tundal45@github:~

Kathmandu as a startup hub for Nepal - The possibilities and the obstacles

Recently, I came across Socialect, a tech startup that has taken bootstrapping to the next level by moving its operations to Kathmandu, Nepal. You can think of Socialect as CitySearch where users enjoy the power to update the contents. And for that extra bit of coolness, everything is geotagged. Oh, and once you find what you want, you can then send the info to your mobile phone. It’s this kind of well thought out design and features that has already got some people talking.

Actually, I need to step back. I would not have been introduced to Socialect if it was not for Freddie Benjamin who came across the site and loved it so much that he could not stop tweeting about it. When I checked out the site, I too was impressed with the features. Sure the site lacks in data but that is the case with any startup, especially one like socialect that depends on the userbase to generate content.

However, that was not what kept my attention on the site. What I found interesting was the post by Akshay Sthapit, the CTO for Socialect. In his post, he explains the reasons why he chose Kathmandu as the operating hub. He further elaborates why he thinks Kathmandu has what it takes to be a great place for tech startups. His reasoning is that if you are anywhere in the United States, the living expenses are going to be much higher than that in Nepal. So Kathmandu, as a major city in Nepal with all the resources that one may need, can be a great place to make the limited capital a founder of a startup has and make it stretch much further.

Of course, this option is much more suitable for someone who is familiar with that part of the world so this solution may not work for everyone. However, his post was geared for other Nepalese programmers and entrepreneurs like himself who would like to enjoy the lifestyle one enjoys in Nepal while still having access to opportunities that the world has to offer.

This was very interesting for me as I often think about how I can pave a path back to Nepal in the future. However, unlike Sthapit, I get easily discouraged by the adversities that one has to reconcile in Nepal in addition to the ones startups everywhere face. I discuss these adversities below.

12 Hour Power Cuts: While Nepal is second only to Brazil in its potential for generating Hydro Electric Power, lack of proper infrastructure, leadership, and plethora of other factors mean that there is only enough electricity to power the capital for half a day everyday.
Political Instability: All you have to do is search #nepalcrisis on Twitter and you will see the live outcry from Nepalese all over the world describing their frustration over how the country can never dig itself out of the political stalemate. Political turmoil has been an issue for Nepal since People’s movement for Democracy back in 1990 and the situation continues to worsen as the country struggles to find proper leadership focuses on helping the nation and its citizens rather than constantly fight among each other for power (not to mention their cut of corruption money).
Lack of Talent Pool: With majority of the nation’s youth already in or looking to move to the United States, Australia, the United Kingdom and other western nations for better opportunities, finding (and retaining) talented individuals has been a problem for companies in Nepal. I interned at Mercantile Communications in 2004 and the Manager of the e-Commerce department told me then that the company stopped hiring engineers and started hiring people who completed some programming course for most of their basic programming needs as most of the engineers they hired would leave the company within 6 months for academic or professional opportunities outside Nepal. Founders of other established businesses that I have had the opportunity to interact with have also shared similar frustrations.
Extortion Racket: It is not unusual for people representing different groups, especially groups related to the Maoists but not limited to them, to come to your home or the place of your business and demand that you “donate” to their organization. There is absolutely nothing that one can do in such a situation but to meet their demands unless the person is willing to face the consequences. There are also some cases where these groups will force you to hire/retain an employee whose only qualification is his connections with the group.
Inefficient/Slow Government Agencies: People who think that the government agencies in the United States respond slowly are in for a treat if they ever have to deal with government officials from Nepal. While the office hours are from 9:00 AM to 5:00 PM, work does not begin until 11:00 AM (sometimes even later) and very rarely continues after 3:00 PM. It is not unusual that you have to provide “additional incentive” to the government official looking at your file/request. Furthermore, it is not at all surprising that you are sent on a wild goose chase to get one simple signature. One has to be really patient, thick skinned and prepared to succumb to any demand to be able to get any stuff done with the government agencies.

Sthapit is aware of these issues and talks about them in his post. However, the only issue that he addresses is that of the power cuts (He notes that the cost of a backup generator or battery to power your developer machine is still much lower than the living costs in the US). As per the server that hosts your awesome application, he mentions plethora of cloud computing services to hint that startups have the option to use these cloud using services from one of the many companies that are based around the world where persistent power supply is not a luxury.

Freddie, in his post, does a good job in shedding some light on the talent pool aspect. He suggests that there is talent in Nepal but what is lacking are incentives for most people to truly express themselves and bring out their full potential. He thinks, and I agree, that given proper incentives and stake in the success of the company, there still is a good talent pool available in Nepal. The only hurdle is to make sure that they are given enough incentive so that they do not need to look for “better” options outside of Nepal.

The big issue here, that niether Sthapit nor Freddie address, is that the political turmoil, uncertainty and complete lack of security (financial as well as personal) within the country are a huge factor that make people want to leave. As Sthapit points out, getting oneself out of the herd mentality is crucial. This is not just true for the founders to see the hidden potential but also for the employees to understand what their future could hold for them if they ride out the storm.

So what do I think? I think that the point Sthapit makes about low living cost is an excellent one and something that I had not thought of until I read his post. It is clear that Kathmandu is a great place if you are thinking purely in terms of cutting costs. Don’t get me wrong. Neither me nor Sthapit are under the illusion that Kathmandu is replacing Silicon Valley. However, Sthapit points out that the city has all the makings of a good hub for LILOs. Power cuts are also not that big of a deal with proper backup power sources. In fact, Sthapit raises an interesting point about how power cuts makes him more aware of his consumption habits. Freddie’s two cents on giving employees proper incentives and the opportunity to express themselves by giving them an environment where they can get their creative juices flowing is a great solution to tap into the talent pool currently stuck in dead end jobs. Based on my conversation with Sthapit, I think there is very little need to work with the government agencies. Therefore, their slowness becomes irrelevant for the most part.

However, we are still left with two big problems: Political Instability and Extortion Racket. The very idea that anyone can come to me and make ridiculous demand and I have to comply, irrespective of how ridiculous the demands may be, is something that I personally cannot look past. There is no guarantee that the result of your hard work has to be shared with people who had nothing to do with your success. Add to that the uncertainty that violence can erupt any second and the nation could go back to civil war because some politician was not too happy about his needs not being met.

I certainly admire the optimism that Sthapit, Freddie and others who responded to the original post on Socialect demonstrate and I really hope that the situation gets better in Nepal, not just within the context of tech startups but as a whole for the country and its citizens. However, with the current state of the nation, it will take someone who is as daring as Sthapit to ignore all the obstacles that lay around him. I wish him and all the entrepreneurs who share his vision and optimism all the best. May their vision and leadership build the much needed foundation that will help Nepal survive the current storm.

UPDATE 1: I want to be clear in regards to my statement about this being more relevant to Nepalese entrepreneurs/programmers. I am not saying this option is limited to Nepalese. Sthapit, in a discussion after the first draft of this post, was quick to point out that there is a Canadian startup that is based in Kathmandu that is doing very well despite the poor global economic outlook because they were able to cut costs by moving operations to Nepal. My point with that was that it is much easier for someone who already is familiar of how everything works in Nepal as opposed to someone from a developed part of the world whose expectations might be a lot different than those of us. However, Sthapit was also able to inform me that it is not as difficult for someone unfamiliar to the region and cites the story of the CEO of the Canadian startup who came to Nepal only 9 months ago and have managed to do just fine with only few minor difficulties.

UPDATE 2: As I was migrating this post to my current Jekyll powered & GitHub hosted blog, I noticed that a lot of links were not active. The reason is that Socialect seems to no longer be running but don’t feel bad for Akshay because he has been crushing it as an entrepreneur with multiple ventures most notably of them being Harilo, a site that gives access to products from the US to folks in Nepal.