Businesses are hard to predict. There is a saying “God laughs at those who plan the future”. This applies both to life and to businesses, especially the ones that are just starting. Pukar Shah, a returnee from the UK, has recently started a business of planting Aloe Vera in his own ancestral land that was mostly going to waste due to shortage of trusted labourers. He believes that Nepal can improve its status only by making large investments in the agriculture sector. While the rest of the world has reached far away from the time of doing agriculture, 80 per cent of Nepal‘s population still relies on nature for a living.  This is not only a culture but also a big natural advantage to Nepal. Nepal can grow everything that grows in between 8000 m to 60 m above sea level. While the richest country of the world, the US, with its organization USAID is investing in Nepal’s agriculture with projects like FTF (Feed the Future) and Health for Life (H4L), it is an opportunity to respond. Plus, according to Pukar, it is a risk-free business because he already has a line of buyers who want to buy his produce.

Harvard Business School Professor Noam Wasserman has outlined  three Rs for the people wanting to start up their own business. In his article, Wasserman lists them as “Three Pitfalls Startup Founders must avoid”. These are the relationship decisions, roles decisions, and rewards decisions. According to Prof Wasserman, while starting a new business, there’s a strong temptation to make decisions for the short term. But you need to anticipate the long-term challenges. It is very critical to get at least three things right. They are:

•    Co-founders: The natural inclination is to co-find with family or friends. But these relationships can be fraught. Plus you’re more likely to have similar perspectives. Look for partners who bring complementary skills and assets.

•    Roles: Most founders want a C-level title. After all, they were there from the start. But choose roles that reflect the actual work each founder will do, not the fancy title he wants to show off.

•    Rewards: One of the biggest questions for start-ups is how to split the equity ownership. A handshake on 50/50 will not do because almost all new companies will have a major change in strategy or founder involvement. Negotiate an arrangement that can change when the circumstances do.

Pukar, in his startup business, has successfully implemented all these strategies. He happens to follow this idea from his uncle who has been involved in this sector for over 20 years now. Pukar is confident that his uncle’s expertise and his knowledge in proper management of the company will help him succeed in the long run in this sector. Pukar is not obsessed with the CEO title. He has chosen the role of managing the production process and looking after the financials while his uncle handles the marketing department. He had set up an initial agreement of 50 per cent  investment and 50 per cent  returns with his uncle. But according to him, he currently owns only 35 per cent of the return and the overall organization has four shareholders from two in just a matter of a year. He believes that one cannot have a fixed agreement in business; instead, one needs to go with the flow.

 Also, it is very crucial to understand the cash flow before starting a business. More than a third of new businesses fail in the first three years and it’s rarely because of a bad business concept; it’s almost always the result of running out of cash. As well as having working capital to cover early stage losses, it’s imperative that you collect your invoices on the due date. If you don’t, you are providing working capital to your customers and unless you are running a bank, you can’t afford to do this. According to Pukar, if cash is the king for a successful business, it’s the emperor for a start-up.  

For Pukar, there was no problem of having insufficient resources and capital for giving a shape to his idea, but most of us who want to start a business do not have the resources and capital. Not only in Nepal but also in most of the developed countries in the world, there are angel investors. Angels typically invest their own funds, unlike venture capitalists, who manage the pooled money of others in a professionally-managed fund. Angel investments bear extremely high risk and are usually subject to dilution from future investment rounds. As such, they require a very high return on investment. A large percentage of angel investments are lost completely when early stage companies fail. Therefore,, professional angel investors seek investments that have the potential to return at least 10 or more times their original investment within five years through a defined exit strategy such as plans for an initial public offering or an acquisition. The Silicon Valley of the United States of America, also known as the home to many of the world’s largest technology corporations as well as thousands of small startups, was funded by the Angel investors from the beginning. A Harvard report by William R Kerr, Josh Lerner and Antoinette Scholar provides evidence that angel-funded startup companies have historically been less likely to fail than companies that rely on other forms of initial financing.