Tim Gocher OBE, a native of the UK, is the Chief Executive Officer of Dolma Impact Fund. After working for many years as an investment banker, in 2014 he established the Dolma Impact Fund in Nepal, the first Private Equity and Venture Capital of Nepal (PEVC).
In the last decade Dolma Impact Fund has invested 108 million dollars in Nepal has created thousands of employment.
Recently Onlinekhabar caught up with OBE and talked about the various aspects of PEVC.
We all know that you have a long experience in investment banking and could have had a promising career in international financial hubs, but you chose to work in Nepal. Could you share the reason behind this decision?
I think money is important. We all need to earn enough money to support our families and have a good life. But it is not everything. Yes, I had worked for a billionaire. I have worked for some of the biggest financial institutions in the world, mostly in London, New York, and Singapore.
However, I got to know Nepal through my wife and immediately started a non-profit organization, Dolma Foundation. This was in 2003 during the insurgency. I didn’t think of doing any private sector investment, because you can not know the situation, but I got to love the country. At the same time, other impact funds in rural India, and Africa were starting up and I got to know the people running those. And you know, it just clicked.
So I think it’s honestly a passion. Something just clicked which is more important than money.
When you started the PVC firm in Nepal, very few people knew about it. So, did that cause you a problem?
Yes. First of all, I thought we were the unluckiest fund in the world. Not because of Nepal. So we started, and we raised the funds. We had our first close in September 2014 exactly 10 years ago.
So, for the first seven months, People did not understand us. They used to ask questions such as Are you giving grants? Are you a bank?
They weren’t familiar with the concept of sharing equity. It just didn’t exist here. So there was quite a lot of education to be done. Then the earthquake happened. We were only seven months in. We hadn’t done any deals. Most funds are fixed life. So the investors get nervous if you are not investing,
Then, of course, the blockade happened. Nobody was doing any deals of any kind when there’s an earthquake as it is about life and death, isn’t it? But we did our first deal after 16 months in hydro
What differences have you noticed in the PEVC sector over the last 10 years?
It has transformed. We have a very positive experience working alongside local private equity funds. Everybody brings knowledge and we all share risk.
Sometimes you win, sometimes you lose. That’s venture capital private equity. But it is not because of the lack of knowledge and dedication of local funds. I am thrilled and to think we might have played some part in stimulating that ecosystem is rewarding.
What expectations did you have when you started Dolma Fund, and have you met them?
Our objective from day one has been to build a bridge for foreign institutional private sector investors to Nepal. We knew that was a very long-term goal. The problem you have raising money for Nepal is there’s no track record of FDI coming in and out. And in many cases, in many sectors, like hydro at the moment, we will be the first. So, you know, when the government says it wants 46.5 billion for energy, that’s great. But where is that going to come from? The government has a little bit, and the banks have some, but that is not going to make 46.6 billion. Then there are Development Finance Institutions (DFIs), well they could do a bit, but again you’re not even at 50 per cent of that. So the only place Nepal can find that amount of capital is the international market. Either capital markets or direct investment from those big investors. Now what those investors will need to see is regular returns. A series of data points show that Dolma and others have invested in five hydro plants. They put in the money, built them successfully, commissioned them, listed them, sold them, and made enough profit from the investors’ perspective
That return would be enough to compensate me for the risk. And because there is no such track record at the moment, you don’t know what that number is. It’s more than whatever India gets because it’s going to be perceived as more risky than India.
Dolma has done five energy projects, and they have made an average of 17%. We think that is enough to be attractive to you. That is the journey we’re on.
Your question was actually, have we met our expectations? Absolutely. I did not have a timeline for this. Ten years ago, I had no big expectations as I would be managing over a hundred million and creating eleven and a half thousand jobs. I did so because I am very happy with whatever I have in Nepal.
You seem to be happy with whatever you have done in Nepal. So in that case could you also let us know about your 10 years of working experience in Nepal?
Because I had been working in Nepal for 10 years albeit in non-profit, it is easier to give money away than to get it back. I knew exactly what Nepal was like. We all know it is not an easy place to do business and there was nothing unexpected. So I didn’t come here thinking this was Singapore where I would register my company online, I was not under any illusions. It has been as difficult as I thought.
I wasn’t new to Nepal when I entered the market. It is very challenging, with much of the work consumed by red tape—getting multiple signatures for things that, in other countries, might not require any signatures at all.
I set up all the funds in full knowledge of that. I think what it does prove is that you can do business in Nepal. You can invest in Nepal if policy reforms and private sector-focused policy reforms were in place and the poll would have a lot more investment.
Are you satisfied with the return of investment from the company you have worked with?
It is too early to say, because we have only exited from one company, and that was Cloud Factory. That was technically a British holding company although the operations were in Nepal. So, we played a long game. So all I can tell you is our returns are based on accountants and valuation experts, but that is never the same as when I sold and repatriated the money.
We are now on the edge of selling some of our listed shares, which should happen in the next few months, but you know it is a long game. So. Am I satisfied with the returns on paper? Yes. As long as, as long as they are real. As long as it turns into cash I can return to our investors.
In Nepal, many investments have faced losses, and some have even been written off. How would you describe your success ratio? So, don’t those things bother you?
No. And let me tell you why. When you are especially venture capital funds, which this is, even in the US, you are gonna make eight investments in a fund, you expect to lose the money on at least two. You would hope one or two do well, but you don’t hope the others are somewhere in the middle. Certainly, that is exactly how we plan the funds and it is played out very well.
We have had a cloud factory. We have had Fused Machines, which is listed on NASDAQ this year. I would expect that to be a very strong performer. We have got hydro and solar. Hydro is showing a medium good return, but it is less risky. It’s not a tech company. And, Sastodeal, we have had to write off.
And that is exactly how we plan. And we do that on purpose.
You are not going to make a fortune out of hydro because the Power Purchase Agreement (PPA) is only going to pay you a certain amount. You might make decent money. But you take those bets on purpose and you have a diversified portfolio. So obviously the tech platforms that have no assets underneath them, you could well lose your shirt or you could make an absolute fortune.
For the last decade, you have been working in Nepal, but other foreign private equity firms still do not focus on the country. There are very few firms operating in Nepal. What are your thoughts on this?
Again it comes down to passion versus logic. If you love a country, you are going to do a lot more, if you’re sitting in a boardroom in Delhi or Singapore looking at the numbers and the track record and all the risks associated with Nepal that explains why you are not seeing many multinationals or big foreign investors coming in. Personally, I think the global perception of Nepal’s risk is bigger than the actual risk. And what do I mean by that? I mean, I am here on the ground. The country has no credit rating.
The NEA is not backstopped and is not guaranteed by the government. It could go bust, in other words, and the government has no obligation to step in. So if I am looking at that from abroad, I am not even allowed to invest. If I am managing an insurance fund and I look at Nepal’s hydro, the first thing I look at is what is the credit rating of Nepal. Oh, they haven’t got one. Okay, how are the bonds trading? Can I look at the international sovereign bonds? Oh, they have not got any. Is the government standing behind the NEA? No. And then you have got currency risk.
So Nepal is kind of excluding itself from the big money that it needs. Now, what is the reality? Do I expect the NEA not to pay their bill? No, they pay very well. They have been doing it for 30 years. Do I expect the NEA to go bankrupt ? No. Instead, they have got the exports to India now.
So, there is a difference between how the international market perceives Nepal’s risk and how we are on the ground. They’re thinking it is Afghanistan and I am thinking it is Nepal.
Besides results, you are also concerned about the impact. What impact have your investments created in Nepal?
WelI I gave a speech last night. By far the most important is employment. So, there are lots of other impacts, obviously clean energy and CO2 avoided and tax paid and things like that. But, at the moment, we have created 11,600 jobs in our portfolio companies.
Now, I am sure you have been to Tribhuvan Airport recently. A lot of young people are leaving the country. That is not a happy situation. This is painful, a newly married couple breaking up, the parents saying goodbye to their children.
The remittance is keeping the economy stable, but it is absolutely painful. And I know this because of my frequent trips.
For example, I was in Rasuwa on the weekend. I saw that everybody wanted to leave the country. I was at a child’s house where her parents are outside the country and she is living with her grandmother. The parents split up because of the pressure of the man being in China and the mother being in Kuwait. And now they have stopped sending the money. The child is living in extreme poverty. In this regard, there can be no more noble and urgent impact in Nepal than generating jobs. ‘
So far, Dolma has invested $108 million in Nepal. What are your plans?
The plan is that we have to launch a new fund. We have started fundraising. That is called the Dolma Climate Fund. This is for mostly renewable energy. We are targeting 200 million dollars.
Would you recall the happiest and saddest moments of your last 10 years working in Nepal?
The sad ones are easier to recall. These are the instances of fatal accidents, especially when they occur at a hydro facility or a construction site. For an investor, such incidents are devastating.
What’s the best? Probably the exit of Cloud Factory.
We still own some shares, by the way, but we exited a large chunk of our stake. It was a smallish company, started in Nepal. Gradually, it employed about 4, 000 people here with a few hundred permanent workers. It also opened a similar-sized office in Kenya.
So far you have worked with various companies. Could you let us know how you select the companies to work with?
So the first thing to say is we are fairly large investors in Nepal. So at the moment, we would not probably invest less than 3 million dollars and our maximum is 10 million dollars.
Firstly, you have got to have some revenue and a valuation. You have got to need that amount of money.
Similarly, another requirement is they don’t have to be brilliant. They don’t have to be geniuses in their business, but they need to be trustworthy.
Lastly, there is anything you want to add?
I think I just want you to know that Nepal needs to get used to taking risks.
You can’t possibly win without failing.
There is a big focus on failure here. Oh, it failed. Oh, they have lost all their money. But nobody looks at the stuff we have won. And that is not just for Dolma, that is for everybody. If we are going to get a venture capital culture, we have to get used to taking balanced risks.
