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Over a decade ago, I resolved to start the first international private equity and impact fund dedicated to Nepal — Dolma Impact Fund. I took advice from friends in India where such funds, and private equity in general, were well established. But Nepal, a country of 30 million people sandwiched between India and China, was almost completely overlooked. In those days, it was rare for Nepalese companies to receive any foreign direct investment, let alone institutional private equity or impact capital. 

I soon realized that I was underprepared for the challenges introduced by cultural, regulatory and awareness gaps in such an undeveloped investing market. Even though I had witnessed the vast economic divides in the world firsthand, I didn’t realize how much patience I would need to embrace, and how much unlearning and relearning I would need to practice, in order to serve this market effectively.

Below, I outline what my private equity investment journey in Nepal thus far has taught me; why I believe that international financing vehicles are a key way for frontier markets to break the cycle of unsustainable business practices; and why short-term hurdles — whether they involve fundraising, regulatory acceptance or public awareness — should not be allowed to cloud investors’ longer-term vision. 

The Challenges of Bringing Private Equity Investing to a Frontier Market 

I launched Dolma Impact Fund I in 2011, along with its fund manager Dolma Fund Management, achieving its first close in 2014. Our mission for Nepal was apparent, even though our path to it was not. I had formed a small team of Nepali professionals, all of whom had gained work experience and education abroad but wanted to move home. I’m delighted to say that almost all of those original team members are now executives, with two becoming partners. 

We knew we wanted to achieve risk-adjusted financial returns with meaningful social impact. However, this goal presented challenges from the start, as the country’s lack of prior experience in private equity investing required us to do some heavy lifting in stakeholder education. For instance: 

• It was difficult for potential investors to buy into the notion of risk-adjusted returns in an inevitably high-risk market like Nepal, where something like this had never been done before. 
• The pool of potential portfolio companies were unprepared for foreign investments, corporate governance and ESG, and unaware of how a private equity fund worked. 
• The government didn’t understand private equity structures and risk-taking investments, and didn’t know how best to apply regulation.

Additionally, we had to address the challenge that businesses in frontier markets often find it easier to depend on grants and donor funds, rather than accepting growth-stage investments in exchange for equity. The broader impacts of growth capital are not immediately apparent to entrepreneurs in these markets, such as the number of jobs created, the number of people who no longer have to leave their countries to seek employment elsewhere, and the ability of diverse community segments to partake in new, exciting opportunities. 

When there’s no glass, it can neither be half full nor half empty. So we invented a glass where there had previously been none, and started filling it — one viable investment opportunity at a time. Our first area of focus involved actively educating our stakeholders. So we engaged in a lot of interactions with key leaders and decision-makers to help them envision an empowered Nepal with sustainable, private sector-led opportunities. Similarly, we reasoned with the government to change some policies that would have prevented us from entering. 

Setting Realistic Investor Expectations

In a frontier market like Nepal, there are few success stories that highlight the benefits of private capital for both local entrepreneurs and international investors. As a result, both running a local business and investing in one seem riskier than they actually are. If we look across the border to India, we can see how the pull of private sector success, backed by increasing amounts of international and local private equity, changed this calculus. Businesses there began to recognize that they had a reasonable chance of success if they played by the rules (whether imposed by regulators or investors). To create a similar dynamic in Nepal, we saw that we needed to build international investor confidence by addressing perceived risks that seem larger when seen from abroad than they actually are when assessed on the ground.

To tackle this, we found that sharing real-life success stories from our investments was helpful. We started documenting both financial and impact results and celebrating our small and big wins to inspire action at a larger scale. For example, when we shared that Dolma (now with a second fund and over US $100 million under management) has created over 11,600 sustainable jobs in Nepal, it showcased the broader societal benefits of investment and helped inspire a change in perception. When our portfolio company, Upaya City Cargo, was named “Best Startup of the Year 2021” in a local startup award competition, we worked to leverage this publicity to show how the company revolutionized logistics in Nepal, providing essential services to small businesses and creating hundreds of jobs. We’ve also drawn attention to another portfolio company, Fusemachines Inc., which not only contributes to the global AI sector but is now preparing for a NASDAQ listing, illustrating the extraordinary heights that Nepali entrepreneurs can achieve with financial and strategic support. Such achievements are covered in local and international media, and we have highlighted them to our investors, investees and government stakeholders to showcase this success.

As we’ve continued these efforts over the years, we have seen the perception of sustainable business growth opportunities in Nepal slowly but steadily changing among our stakeholders. This, and the observable track record we built with our first fund, made it easier for us to achieve the close of Dolma Impact Fund II in 2021. 

Diversifying Investments and Embracing Risks

A country often hampered by economic distress needs investment approaches that foster confidence, innovation, self-reliance and sustainability. We started by investing in renewable energy and healthcare, which both had huge domestic demand and obvious impact benefits. However, we were soon surprised to discover that Nepal has a growing tech sector, including AI companies serving international markets, and domestic-focussed firms in tech-based logistics, food delivery and internet access. In response to this emerging opportunity, we diversified and added tech as a third core sector where we can help create a larger-scale impact in the country. The tech sector, though not part of our original plan, is now by far the largest driver of employment in our portfolio.

Over the past decade, we have invested and committed almost $110 million, the most significant investment in the country from any international private equity fund, strategically investing across our three core sectors: healthcare, technology and renewable energy. Through this funding, we have generated jobs, strengthened the entrepreneur ecosystem and empowered communities. We have also created a diverse portfolio with investments that range from renewable energy plants that create steady but capped cash flows, to tech investments that generate both higher growth, and greater risk. This is borne out by our tech exits, which have yielded both high returns, and a loss. 

Simultaneously, we have focused on fostering a risk-tolerant culture — one where we have demonstrated through our actions that it’s okay to fail. We’ve advocated risk-taking as a natural part of entrepreneurship and investments. We have also encouraged our investors to take a long-term perspective on these investments. Since quick returns are not realistic in frontier markets, we’ve chosen investments with the potential for longer-term financial, social and environmental impact.

Leveraging Investment to Advance Global Climate Goals

The entire world is grappling with climate risks. Yet Least Developed Countries like Nepal have been bearing the brunt of these impacts. Today, Nepal ranks among the most climate-affected countries globally, with the rapidly melting Himalayan glaciers threatening not just Nepal, but at least 800 million people in bordering Indian states and Bangladesh. Alongside these risks, many Nepalese communities still lack reliable access to electricity. 

To address these interrelated challenges, we have invested in clean energy generation through solar and run-of-river hydropower. Our renewable energy portfolio of 160 MW has helped us to provide electricity to over 1.8 million households while contributing to climate change mitigation goals. We financed the first on-grid private sector solar project in Nepal, and are the first international investors to finance renewable energy companies that are now listed on the Nepal Stock Exchange. Our success in this sector, combined with the government’s agreement to export up to 10,000 MW of power to India, has led us to launch our third fund — Dolma Climate Fund — focused on scaling renewable energy generation in Nepal.

These energy projects have empowered local communities by creating jobs and fostering economic development. Through similar projects, Nepal can help demonstrate the overall impact of sustainable investments, inspiring new approaches in other developing countries.

What We’ve Learned from Investing in Nepal

Investing in Nepal has taught us invaluable lessons about the importance of patience, the necessity of taking risks and the need to learn from failure. In the private equity and venture capital world, every investment is not expected to be successful — and indeed, our fund has faced its share of failures. Yet each setback has informed our strategy and strengthened our resolve.

Our experience has shown us that Nepal is a land of opportunity. While it may present unique challenges, it also offers unmatched potential due to its talent, natural resources and innate resilience — all key ingredients for powerful growth and impact. Based on the lessons my team and I have learned thus far, I encourage investors to explore Nepal and other frontier markets. You may find a surprising number of opportunities hidden in the world’s remotest and most under-resourced communities. 

Tim Gocher is Founder and CEO of Dolma Fund Management.

Photo courtesy of Rob Goodier / Engineering for Change.