Overview
A startup policy is a set of guidelines and frameworks established by a government to encourage the establishment and development of new companies. It helps governments better govern startups through standardized processes. This fosters an environment where more people are encouraged to start their businesses. The governments can diversify revenue sources and create employment opportunities by investing more in the country’s startups. This is particularly important for developing countries like Nepal, where technological advancement has just started. It has been about a decade since Nepal began taking startups seriously and incorporating some aspects of startups into its annual budget, plans, and policies. Historically, Nepal heavily relied on subsistence industries. The emerging trends to promote and invest in startups will likely help Nepal smoothly transition from traditional economic activities to modern ones. All the countries in the world feel the dire need for the startup policy owing to the current trend.
Start-ups have experienced a positive trend and substantial expansion in recent times. The Global Entrepreneurship Monitor has collected data from 100 nations, revealing that almost 613 million individuals aged 18 to 65 are currently involved in entrepreneurial activities. These countries collectively account for around 90% of the global Gross Domestic Product (GDP) and have a population that represents approximately 73% of the entire world population. A total of 613 million individuals, who are willing to take risks, attempt to establish 396 million enterprises. According to Moya Mason's Worldwide Business Start-ups, there are around 133 million start-ups per year, with a success rate of 33%. Slightly more than one-third of these are newly established enterprises in the technology industry. Annually, there are a total of 1.78 million newly established technology enterprises. According to Forbes, only 0.05% of projects reach the basic fundraising threshold, which falls between the range of 90,000 to 1,00,000 dollars. The United States offers assistance to around 50,000 of these individuals.
Key Aspects of Startup Policy in Nepal?
Nepal's Startup Policy 2080 prioritizes the creation of a conducive atmosphere for emerging enterprises by implementing several key strategies (Nepal Startups Policy, 2080). The government aims to develop a favorable ecosystem by preparing legal, institutional, and infrastructure frameworks. This includes updating current industrial rules and laws, formulating new ones (if needed), and facilitating access to business incubation centers, accelerator programs, resource persons, instructors, and capacity development programs. The policy seeks to increase production and job creation within the country by promoting startup-based entrepreneurship and incorporating regional and international research and best practices. It encourages investment by attracting both national and international funds, including foreign direct investments (FDIs) and investments from Non-Resident Nepalis (NRNs), with amendments to laws to ease their entry into the capital market.
Additionally, the policy promotes collaboration between the three levels of government, academic institutions, and the private sector to support innovative ventures. Financial instruments such as tax subsidies, seed funding, subsidized loans, cash dividends on exports, technical assistance, and financial and non-financial services will be utilized to make startups more competitive. Lastly, the 'Nepal Startup Fund' will be created to offer financial assistance to startup entrepreneurs.
Comparative Analysis of Startup Policies of Nepal, India, and the United States of America (US)
The following comparative analysis of startup policies of the selected countries from around the world delves into the startup policies and initiatives of the United States, India, Nepal, Thailand, and Bangladesh. Each country has its own ways to help startups, like giving grants or creating special funds. They also offer incentives to attract investors and help startups grow. In the United States, there are programs like the SBIR grant.
Nepal has established the Nepal Startup Fund to support entrepreneurial ventures, and India has schemes such as the SISFS, providing financial aid to startups at early stages. Meanwhile, Thailand attracts foreign talent through initiatives like the SMART Visa, and Bangladesh offers tax exemptions to lure investors. These efforts boost innovation, create jobs, and strengthen their economies.
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Variables |
US Startup Policy 2012, 2020 (Revised) |
Indian Startup Policy 2019 |
Nepali Startup Policy 2023 |
Thailand Startup Policy |
Bangladesh Startup Policy |
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Funding Initiative |
The Small Business Innovation Research (SBIR) grant program was launched to encourage small businesses and startups in the United States to collaborate with the country’s research and development (R&D), which can benefit government bodies and federal agencies. The Economic Development Administration (EDA) is part of the US Department of Commerce and offers grants to startups and SMEs via its Build to Scale (B2S) program. |
Startup India Seed Fund Scheme (SISFS) aims to provide startups with financial assistance at early stages, such as proof of concept, prototyping, product trials, market-entry, and commercialization. |
A separate fund named ‘Nepal Startup Fund’ will be initiated to support the startup entrepreneurs. |
The government has allocated funds to support coworking spaces at public universities and other government properties. Additionally, research grants and competition prizes provide capital for the pre-seed stage. |
Bangladesh's government supports innovation through seed funds, focusing on youth who lack access to private investors. Initiatives like 'Shoto Borshe Shoto Asha' (100 Dreams for a Century) fund and a micro-grant student competition called Bangabandhu Innovation Grant (BIG) are particularly popular among young people, nurturing their entrepreneurial aspirations. |
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Financial Instruments |
In the US, several financing models promote startups, including bootstrapping, angel investment, venture capital, crowdfunding, initial public offering, incubator and accelerator, and debt financing. |
The Pradhan Mantri Mudra Yojana offers refinancing support and financial services to promote startups. The Multiplier Grants Scheme (MGS) provides matching grants for R&D collaboration between businesses and academic institutions. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) offers credit guarantees up to INR 200 lakhs with no collateral, supporting income-generating activities and technical assistance. To promote global exposure and exports for startups, the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme remits taxes and duties on exports. |
To promote startups, tax subsidies, seed funds, subsidized loans, cash dividends on exports, technical assistance, and financial and non-financial services will be available. |
The SMART Visa for foreign tech talent, a five year income tax exemption, and tax incentives for angel investors were introduced in 2018. Additionally, the Bank of Thailand launched a regulatory sandbox for the fintech industry to experiment with new regulations. |
Startup Bangladesh, the government's flagship venture capital fund, and the iDEA (Innovation Design and Entrepreneurship Academy) project, a coworking incubation hub, strategically fill gaps in areas where private sector engagement is lacking. They provide vital support such as funding, mentorship, education, networking opportunities, legal and IP assistance, and coworking spaces, all aimed at fostering the growth of startups. |
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National and International Investment |
The BEA reports that the sales of Majority-Owned US Foreign Affiliates (MOUSFAs, with more than 50 percent U.S. ownership) in China in 2014 were over USD 341 billion, and the value added was USD 66 billion or 27.9 times the NBS reported USFDI for that year. This is similar to the USD 75 billion reported by the U.S. Bureau of Economic Analysis (BEA) for the USFDI position in China through the same year. |
The government of India has allowed FVCIs to subsidize startups' capital up to 100 percent, regardless of their sector, using the automatic route. |
Direct foreign investment (FDI) and NRN investments will be attracted to promote startups. Related laws will also be amended to facilitate the entry of such startups into the capital market. |
The Board of Investment (BOI) supports Thai and foreign investors with tax and non-tax incentives in key sectors. Recent business reforms have reduced startup times from 29 to six days, boosting Thailand's rank to 21st in the World Bank's Doing Business Report. Thai officials also regularly engage with investors through foreign chambers of commerce. |
Bangladesh offers multiple incentives to attract foreign investment, including tax exemptions for up to 15 years and no import duties for export-oriented sectors. Retained earnings are treated as new investments, and foreign-owned companies can access working capital and long-term financing from local financial institutions. These measures aim to encourage and facilitate national and international investment in the country's economy. |
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Job Creation |
When the Labor Department reports that 200,000 jobs were created in a particular month, for example, there were 4.8 million separations – people either losing or leaving their jobs – and five million new hires or some similar differential. In 2019, 67.9 million separations occurred while 70 million Americans took new jobs, for a net gain of just over two million new jobs. |
The Pradhan Mantri Mudra Yojana creates jobs by offering collateral-free loans up to INR ten lakhs to micro-enterprises, enabling them to start or expand their businesses. This financial support promotes entrepreneurship, leading to increased employment and economic growth. |
Promoting startups through internalizing regional and international studies, research, and good practices will create jobs within the country. |
Thailand produces many tech graduates, but most prefer stable jobs in large companies, limiting startup talent. Since 2016, startups have raised this issue, leading to the introduction of the SMART Visa, which attracts foreign experts and investors. This has helped startups in cleantech, edutech, agritech, and healthtech by filling talent gaps and enabling job creation and business growth. |
In the past decades, Bangladesh has witnessed rapid startup growth in sectors such as fintech, edutech, health, logistics, and e-commerce. The country currently has over 2,500 unique startups, with over 200 new startups being developed yearly. The Bangladeshi startup ecosystem has generated more than 1.5 million employment opportunities, which has enabled individuals to fight unemployment. |
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Startup Ecosystem |
Components distinguishing the American entrepreneurial ecosystem in promoting startups are world-class universities and research institutions, a robust venture capital landscape, a culture of risk-taking and innovation, and government policies supporting entrepreneurship. |
(ASPIRE) - A Scheme for the Promotion of Innovation, Rural Industries, and Entrepreneurship This initiative was developed to establish a network of technology and incubation centers across India. It aims to promote innovation, address unmet social needs in the agribusiness sector, and accelerate entrepreneurship. |
Update rules, develop infrastructure, and provide access to resources like incubation centers and training programs to support startups. |
(Digital Economy Promotion Agency) DEPA champions startups and focuses primarily on those in the early stages. The Digital Economy Promotion Agency (DEPA) champions early-stage startups and drives the country’s digital transformation. Between 2012 and 2021, the number of startups receiving investments grew more than tenfold, and the value of investments surged from $3 million to $311 million. This growth was accompanied by a significant increase in venture capitalists, angel investors, and corporations investing in Thai startups. |
Between 2013 and 2023, Bangladeshi startups have raised over USD 909 million through 377 deals. From 2014 to 2022, indigenously-grown mentoring programs like the Founder Institute, Toru, TiE Dhaka, GP Accelerator, and Makerlab have popped up in the country’s startup ecosystem. |
Way Forward
In Nepal’s existing startup policy, two aspects of organizational setup stand out: the startup council and the startup board. Both operate under separate jurisdictions. However, if the local government can manage the board's responsibilities, merging it into the local government could streamline operations. The local government should be the first point of contact for entrepreneurs envisioning startups. Although the board may not have significant authority, the local government will retain its independence and ensure effective support for startups. Also, implementing the Nepal Startup Council policy poses significant challenges due to the need for coordination among diverse stakeholders, including government officials, private sector representatives, and academia.
To effectively coordinate the Nepal Startup Council, efficient communication methods could be utilized, frequent meetings could be held, transparency could be ensured, and a disincentivizing mechanism could be implemented if the concerned authorities do not make a significant effort. To foster the growth of entrepreneurs in Nepal, Nepal can adopt comparable strategies already implemented in other countries. The strategies could be to provide early-stage financial assistance, including proof of concept, prototyping, product trials, market entrance, and commercialization, similar to India, and to provide funding for research grants and competition prizes, as Thailand does. Like other nations, offering credit guarantees without collateral and supporting exports by remitting taxes can attract more investment. By obtaining working capital and long-term financing from local financial institutions, Nepal can attract new investments and foreign-owned companies. By providing collateral-free loans to microenterprises, it is possible to generate employment opportunities, enabling them to establish or expand their enterprises. In addition to addressing unmet social requirements in the agribusiness sector, Nepal can also concentrate on improving education and research institutions and government policies that support entrepreneurship to establish a more robust startup ecosystem.
Sagun Baba Shrestha
Research Officer - Center for Research and Development, King‘s College Nepal
