No Guarantees

(written for Vishwa Sandesh)

A tech startup is high risk behavior. If you had 100,000 dollars to invest, a financial advisor would tell you, put 10% of your money in the no risk zone. It might be money in a checking account, or a savings account. Put 10% of your money in high risk, high gain investments. This is money you could lose, but this is also money that could see wild growth. And then put 90% of your money somewhere in between. US Treasury bonds might give you a 5% annual return, but they are safe. Stocks might give you a 10% annual return, but they are volatile.

Investing in the first round of a successful startup could see your money grow 10,000%, but it is very hard to get in. Chances are you don’t personally know the founder of a tech startup who is just starting out. You simply don’t have that kind of social capital. And it is very hard to figure out if a tech startup is going to be successful or if it is going to go belly up.

And so I offered a hybrid situation to my high school friend Ravindra Sapkota a few months back. He is an Oxford University graduate running the top biotech company in Nepal. He raised half a million pounds out of college to launch his venture. It has had a few successful years in a row and I feel is in a prime position to raise its second round of funding.

Ravindra invested 5,000 dollars as soon as he found out I was launching a tech startup. A week later after sending the money we finally got to talking about what the idea is, what my plans were. He also later brought in one of his professors at 5,000. The professor is hoping to launch a biotech startup and is eager to raise some money for it in the New York market. I have also offered to help Ravindra raise round two money for his biotech startup in the New York market, the money capital of the world.

I made it risk free for them, as to Kundan Gurung who was one year senior to me at high school, and now lives five blocks from me in Woodside. Kundan is also in at 5,000.

The “risk free” deal I offered to them is this.

Should the venture fail, from the day of the failure, I will have 12 months to return this 5K to you, as if it were a personal loan. Should the venture succeed, I will get 5% of the growth this investment might see. So if this 5K becomes a million dollars in five years, I get 5% of that million, namely 50K, and you get the rest.

To them it feels like the worst that can happen is their 5K will not grow. That puts their money in the safe 10% no risk zone. To me it feels like I just signed up to get 50K for free. I am hugely optimistic and confident about my venture.

This instrument I invented is not to say a tech startup is risk free. It is anything but. You take multiple risks on a daily basis. You have to innovate fast. You have to move fast.

A tech startup is super risky. That is precisely why the rewards are super high. No Nepali in New York City has a net worth approaching a hundred million dollars. And you can’t dream of getting there the old economy way. A successful tech startup might be one of the few vehicles to get there.

Launching a successful tech startup also puts you in a good position to raise money for your NGO, your non profit, if you have one, it puts you in a good position to raise money for hydro projects in Nepal, should that hit your fancy.

It takes a lot to be a successful entrepreneur, especially a successful tech entrepreneur. A huge appetite for risk is key. You will almost never have 100% of the information you need. Often times you will only know half of what you need to know. And you still have to call the shots with utmost confidence. You have to have the right instincts, or you have to cultivate them.

You could fail a thousand ways. You could fail every step of the way. You could fail after two years of “success.” The market (the goddess) could kill you three years down the line in one fell swoop and with little to no warning.

I don’t see all that as a downside. That risk factor is part of the excitement. It is reward in its own right.