chief Minister of Bihar, and for all current and future Prime Ministers of Nepal. Delhi is a tall task, because coordinating all those states across India is no easy task. Patna? Nitish did it year after year. Nepal? Now that is the sad part.

Being in transition does not help. Not having a constitution does not help. There is also the no small matter of not having an obvious leader.