ILLUSTRATION: KATMANDU JOURNAL
CONSIDER WHAT built Nepal’s $1bn IT export industry. CloudFactory, which turned Kathmandu into a global data-labelling hub, was backed by a combination of development finance institution (DFI) capital and diaspora networks.. Fusemachines, the AI services company founded by Cornell-trained Sameer Maskey, raised from Dolma Impact Fund and built itself into a landmark enterprise, culminating in a historic NASDAQ listing in 2025. Foodmandu, the country’s most funded consumer tech startup, has been through five rounds from True North Associates, Team Ventures, Dolma and Himalayan Capital. WorldLink, which wired much of Kathmandu’s internet, built up organically before eventually attracting institutional equity.
These are Nepal’s tech success stories, and they share a common feature: almost none of them raised money from a Nepali investor in the way a Silicon Valley startup raises money from a Sand Hill Road VC. Most of the capital came from one fund (Dolma Impact Fund), from one category of international institution (development finance) or from the kind of patient family-connected capital that doesn’t really have a name.
Lamina Labs, the first all-Nepali startup ever funded by Y Combinator, got there in June with no local institutional support at all. The two co-founders met at MIT, built in San Francisco, raised $3m from American investors in a Demo Day room for their AI tool Simi, and declined other investors’ money because demand was strong enough. Nothing about that process touched Nepal’s PE/VC ecosystem. Whether it should have is a separate question. Whether it could have is a more honest one.
Nepal’s formal venture capital sector is younger than most realise and more active than most outsiders assume. Business Oxygen, the first private equity fund, was registered in 2012 with IFC backing. Dolma Impact Fund came in 2014, founded by British investor Tim Gocher, who deserves most of the credit for demonstrating to development finance institutions that Nepal was a viable investment destination at all.
Team Ventures and True North Associates followed in 2016. SEBON’s Specialized Investment Fund (SIF) regulations, introduced in 2019, gave the sector a proper legal home for the first time. The Securities Board has since issued SIF fund manager licences to nearly a dozen firms. Over 100 companies have received some form of PE/VC financing. Nepal Private Equity Association data put total investment at $66m as of 2022. By any measure, something real has been built.
What has not been built is the middle layer. Government startup schemes provide up to Rs2.5m per company—enough to buy equipment, not to build a product. Safal Partners, a seed fund, operates in the Rs1-5m range and describes itself, accurately, as a feeder for the larger funds. Dolma’s minimum ticket size starts at around Rs100m. That funding chasm is where most of Nepal’s technology companies actually live in their early years: too large for seed funding, too small and too risky for the capital available at the next level. A big funding gap exists. The sector desperately needs an SME-focused fund covering that middle range yet nobody has built one at scale.
The reasons are well-known to anyone who has watched frontier market VC ecosystems struggle. The tax framework is hostile in a way: Nepal’s PE/VC funds don’t benefit from pass-through tax treatment, meaning investment returns can be taxed twice—once at the fund level and again at the investor level—rather than flowing directly to limited partners as in most functioning VC markets.
Every foreign investment into a fund needs separate approval from the Department of Industry, the NRB and the Office of the Company Registrar: three agencies, each capable of introducing months of delay.
Team Ventures has noted publicly that business opportunities have moved on before capital could be deployed. The exit landscape is lamentable: the stock market is dominated by financial institutions and hydropower companies, making an IPO of a technology company into a listing on a market that doesn’t know how to price one. Secondary sales between PE/VC funds need SEBON approval for unlisted shares, adding another layer. The upshot is a capital cycle that is too slow and too uncertain for the kind of investors who fund technology at scale.
The state’s latest remedy introduces fresh contradictions. The newly authenticated Alternative Development Finance Mobilization Act, 2026, establishes a massive Rs100bn fund seeded by government money, the Employees Provident Fund and insurance companies. However, the legislation explicitly mandates a minimum project threshold of Rs1bn and bars projects unable to offer traditional guarantees. Rather than filling the critical Rs5-100m gap, this government-backed capital is legally engineered to chase the same massive, safe infrastructure assets that commercial lenders already fund. Genuinely risky, early-stage tech bets are left out in the cold. A fund run by the EPF and conservative insurance firms carries a fiduciary mandate that just does not extend to writing cheques for three-year-old software startups with zero physical collateral.
Nepal’s tech momentum is, for now, real. A billion dollars in annual IT exports, 100,000 sector employees, clusters in Australian mortgage processing and US healthcare analytics, a YC-backed startup: these are commendable achievements. They were built primarily by talented people working around the system rather than through it.
The question of whether sustaining the next phase, and scaling from $1bn towards anything approaching the government’s ambitious long-term cumulative targets requires closing the VC gap or just hoping the workarounds keep working, is one the industry and the government are answering differently. The industry says the gap is the problem. The government has enacted a fund that looks right over it. The startups, as usual, are not waiting. ■
