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What is Seed Capital?

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Just how a germinating seed needs water, sunlight and proper nutrients to grow into a beautiful plant, any budding entrepreneur also needs funds to implement his/her startup ideas. This initial investment which helps to cover up the basic operating expenses, research and development expenses etc to grow the business until the product itself starts generating revenue is called Seed capital or Seed funding. Generally, seed capital is considered as the first round of investment until one develop his/her business to a certain level after which he/she can find venture capitalists to invest in them. So, where does the seed capital come from? Some of the easy sources may include :

  1. Friends or Family
  2. Crowd Funding
  3. A seed-stage angel investor
  4. Corporate seed funds for startups
  5. Self – financing
  6. Government subsidized loans and grants

Finding an investor can be a challenging task as your startup is still in conceptual phase. Generally, the banks often ask for collateral against the applied loan. Even more, the interest rates may be high and not every person can afford to take the risk. On the other hand, investors may invest in you and your idea in exchange for certain equity in stake. This means you will be losing your share of full decision making authority over your business in exchange for his contributed amount of capital. However, reaching out for friends and family or using your own savings is always a good idea if you don’t want to get involved in debt. There are also government grants and subsidized loans in recent years that plan to support to aspiring entrepreneurs in the country. So, before you make your decision, make sure to do a good research and weigh all the pros and cons of each source to find one that actually compliments your business model, as it plays a determining role in the future of your business.

The author is a CA student.  If you want to add more information on the given post, please comment below and your comment will be incorporated in the article.


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1 Comment

1 Comment

  1. Sunil adhikari

    September 12, 2019 at 9:58 pm

    Good source of knowledge.in today perspective we all democratic lovers how do u analyze India pm move to buy weapons from Russia when it’s economy shrink and lot of youth might lose job?In this critical situation Indian pm take such a major step in Kashmir n we know we also feel pressure as most of Indian workers start migrating Nepal from poor state? Did this move show democracy only means to have election or worthwhile public government? Nepalese pm take same action trying to build railwaysline to Kathmandu? Is this today demand? Why pm cannot address the path of bimstec business roadways line ? We can easily access goods to Thailand too in cheap price through seaways? So our economic shows no sign of hope unless bimstec proposed some good plan n us insist on Indo Pacific ? Does it reliable for us? Everybody know it’s hard to get access ocean due to bias policy of Indian government?common India be open minded n tell what u gone a loss if Nepalese access good from your ocean?

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Business

Should I Fear Sharing My Business Idea With Others?

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“I have a great business idea, but I am scared to share.  I fear, someone may steal my idea,” he told.

I said to him, “I too have some great business ideas.”  Some of my business ideas are:

  •  Running a travel agency, targeting Indian corporate crowds.  Make a honeymoon package, vacation package, reach out to big Indian companies from Bangalore and Mumbai, etc etc.
  • Running an e-commerce site, purely brand-oriented, targeting upper middle class and upper class.
  • Running a cafe, which is more like entrepreneur friendly and also with library and boutiques.
  • Running a trading company, same like share market but here, will be trading FMG, where consumers make an order and market delivers and we earn by taking brokerage kind of service charge.
  • Running a school, that teaches youths on various practical aspects of life, provides counselling and consultancy… and they can join school at their convenience,

Bla, bla, bla, bla.

And I told him, I am not scared of sharing my business ideas.  “You know why?” I asked him.  “Why?” he asked back.  I told him, “because idea alone is BULLSHIT.”  It’s like opinion, everyone has one.

“Ideas don’t mean shit… Execution is the game”  Gary Vaynerchuk


What is business idea?

Business idea is nothing but an idea that is constructed when you see a problem and figure out a solution and way to make money in this process.

Let me tell you this.

The other day, I was in The Bakery Cafe.  A customer was trying to call waiter and as you may know, waiters in Bakery Cafe are deaf (ya, only deaf people are hired as waiter), no waiter could hear the call.  The customer got so pissed off, that he just left the place.  Then and there, an idea popped up in my head.  How nice it would be if there in the table, it had button to press and light would blink in reception or somewhere appropriate and waiter would know from where the call is coming — something like in Airplane.  I was thinking, “there are so many branches of The Bakery Cafe and proposing the idea and installing the feature in all those branches can be a great idea.”  I thought of then and there.  You see? a business idea was born there itself.  There are billions of humans constantly coming across many problems and just like me, they constantly come up with ideas to solve those problems.

So basically, construction of business idea is very ordinary thing that almost all humans are capable of.  Every mindblowing idea that you think you have, is also an idea of someone, somewhere.  The ideas that I have listed above surely are also ideas of many.

So, here is the answer on, 
“Should I fear sharing my business idea with others?”

I just shared my various business ideas above.  Now, what you gonna do?  You think you can just steal my idea and turn into a business? It’s not that easy.  Idea is nothing but a thought.   Now, that simple thought has to be turned into a working idea, and then comes building a team, and then engineering part, and then comes building a prototype and then comes marketing of the product, etc before you finally make money out of it.  This whole process gonna take if nothing also 2-3 years (provided you have money and needed spirit).

Idea comes and goes.  Most of the people, never work on the idea in first place. Those who do, that too in large number give up in middle of the trial. Barely 1% succeed to take it to money generating mode.  What keeps one to keep pushing until the end is the spirit, is the needed fund, is the needed skills, etc.  It’s easy to steal someone’s idea but it’s no way easy to execute the idea.  Another thing one needs to understand is, no idea remains as it was in conception time.  Idea evolves as you start working on the idea.  Facebook today is quite different than how it was in the initial days.

That’s why, I say every idea is great idea if is worked on.  Instead of fearing to share ideas, I rather say, DO SHARE.   This in fact will help you to have broader perspectives towards your ideas, through input of various minds. You being the father of your idea, you are prone to be optimism biased. By sharing your business idea, you are letting your idea to be refined.

Long thing short, I have hundreds of business ideas, that I truly care and value, and wish to turn into a reality, turn into a tangible thing, that can be touched and shown, and make money from, but I still can’t execute them due to various reasons.  To think, by sharing those ideas, someone may steal and become rich is just a paranoia. Real world does not work that way.  If you find someone working on your idea, probably you found someone that too have come up with your kind of business idea.

So, fear not.  Let your ideas be heard and refined.  Ultimately, it’s your idea, and only you can execute it or somebody who too has similar idea.  End of the day, winner is the one that doesn’t give up, until not crosses the finish line.  As they say perseverance is mother of success.

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Business

Smartphones are very expensive in Nepal – Here’s Why!

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It is no news that the price of smartphones in Nepal is crazy. I mean, yes, we might be used to with expensive prices, but compare those prices to international ones, or even the neighbouring country for that matter, and you’ll know. When you allocate some budget to get a good phone, you check out reviews and stuff. And just when you think you can have the one, you have your heart set on, the price differs – by a lot! And it is, of course, common to accuse retailers here of extracting a large profit, but there are also quite a few reasons why smartphones are so expensive in Nepal.

1. Taxes, Taxes

The current fiscal year of Nepal brought quite a few changes in the Nepali tax policies. Prices of almost everything went up, including electronics and gadgets. Before this new tax policies, smartphone importers paid only 13% of tax. And on top of that, 40% of VAT was refunded to them at the end of the fiscal year. That made it a net total of 7.8% on taxes.

But with the new policy, the 40% VAT refund has been waived. And in addition to the 13% tax, another 5% of excise duty has been added, making it a net total of 18.65% on taxes alone! And that is enough to stir the prices of such phones and gadgets upwards. This, however, is only for smartphones. There are other policies for other electronics and automobiles.

2. Distribution Channels

The economy of the country is not strong enough to attract official retailers themselves. For example, we only have Samsung, Huawei and Xiaomi’s official presence in Nepal. But for other phones, they arrive through various distribution channels. There are agents, regional distributors, wholesalers, etc. before the products even make it to retailers. And with each part of the distribution channel nicking off some profit, it’s only natural that the prices go up.

How does it work? First, there’s the company, i.e. the brand itself. Then come the National Distributors (NDs), followed by Regional Distributors (RDs), Retailers and Mobile Stores. NDs import the smartphones for which, they pay a certain bank guarantee to the brand. This assurace financial safety to the company as well. The same thing happens with NDs and RDs. RDs are responsible for placement of phones to retailers, who, in turn, deal with mobile brands. Hence, this creates a long chain, where each party involved has a certain profit margin.

Also, NDs have their own team of sales promoters, who promote their products in mobile stores. Ever seen someone in the company mascot’s costume? Yeah…that’s them. They also have their own marketing team, sales officers and product team who help improve sales and marketing of a product. As for RDs, they possess local level knowledge of the market, and maintain good relation with retailers. Thus, from the company’s point of view, these parties are necessary link in the chain too. So, we can see why they are needed.

And if you ask why don’t the company’s bring the phones straight to retailers, here’s why:

3. Lack of proper e-commerce

The smartphone marketplace of Nepal, or any other small developing countries for that matter, differs a lot from international scenario. Many phone companies have a strong presence in e-commerce and sell their product online via sites like Amazon, BestBuy, GearBest, etc. And they even provide various discounts from time to time. Their online presence is so strong that they even have online exclusive brands!

For example, there are brands like Realme, which is an online exclusive brand internationally. Honor, is also an online exclusive brand but is slowly moving to offline as well. Samsung’s new phones, the M-series are also online exclusive. But, in Nepal, all of these three are sold offline. Because, the e-commerce platform is not very developed. There is lack of proper e-payment gateways, and most people hesitate to buy things online, for good reasons.

This leads to popularity of brick-and-mortar stores, which increases the expenditures of phone retailers. And that too, leads to an increase in pricing. If you compare the pricing of Honor phones in Nepal with international market, you’ll know!

4. Economies of Scale

If you are a little bit familiar with the Economics, then, you probably know the economies of scale – i.e. larger the quantity, lower the price. It applies almost anywhere – from printing stuff, to banquet halls and yes, smartphones. Since the economy of Nepal is not as strong, the number of phones sold in the country are a lot less than in others.

While smartphones ship by the millions in other countries, we play in thousands here, and only among hundreds for very expensive flagship ones. This affects the cost per unit of these products, hence, adding up more burden to their prices.

5. Everything is imported!

This is no surprise. Since almost all of what we use are imported, smartphones are the same. What I mean is, there are no in-house manufacturing plants to make smartphones, or even assembling houses to assemble components. Countries like China and India have their own manufacturing plants, so, they can price the phones accordingly.

When whole gadgets are imported instead of parts, the excise duties are considerably higher. Add the distribution channelling to it, and shipping costs, you get the Nepali prices for smartphones!

So, why are smartphones so expensive in Nepal? You have the answer.

A version of this article appears on GadgetByte Nepal. Do check the website for more tech-news and such.

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Business

A simple guide to “Ncell tax scandal” for dummies

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Ncell and Its ownership

This article is created to give a simplest perspective on what’s the fuss and buzz on Ncell issue, for general public who are just curious to understand the issue for general knowledge purpose only.



First thing to understand

A foreign company can only invest in Nepal with local resident holding at least 20% of shares.  So there comes the company Raynold Holdings to invest in Ncell with 80% shares and 20% shares by local resident, Niraj Govinda Shrestha

Second thing to understand

There is a company TellaSonera Asia Holdings which owns 100% shares on Raynold Holdings.  That makes TellaSonera indirectly owning 80% shares on Ncell.

Before moving to next thing, let’s recap

Raynold Holdings, a foreign company, owned completely by another foreign company, had invested in Ncell taking 80% shares through FDI.

They made loads of money in Nepal.  Ncell was just 10 cr company and with its superb business success and growth, value went to multi crores.

WHAT HAPPENS NEXT

AXIATA, a UK-based company wants to invest in Ncell not by coming to Nepal directly through FDI but by buying Raynold Holdings from TeliaSonera.  AXIATA is based outside Nepal, and so the TeliaSonera which owns Raynold Holdings.

TeliaSonera then comes up official press release stating that “TeliaSonera has agreed to sell its 60.4 percent ownership in the Nepalese operator Ncell to Axiata, one of Asia’s largest telecommunication groups, for USD 1,030 million on a cash and debt free basis. At the same time, TeliaSonera will dissolve its economic interests in the 20 percent local ownership and receives approximately USD 48 million.

 

AXIATA gives the money to TeliaSonera and owns the company Raynold Holdings which is 80% shareholder of Ncell.

 SO WHAT IS THE ISSUE?

TeliaSonera made billions of dollars and didn’t pay a penny to government on capital gain tax.  AND THAT WAS THE ISSUE!!

Why?? Because, technically speaking TeliaSonera made billions simply by selling Raynold Holdings outside Nepal.  Just that by buying Raynold Holdings, all its assets  automatically went to the new buyer, which is AXIATA.  And one of the assets of Raynold Holdings is 80% shares on Ncell.   Even after the deal, the substantial holding of NCell would continue to remain with Reynolds Holding and so legally there would be no change in shareholding of NCell in Nepal. This is regarded as an indirect transfer of underlying ownership.

SO, IT WAS A WELL PLAYED GAME, HUH?

Very well played! In the eye of law, FDI Company Raynold Holdings is still the 80% owner of Ncell, which happened to have changed its parent company from TeliaSonera to Axiata — Raynold Holdings nor Ncell made any capital gain to tax.

And?

Well! TeliaSonera could not be taxed since legally speaking there was no buy and sell within the country, so Supreme Court on Wednesday issued a mandamus order directing the government to recover the due capital gains tax from Ncell and Axiata.

Will Ncell and Axiata pay the due capital gains which, principally speaking, is supposed to be paid by the party who actually had made the gain, is yet to see.

This interesting game of loophole is what made Ncell a curious case.





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