PHOTO:HASEEB JAMIL/UNSPLASH
TWENTY YEARS ago Romania was a place where Western firms went to hire cheap coders, rather than to hunt for the next tech unicorn. Its engineers were good, its startups few. Venture-capital deals barely registered. Today Bucharest boasts three unicorns; a clutch of active domestic funds; and annual VC investment nearly a hundred times larger than a decade ago. The transformation has been stunning, but it did not happen by accident. For Nepal, which dreams of its own startup revolution, the Romanian example holds a hard lesson: building an ecosystem is not the same as building an economy that keeps value at home.
Romania’s success rests on four pillars. First, public money—from the EU and development finance institutions (DFIs)—provided the patient capital that private investors would not. Programmes like JEREMIE backed first-time fund managers, giving them the track record to attract follow-on money. Second, a single company, UiPath, changed everything. After a seed investment from a DFI-backed fund, the robotic-process-automation firm grew into a $36bn giant, proving that a Romanian startup could conquer the world. Third, a deep pool of technical talent, forged in the outsourcing boom of the 2000s, gave founders the skills to build real products. Fourth, diaspora networks—angel groups and crowdfunding platforms—bridged the gap between Silicon Valley experience and local ambition.
None of these elements exists in isolation. They reinforced each other: UiPath’s success drew international attention, which made it easier for later startups to raise money; DFI credibility brought co-investors; returning diaspora founders brought know-how. The result was a virtuous circle. Venture investment climbed from an average of $11m a year in 2016-20 to $84m in 2021-24. New business registrations nearly doubled. The enterprise value of the ecosystem reached €19bn.
Now look at Nepal. The country has pieces of the puzzle. It produces capable engineers—more than 17,000 digital-sector graduates a year. A growing venture-capital industry deployed $64m in 2024, a record. A startup policy exists. The diaspora is large and increasingly wealthy.
Yet the outcome could not be more different. Nepal’s most celebrated tech success, Fusemachines, listed on NASDAQ last October. The founder is Nepali, the engineering team mostly based in Kathmandu. But the company is incorporated in America. The equity, the value, the tax base: those belong to Delaware. Nepal supplied the labour; Delaware took the upside.
That is the logical endpoint of a system where staying at home makes no financial sense. Nepal receives almost no foreign direct investment—just 0.12% of GDP, a fraction of Cambodia’s 12% or Vietnam’s 6-8%. The investment climate is forbidding: governments come and go (27 administrations in 30 years), courts move at glacial speed, labour laws make firing impossible, and contracts are worth less than the paper they are written on. For a foreign firm, the calculation is brutal: a market of 30m poor people, endless red tape and no predictability. For a Nepali founder, the rational choice is to incorporate in Singapore or America the moment the business achieves scale.
The government has noticed that IT service exports have grown to perhaps $1bn, and drawn the wrong conclusion. Its response has been to offer tax breaks for service exports: a 75% waiver on income from IT services, a flat 5% rate for exporting developers. That makes labour arbitrage more profitable but it does nothing to encourage product companies. It entrenches a model where Nepalis write code for foreign clients, the intellectual property stays abroad and the brand never becomes Nepali. Making outsourcing more profitable produces more outsourcing, and not a Stripe or a Spotify.
The Romanian comparison exposes what is missing. Nepal has no UiPath—no homegrown champion that proves the model and attracts a flood of international attention. That is partly because the exit pathways are blocked. Of 137 private-equity deals since 2012, only 19 have produced exits. The stockmarket is slim and illiquid. Big domestic buyers are scarce. Selling to another fund or back to the promoter are the only real options. Investors who cannot cash out will stop putting money in.
DFIs have stepped into the breach, providing patient capital for hydropower, banks as well as internet providers. Their presence is welcome but they cannot substitute for a functioning market. They are capital with a conscience: willing to tolerate dysfunction but not to fix it. The real problem is bigger. Nepalis themselves have voted with their rupees. Every year families spend more on foreign education—over $800m a year—than the entire accumulated stock of foreign direct investment in the country. That money, mostly from remittances, buys plane tickets and university tuition in Australia, Britain and Canada. It does not buy factories, hotels or food-processing plants in the Terai. The human capital follows.
For a young Nepali, the choice between trying to build a business in a country that discourages entrepreneurship and building a life in Melbourne is no choice at all. That is the catastrophe. The country exports its most enterprising people and imports educational services in return. The skills that might have upgraded local industries are applied in foreign hospitals and accounting firms.
So what does Romania tell Nepal? That talent alone is not enough. You need patient public capital to seed the ecosystem. You need a catalytic success story to change perceptions. You need diaspora networks to transfer skills. And you need an investment climate where staying at home is not a fool’s errand. Nepal has the first glimmers of all these things—but the last one is the hardest. ■
