ILLUSTRATION: KATMANDU JOURNAL
SOMEWHERE IN Kathmandu right now, a WhatsApp group is filling up with messages about shares in a company nobody has formally approved. A merchant banker or a well-connected broker is distributing a one-page summary and a bank account number. The shares are priced at Rs1,500 to Rs2,500 a unit — fifteen to twenty-five times face value — with a verbal promise that once the company lists on NEPSE, the price will be even higher. This is Nepal’s pre-IPO market, which is entirely unregulated, raising hundreds of millions of rupees from retail investors and growing because the formal capital market has stopped working.
Over the past year SEBON approved only one IPO — Guardian Microinsurance Company — while 80 companies or so waited for approval. The backlog built during a period when SEBON was without a permanent chairman for nearly eleven months. With the front door of the capital market effectively closed, companies found a side door: an unregulated pre-IPO market expanded dramatically, with companies raising hundreds of millions of rupees from private investors before receiving any SEBON approval. The process worked through merchant banks, WhatsApp messages, direct SMS and personal referral networks. The regulatory bottleneck meant to protect investors from unscrupulous promoters has instead created a parallel market with no protection at all. This is Nepal’s capital market logic in practice.
An estimated 100-plus companies have received PE/VC funding in Nepal, including Foodmandu, Sastodeal, Fusemachines, CloudFactory, SmartPani and others. That number sounds like a functioning ecosystem. The exit data tells another reality.
Business Oxygen, Nepal’s first private equity fund, exited from Godawari International, Le Sherpa and Shanti Engineering — solid businesses, but none of them technology companies in the venture-backed sense. Tim Gocher’s Dolma Impact Fund made Nepal’s first technology-adjacent exit in 2019 with a partial sale of its CloudFactory stake. Team Ventures sold part of its Foodmandu holding to Himalayan Capital in 2023 at a 2x return. That is, effectively, the complete list of substantial VC exits from Nepal’s technology sector. Two significant transactions across a decade of investing.
The reason exits are so rare is not investors’ unwillingness to try. It is the architecture that surrounds them. Secondary sales of shares in unlisted companies require SEBON approval, with each method carrying different regulatory and tax implications. A major problem is that SIF funds are not tax pass-through — the fund itself is taxed on investment income, unlike international best practices where only investors are taxed. A fund that invests in year three of its ten-year term and wants to sell in year eight must obtain regulatory approval for a secondary transaction, and if the secondary buyer is foreign, must also clear the Department of Industry, the Nepal Rastra Bank and the Office of the Company Registrar. International acquirers who have looked at Nepali tech companies have mostly concluded that the regulatory timeline — 12 to 18 months from term sheet to close in the best cases — makes Nepal acquisitions unattractive relative to comparable opportunities in India or Southeast Asia.
Of the little fewer than 300 companies now listed on NEPSE, banks, financial institutions and insurance companies contribute some 59% of market capitalisation. The public market that a tech company would theoretically list on is one that has no experience pricing growth-stage companies on forward revenue multiples, where the dominant investor base is retail Nepalis trained to evaluate banks on book value and dividend yield, and where the lock-in period for post-IPO shares has recently been extended from one year to two.
The IPO eligibility requirements themselves are a barrier: companies must show net profit in at least three of the five preceding fiscal years. Most genuinely innovative, growth-stage technology companies run losses for their first several years by design, reinvesting revenue into user acquisition and product development. They are ineligible for NEPSE listing under current rules.
SEBON introduced Securities Issuance and Trading Regulations for SMEs in 2025, creating a dedicated platform for companies with paid-up capital up to Rs250m. Proposed policies for 2025-26 aim to ease exit mechanisms for SIF funds, allowing more efficient divestment after the investment term ends, creating a clearer pre-IPO to IPO lifecycle. These are welcome. They are also, at this stage, proposals. The SEBON chairman who announced a streamlined framework in April 2026 resigned within days of the announcement. The implementation of the new framework rests with his successor.
The funding gap at entry mirrors the exit gap at the far end. Government seed programmes provide up to Rs2.5m. Safal Partners invests between Rs1m and Rs5m. Dolma Impact Fund’s minimum ticket starts at Rs100m. Between Rs5m and Rs100m — the range where most early-stage tech startups actually live — there is almost no institutional capital available. Founders either bootstrap, raise from friends and family or enter the unregulated pre-IPO market. The upshot is an ecosystem that is growing despite its capital market, not through it. Fusemachines listed on NASDAQ, incorporated in the United States. Lamina Labs raised from Y Combinator in San Francisco. The exits that Nepal’s startup community celebrates most are the ones that happened somewhere else. That will persist absent the regulatory apparatus catching up with the capital formation it was meant to support. ■
