Things to consider while looking for investment in Nepal

Investors these days are very specific about what they look in investees and many a time than not, the investees understand and fulfill the criteria. It is, however, important for investees to be aware about the market in depth while looking for investors, because the relationship of the investors and the investee is two-way and long-term.

For this edition of NEXT Venture Corp’s blog, NEXT is in conversation with Ashish Shrestha,  the Director of Seed Investments, who talks about the factors startups should consider while looking for investment in Nepal. Seed Investment, an investment management company, creates an equity bank by bringing investors together, and helps in balancing risk and returns of such investors. The investors mainly invest in three types of structured portfolio: infrastructure, equity and ventures. Today, the company has collected around NPR 400 million which is being disbursed through 3 Special Purpose Vehicles (SPVs)–SeedInfra, SeedEquity, and SeedEngery.

 Have a clear idea about your requirements

 The types of investments that may be suitable for different companies largely depend on their requirements and growth timeline. In Nepal, several startups depend on family and friends for initial seed funds. While several startups have started using the services of accelerators and incubators, they are still seen as a new phenomenon here and their roles are yet to be fully assessed. As a company moves from the startup phase to a  growth-stage business, its requirements also change. They start looking for expansion capital and equity investments. It is important for both startups and growth-stage businesses to be certain of their requirements, which to a great extent, will define the potential investor’s nature.

 Understand the investor’s nature

 In order to better assess the investor’s priorities and expectations, companies need to have a clear idea of whether the investor wants to lead or just follow the business proceedings once the investment is made and whether they are committed and serious about the investment. It may be difficult to exactly predict their behavior, but it is important to know how the investor’s understanding of the business or the sector is. Businesses also have to be wary of overly excited investors who agree to jump on the bandwagon based on a 5 or 10 minutes presentation or pitch. Such investors might not have understood the business fully or may have ulterior motives. Any investor who does not clearly spell out their reasons for investment, and their expectations from the initial years of investment could bring trouble in future.