NEPAL’S VENTURE scene is hardly booming yet it lives. Capital moves here much like its traffic: slow and frequently stalled by a bureaucratic cow in the road. In 2023 private equity and venture capital (PEVC) investments totalled a meagre $35m. That amounts to less than a week’s burn rate for a well-funded Indian fintech or a reckless evening at a crypto conference. Yet for Nepal this gradual flow carries weight. It signals genuine movement in a financial ecosystem that until recently existed more in theory than in practice.
From 2012 to 2023 total PEVC deployment has only just crossed $100m. Sixteen funds tried their luck; half disappeared. The eight that survived executed 96 deals over eleven years, scarcely nine a year. If India’s startup sector resembles a Bollywood musical, Nepal’s is closer to a minimalist Buddhist chant: sparse, deliberate and oddly calming. The pace may seem glacial, yet it mirrors a market still being assembled, one spreadsheet at a time.
Much delay stems from red tape. Regulation is still taking form. The Securities Board of Nepal (SEBON), which oversees the sector, faces the unenviable task of building the runway as the plane taxis. Licensing moves slowly; due diligence proceeds step by step; approvals arrive in fits and starts. One fund, Global Equity Fund, spent years easing regulators into comfort before deploying a single rupee. For founders this feels less like supervision and more like an extended interrogation. Mistrust breeds inertia.
Even so, 2023 brought signs of headway. About 47% of deployed capital came from foreign development finance institutions—multilateral donors and impact investors with extended horizons and modest return targets. Domestic funds contributed nearly 40%. The rest came from SEBON’s newly licensed Strategic Investment Funds (SIFs), which supplied a further 13.5%. A dozen SIF managers have licences, though only a third have put money to work (based on 2023 data). The remainder sit in what might politely be termed procedural limbo.
The capital is cautious yet brave. Nearly three-quarters of deals take the form of equity. Debt, in a country where enforcement is hazy and collateral scarce, attracts less enthusiasm. Blended finance and quasi-equity structures—common elsewhere—are still unusual. Investors therefore assume substantial risk, backing firms that rarely qualify for bank loans but, with luck, may reward patience.
Where does the money land? Largely in hydroelectricity and hardware. Renewable energy absorbed nearly 23% of 2023’s PEVC investment. Geography helps—Nepal’s steep terrain suits hydro—and geopolitics adds appeal, with investors wagering on electricity exports to India and other neighbours. Clean energy has drawn about 40% of cumulative PEVC funds since 2012. In global finance a $1m hydro deal barely registers. In Nepal it can electrify a valley.
Technology follows. IT firms captured 18% of 2023’s deals and nearly 30% of cumulative investment. Cheques are modest—sometimes under $100,000—yet the significance stands out. Tech is the sector least tethered to terrain. For a young, connected workforce, it promises escape from subsistence and a path to scale. App developers now share café tables with mountaineers and monks.
Other industries nibble at the edges. Transport, agriculture, light manufacturing and hospitality all feature on investment dashboards. Hospitality serves as a proxy bet on tourism and rising domestic affluence. Properties such as the Aloft Kathmandu, an international hotel chain in the capital, signal confidence in a middle class still faint in income data (GNI per capita sits under $1,400) yet visible in spending habits and ambition.
Exits pose the toughest challenge. Since 2019 only 17 have been recorded, mostly through founder buybacks. In Bangladesh or Vietnam such figures would barely merit mention. In Nepal they count as milestones. Four additional exits were projected for 2024, though favoured routes—acquisitions, secondary sales or stockmarket listings—are scarce. The Nepal Stock Exchange is shallow and illiquid. M&A activity is limited. Strategic buyers are few. As one investor joked, the typical exit plan is “waiting for divine intervention”. Another fund manager remarked, “Here even the exits need visas to leave.”
Yet momentum builds. Insiders expected PEVC deployment to edge toward $50m last year, though confirmed figures remain unavailable. A broader investor base is taking root. Local fund managers grow more sophisticated. Entrepreneurs speak fluently about cap tables and term sheets. For all the optimism, fragility persists. SEBON lacked a chairman for much of the year, a reminder that personnel choices can matter as much as policy in a country as poor as Nepal.
Compared with India’s herd of unicorns or Bangladesh’s recent funding surge, Nepal’s ecosystem is embryonic. Gradual development may carry one advantage: insulation. The country has sidestepped the hype cycles and valuation bubbles that singed hotter markets. The result may bring fewer headlines yet sturdier footing.
That steadiness may face a trial soon. A new cohort of founders, raised on Shark Tank clips and Silicon Valley lore, shows less patience than its predecessors. They expect replies within hours rather than months, and payoffs within years rather than decades. Can Nepali institutions match that tempo? Time will answer. ■
