Saturday, September 06, 2014

Beyond Federalism To Double Digit Growth

Nepal topography. The green/yellow zones hold ...
Nepal topography. The green/yellow zones hold the Inner Terai valleys. (Photo credit: Wikipedia)
(Article sent to Kantipur on August 6, 2014)

A few months after the king’s coup in 2005 I moved to New York City from the Midwest. I had no such plans, but I ended up putting full time work into Nepal’s democracy movement, and subsequently the Madhesi movement. I went on to become Barack Obama’s first full time volunteer in all of New York City. I also watched Modi’s campaign for hours each day. To this day I follow Nepali politics pretty closely.

It is a shame that Nepal’s constitution was not written during the first two years of the first constituent assembly. Nepal’s leaders failed its people. But here we are with six months to go. Not completing the task is not an option, because massive economic opportunities are knocking at the door.

During the Shivaratri mayhem around Pashupati, all you have to do is go stand in the middle and the crowd will take you forward. China has been growing at massive rates with no signs of slowing down. India is about to take off in a similar way. All Nepal has to do is provide basic political stability, basic law and order, and the economy would take off for being sandwiched between the two awake giants. This is precisely the point I made when I got to meet Prime Minister Sushil Koirala in NYC a few weeks back.

I think the recent electoral mandate was broadly for geographic federalism. We should move towards six states: East Terai (Chitwan and Udaypur included), West Terai (Surkhet included), Koshi, Bagmati, Gandaki, Karnali. The primary achievement of the Madhesh Movement was making sure the number of MPs from the Terai is in direct proportion to its population. That has to continue. Beyond that an electoral system fair to the DaMaJaMa (Dalit, Madhesi, Janajati, Mahila) has to be put in place.

205 seats in a lower house and 100 seats in an upper house might suffice. 7% of the 205 seats, or 15 seats should be reserved for Dalits. These would be constituencies where only Dalit candidates may contest. One third of all seats should similarly be set aside for women, or about 67 seats. Of those seats for women, 20% should be for Dalit women, 30% for Madhesi women, and 30% for Janajati women.

For the 100 upper house seats, it would be fully proportional. How many votes a party collects would determine how many seats that party gets. There would be provisions for the DaMaJaMa. One third for women again, as in every third name on a party’s list should be a woman. 7% for Dalits again. 10% for Madhesis, and 10% for Janajatis. The parties must submit lists before the election and make them public. The lists may not be amended after the election. So if a party gets 10 seats, the first 10 names on its submitted list get in.

A Prime Minister elected by both Chambers of the House would be the Executive Chief, free to form his cabinet with people from inside and outside the parliament, and a president elected by all elected leaders in the country at all levels, local, state and national, would serve as the constitutional head, and the Commander In Chief of the Nepal Army.

The six states would have unicameral legislatures. Every parliamentary constituency might be split into two state legislature constituencies. The 75 districts stay intact. There is the central government, there are the six state governments, the 75 district governments, and the city, town and village governments. It is important to come up with formulas such that the state, district and local governments end up with substantial budgets.

Nepal that is a federal country should have many fewer bureaucrats, soldiers and police officers than it currently has, because federalism is a more efficient form of government. A lot of stuff gets taken care of locally. Downsizing the Nepal Army from 100,000 soldiers to about 10,000 soldiers would free up resources for tens of thousands of teachers and health care workers. Policing is a state function and so Nepal Police will have to give way. Several ministries will have to be eliminated, all will have to be significantly downsized.

Modi during his recent visit said, “Nepal can become a developed nation by selling power to India.” That is true. Once the country has a new constitution and there are regular elections to all levels of government I am sure the country will see plenty of good leaders emerge who might do for Nepal what Nitish Kumar has done for Bihar.

An economic revolution would be Nepal growing at double digit rates year in year out for 30 years. That kind of growth rate is the best and fastest way to wiping out poverty in the country.

(Paramendra Bhagat is a tech entrepreneur based in New York City. His global team is working on an Augmented Reality Mobile Game.)

Tuesday, September 02, 2014

50 Millionaires

Nepali architect - Arniko in Miaoying Temple
Nepali architect - Arniko in Miaoying Temple (Photo credit: Wikipedia)
Russia hosts the largest cluster of Nepali millionaires in the Nepali diaspora. By some counts there are about 30 millionaires based in Moscow. These are all self made people. And so you can not argue the NRN leadership has been dominated by wealth.

For the first time NRNA USA has some semblance of existence. There are thousands of members, there are duly elected leaders. But NRNA USA is still no close to aspirations of global leadership.

For me it is less about the NRNA organization and more about Nepal’s economic growth as it can be projected over the next three decades. I did full time work for Nepal’s democracy movement in the 2005 period. Subsequently I put full time work into Nepal’s Madhesi Movement. And I have moved on. And now the issue is economic growth.

You can’t build a successful company as an act of charity, or by thinking about a particular country. Entrepreneurship responds to its internal forces. It is a high risk venture. You have to respond to the market forces. And it is not like I don’t think about me or my family. But I do also have one eye on Nepal.

To me more important than membership drives of the NRNA is the quest to see at least 50 millionaires among the Nepalis in NYC. That is the only meaningful way the Nepalis in America, more specifically New York, can not only hope to provide global leadership to the NRNA but, more importantly, make meaningful contributions to Nepal’s economic growth. So I look more for aspiring entrepreneurs than neta types. A few I might team up with, many I would just want to stay in the loop with.

You have to be in a position to personally invest, you have to be in a position to guide global investments into the Nepali economy, and then you can also hope to collectively propose policy changes that are so fundamental to letting the economy in Nepal bloom to its rightful size.

Working for Nepal’s democracy and Madhesi movements cost me money. I had to eat into my savings. But this next phase is about making money, about creating some serious personal wealth.

I don’t have much taste for old economy ventures. That is not a stamp of disapproval. The richest Nepalis in the city today have all made their money in the old economy. But I am grounded in software, and my ventures are new economy ventures. I find high tech exciting. Down the line that also makes room for clean energy ventures.

Building an ambitious company in a city like New York necessarily means you are going to aim for a global customer base, or at least a globally diverse customer base. That necessarily means you are going to have to build a globally diverse team. You can not have an all Nepali team trying to serve a global customer base. So you build your company following rules that are best for the company’s growth. And you contribute to Nepal’s economy to the best of your abilities, according to rules that best serve the purpose.

New York City is greatly suited for building great companies, especially multi-national corporations. The infrastructure here - and I don’t mean just the trains and buses - is optimal. It has a well developed financial marketplace. You count your blessings and you make your moves.

I have my tech startup, an Augmented Reality Mobile Game. That is recent, and it is pre-launch. I have had my tech consulting firm for years now. I have a strong bias in that I like working with tech startup type clients. Usually I just build the basic prototype. In rare cases I also end up taking a bigger role. I bring more than tech to the table. I also bring my knowledge of tech startups. I have been building a network for fundraising among professional investors for years now. But you can only cash on it if you have built the right company with the right kind of growth rates. Read: wild growth rates. Investors are business people. They invest because they think you will grow their money.

Nepalis in New York should be able to outdo the Nepalis in Moscow. And entrepreneurship is that route. I happen to believe entrepreneurship is for everybody. I am a big fan of network marketing, for example. Because it allows a venue for entrepreneurship even among the low income Nepalis in the city. Or you could invest 5K, 10K in a tech startup. A successful tech startups would give you returns that land in Kathmandu simply can not. Owning a small equity in a high tech venture beats owning real estate in Kathmandu.

The message of entrepreneurship goes hand in hand with the message of dual citizenship, and I don’t mean the watered down dual citizenship that the politicians in Kathmandu are talking about. They are trying to create a second class citizenship for the NRNs, like they already have for the Madhesis in Nepal. That is a no no.

Thursday, August 28, 2014

One Eye On Nepal



A tech startup launched partly or fully by Nepalis that might manage to raise 100K or 200K from among Nepalis in the first round, also called seed round, or friends and family round, if it does good work positions itself to raise north of a million dollars in its second round from professional investors. But it would be hard, probably impossible, to raise a million dollars from among Nepalis.

There is a flip side to that coin. Say that tech startup does well and ends up with a valuation in the 100 million dollar range in five years. Interested Nepalis either invested in the first round or did not invest at all. Because round two onwards you have to be a licensed investor to invest. You can’t come into rounds two, three or four.

Granted a tech startup is high risk behavior. Bottom line, it could fail. You could lose your money as an investor. But I can’t think of a better vehicle than a tech startup to start tapping into the robust capital markets in this city, the finance capital of the world. And unless you are a successful entrepreneur, you have no moral standing to make any meaningful contribution to economic growth in Nepal. Lecturing goes only so far, you have to be in a position to make meaningful investments. In this era of globalization and the Internet one can hope to make major contributions to Nepal’s economic growth, even if it might be 10,000 miles away.

Let’s say you invest 5K in a tech startup that goes on from a million dollar valuation in round 1 to a 100 million dollar valuation in about five years. Your 5K just grew to half a million dollars. It can be argued that is retirement money. A 500,000 dollar trust fund could generate 50K every year forever. It could be set up that way. As in, your half million stays intact. And you are netting 50K a year forever. 50K a year is not fancy, but it can be if you were to choose to spend all your money in a country like Nepal.

By that token a 10K investment would bring you a million dollars in that startup. A 20K investment would bring you two million dollars. A two million dollar trust fund would bring you 200K every year. That is rich!

What if you invested 5K each into 10 startups and only one of them hit it big? Your 50K still became half a million.

By one count there are 30 millionaire Nepalis in Russia. Shesh Ghale is in Australia. No matter which way you look, Nepalis in America look to be in a bad shape. America should have minted more Nepali millionaires than any place else. But that has not happened because not enough Nepalis in this country have gone into entrepreneurship. I happen to think that is a shame.

In Russia you could have bought factories for cheap when the Soviet Union collapsed. In Australia I guess real estate and education were key. But in the American economy high tech is the way to go. Old economy companies make money but not wild money. The beauty of software is it allows you to cash on your old economy expertise. I believe many software companies like Uber and AirBnB are yet to be born, companies that will target major inefficiencies in the old economy at large scales. Both are multi-billion dollar companies.

Clean energy is another way to get on the cutting edge. Finally Nepal might start making some big moves in a few years. I think there is room to build multinational corporations that do business globally, but also are deeply engaged in Nepal’s hydro sector.

The other day I was at a rooftop party in Manhattan and I came across this guy who had a biotech background who was doing Big Data for some big bank. He was not cashing in on his biotech background, not yet. But just like there are intersections between software and biotech, there necessarily are intersections between clean energy and software.

Risk taking is the top quality entrepreneurs share. Risk taking is more important than smarts, more important than a great work ethic. Sometimes you simply have to jump in and let the chips fall where they may. No risk, no gain.

But to the ablest of entrepreneurs, it probably does not feel like risk taking. To those watching, it might look like risk taking. But the best of entrepreneurs move with the assurance of a sleep walker. Just like I think of New York City as not part of America, but a whole different country altogether, I think entrepreneurs are a whole different species.

Monday, August 25, 2014

Nitish, Bihar, And Development

English: Flag of Janata Dal (United) of India
English: Flag of Janata Dal (United) of India (Photo credit: Wikipedia)
Map of Bihar showing location of Bhimbandh Wil...
Map of Bihar showing location of Bhimbandh Wildlife Sanctuary (Photo credit: Wikipedia)
Lalu Prasad Yadav, at a political meeting in K...
Lalu Prasad Yadav, at a political meeting in Kesariya, Bihar, India. (Photo credit: Wikipedia)
Bihar has seen the emergence of a new alliance with Nitish, Lalu and the Congress coming together. The other of course is the BJP alliance with the likes of Ram Vilas Paswan that swept the recently held national elections.

Right now the two alliances are running neck and neck. That means it will be a close fight next year in Bihar, but it is advantage BJP. Right now Sushil Modi is running ahead. In Bihar it might be 50-50. But in Uttar Pradesh it will be a total sweep by the BJP also at the state level.

Bihar is one place that could give Modi something akin to an opposition. And Modi in Gujrat was known as a man who brooks no opposition. His China model is not only economic, it is also political. He does not like the idea of having much of an opposition. And so he is going to do all he can to put Bihar into Sushil Modi's lap. Sushil Modi is not a bad candidate. He was deputy to Nitish in Bihar's spectacular success story. So he can legitimately take some credit.

If Narendra Modi could sweep Bihar as merely a prime ministerial candidate, imagine what he could do as a performing PM. And I expect him to perform.

Nitish has a tall task before him that has been made tougher by Lalu's mandal-kamandal talk. You can not beat Narendra Modi with that. The way to beat Narendra Modi is with development talk. Laloo was spectacular as Railway Minister, Nitish was the top performing Chief Minister in the country. It is not like they don't have it. But they are not talking development. That is problematic. Right now Nitish is all set to lose the elections next year.

Maybe the real story here is that his break up with the BJP was a bad move. Nitish was the first person to call Narendra Modi a future PM. That was back in 2003, I think. Looks like somewhere along the way he switched his position but has refused to play the role.

He could talk all development all the time and give Narendra Modi a run for the money. But he is not doing it. Puzzles me.

For now Narendra Modi is the man to watch. His political goal seems to be to form BJP governments in enough states that he also ends up with a majority in India’s upper house. His organization people have major plans for the North East and the South. Having a tight grip on the Hindi heartland of Bihar and Uttar Pradesh would go a long way.

All indications are Modi is on his way to giving India growth rates greater than seven per cent. He wants to double the size of the Indian economy by 2020.

Forget Bihar, Modi also has major plans for Nepal. His visit to the country was well appreciated. It felt like he truly wanted a fresh start in a relationship that has always been great but greatly unproductive. If load shedding ends in Nepal within a year or two, you will have Modi to thank for it. He means business.

I still stay curious about Nitish, though. He might have to stop crying hoarse, ke majdoori nahin mili, I did not get my wages. Like Bill Clinton would say, all elections are about the future. The people of Bihar chose to put Modi in Delhi. I am not sure that was a bad choice, economically speaking.

But now Nitish has to make a strong development case for the next five years for Bihar, or make way for Sushil Modi. It is not going to be an easy fight. The two Modis might have to show all tricks up their sleeves to rope in Nitish, once and for all.

The junior Modi is sure determined. Laloo is his usual comic self. Nitish looks a little tired, a little betrayed. He has not taken the latest political debacle too well.

Double digit growth rates are my benchmark, for Modi in Delhi, for the next Chief Minister of Bihar, and for all current and future Prime Ministers of Nepal. Delhi is a tall task, because coordinating all those states across India is no easy task. Patna? Nitish did it year after year. Nepal? Now that is the sad part.

Being in transition does not help. Not having a constitution does not help. There is also the no small matter of not having an obvious leader.

Sunday, August 17, 2014

सच्चा राष्ट्रियता गरीबी सकेसम्म चाँडै कसरी मेट्ने भन्ने हो

The flag of Nepal
The flag of Nepal (Photo credit: Wikipedia)
In response to a Facebook post by a friend.

(१) नेपाल र भारत को जस्तो नजिक को सम्बन्ध कुनै दुई देशको छैन, अमेरिका र कनाडा को पनि छैन। त्यो जनता लेवल को कुरा। र त्यो तराई का मधेसी को मात्र होइन। नेपालको प्रत्येक समुदाय को कुरा। शाह राणा को पनि "बेटी-रोटी" कै सम्बन्ध हो। हिमाली भेग को कुरा गर्ने हो भने तिब्बती शरणार्थी सबै भारत मै छन। यता दार्चुला, उता धारचूला, मान्छे दुबै तिर उस्तै।

(२) सरकार लेवल को कुरा गर्ने हो भने भारत मा जुन सुकै सरकार आए पनि हाम्रो नेपाल संग जस्तो राम्रो सम्बन्ध अरु कुनै देशको सरकार संग छैन भन्छ।  के भनेको होला?

(३) नेपालका प्रत्येक पार्टी का नेता दिल्ली धाउँछन्, र त्यो भु-राजनीति बुझ्नेले अप्राकृतिक मान्दैन। चन्द्रमा पृथ्वी वरिपरि घुम्छ, पृथ्वी सुर्य वरिपरि घुम्छ। बरु राजनीति र लोकतंत्र बुझ्नेले सोध्छ, भारत ले ठग्छ भन्ने त्यत्रो ठुलो डर छ भने नेपालको संसदले अर्को देश सँग गरिने कुनै पनि संधि सम्झौता नेपालको संसद मा पुर्ण बहसमा लगेर बहुमत ले अनुमोदन गर्न पर्ने प्राबधान किन नराखेको? २०४६ पछि मलाई अलि कति excited पारेका नेपालका प्रधान मंत्री दुईटा छन। कृष्ण प्रसाद भट्टराई र बाबुराम भट्टराई।  बाबुराम ले गरेको BIPPA सम्झौता कति राम्रो। तर उसकै उप प्रधान मंत्री, त्यो पनि उसकै जिल्लाको, त्यो BIPPA को बिरोध गर्दै हिँडेको।  कत्रो नौटंकी। बिरोध हो भने के को बिरोध, त्यो specific रुपमा कहिले भनिएन। कागले कान लग्यो, लग्यो भने पछि लग्यो लग्यो। फेरि बाबुराम भनेको धोती लाउने गजेन्द्र नारायण होइनन् , सप्तरीको मधेसी, भारतको मान्छे यसले भारतकै सोंच्यो भन्ने "ह्रितिक रोशन सिंड्रोम" आरोप लाग्दो हो।  बाबुराम भनेको त १९५० को संधि धांधली भो खारेज गर नत्र भने भन्दै बन्दुक उठाएको मान्छे। माओबादीले बन्दूक उठाएको ४-५ बर्षसम्म मैले उसको बाहेक अरु कुनै माओबादी को नाम सम्म सुन्या थिएन। नेहरू खुदले विश्व स्तरको नेता मानेको BP ले पनि देशै बेचने रै छ, बन्दूक उठाउने SLC Board First बबुरामले पनि देशै बेचने, के रै छ त त्यस्तो?

(४) बाबुराम लाई म अझै BP लेवल को मान्दिन। तर फेरि प्रधान मंत्री बनेर उनी नेपालका नीतिश कुमार बन्छन् भने all bets are off. म आफु बामपंथी होइन (म नेपालको परिप्रेक्छ्य मा कांग्रेसी पनि होइन, anti-Congress हो) तर बामपंथी नै सही फिडेल को education र health सेक्टर का कामहरू गरेर देखाउन सक्नु पर्यो।

(५) लोकतंत्र भनेको जनता ले दिग्गज मान्छे खोज्ने र त्यो दिग्गजले ५ बर्ष एकलौटी शाषण गर्ने भनेको होइन। भारत संग गर्ने समझौता हरु नेपालको संसदले पुर्ण बहसमा लाने र बहुमत ले पास गर्ने ब्यबस्था गर्ने हो।  त्यति गर्दा पनि भारत ले ठग्ने रहेछ भने नेपाल त भारत ले ठग्नु पर्ने देशै रै छ भन्ने हुन्छ। कोही कोही हुन्छ नि पाकेटमार लाई सजिलो पारिदिने बानी भएको मानिस।  त्यस्तो।

(६) तर मुख्य कुरा अझ त्यो होइन। मुख्य कुरा नेपालका नेताहरूको competence or rather lack of it को हो।  आफ्नो कमी कमजोरी ढाकछोप गर्न जुन कुरा को दोष पनि भारत लाई दिई दिने। Dictatorships thrive on the external enemy, नार्थ कोरिया ले अमेरिका सँग निहुँ खोजिरहने कारण त्यो हो।  तर नेपालका नेता हरुले लोकतंत्र मा पनि त्यही कुराको सहारा लिएका छन। It should not be possible तर भइराखेको छ।  चुनाब ले मात्र लोकतंत्र हुँदैन भन्ने कुराको प्रमाण Russia छ। नेपाल लोकतंत्र भई सकेको छैन भन्ने कुरा बुझ्नु पर्छ।

(७) पुरानो सत्ताका status quoist हरु हर तरहले दमजम का मुद्दा हरुमा पुराणो सोंच कायम राख्न तत्पर छन।  स्टेट restructuring हुन नदिन हर किसिमका हथकंडा अपनाउन लागि राखेका छन।

(८) नेपाललाई सिक्किम बनाउन खोजेको आरोप कति लाई लाग्यो त्यो गनेर साध्य छैन, त्यो राजनीति होइन गाईजात्रा हो। अस्ति मोदी आउनु अगाडि समझौता का जुन फर्स्ट ड्राफ्ट हरु आएका थिए केही knee jerk nationalist हरुले "नेपाललाई भुटान बनाउन खोजेको" आरोप लगाए। म त चकित भएँ। अरे बाबा, भुटान दक्छिण एशिया को सबै भन्दा गरीब देश बाट quite literally रातारात दक्छिण एशिया को सबै भन्दा धनी देश बनेको कहानी हो।  सिंगापुर र स्विट्ज़रलैंड पछि बनाउने पहिला भुटान नै बनाउने कि नेपाललाई?

(९) नेपाल बाट गरीबी सकेसम्म चाँडै कसरी मेट्ने - त्यो भन्दा ठुलो राष्ट्रबाद नेपालको सन्दर्भमा हुन सक्दैन। त्यस मापदंड़ अनुसार अहिले को नेपालको political class खचाखच अराष्ट्रीय तत्व हरुले भरिएको देखि राखेको छु।  मोदीले सही भनेका छन -"Nepal can become developed nation by supplying power to India." बोलीले होइन ब्यबहार ले हो राष्ट्रबाद झल्किने, तर नेपालको पोलिटिकल क्लास लाई चिंता छ, नेपाल developed नेशन भयो भने जनता जागरुक हुन्छन् अनि फेरि हामी लाई कसले वोट दिने? त्यो घोर अराष्ट्रीय तत्व thinking हो।

(१०) मोदीले वास्तव मै नया किसिमको सम्बन्ध चाहेका छन, त्यसको फाइदा न उठाउनु मुर्खता नै हुनेछ।



Saturday, August 16, 2014

East West Nepal Railway

Nepal topography. The green/yellow zones hold ...
Nepal topography. The green/yellow zones hold the Inner Terai valleys. (Photo credit: Wikipedia)
There is talk of an East West Nepal Railway. The current talk puts that right next to the Mahendra Rajmarga, the East West Highway. I believe that would be a mistake. The rivers right south of Chure tend to be really wide. You go further south and they narrow down substantially. Bridges are the most expensive part of a road (or rail).

So if the idea is to build an East West Railways at the lowest cost possible, the best part to do it would be in Mid-Terai.

There is widespread feeling among Madhesis that the Mahendra Rajmarga was never built for Madhesis in the first place. It was built for the Pahadis. The highway that would most benefit the Madhesis would be the Postal Highway, or the Hulaki Rajmarga. It goes very close to the Indian border. Because the most dense clusters of the Madhesi population happens to be close to the Indian border.

An East West Railway that runs through the middle of the Terai would benefit the Madhesis a lot. That is true. But that can not be the reason why you not do it. You build it along a route that would be cheapest to build. And you build so as to benefit the largest number of people. That would put the East West Railway along the middle of the Terai.

But you also have to build it for India. India's North-East feels isolated from the rest of India. This East West Railway would connect that North-East to Delhi and mainstream India. The larger South Asian market is what would make this train route indispensable and highly profitable.

It will be easier, much easier, to find investors for the project if you draw in the larger picture. Not only is there a larger South Asian picture, there is also a larger Asian picture. China has plans to connect with India through Sikkim. That rail route could be connected to the Nepal East West Railway. Next thing you know a whole bunch of Indians are traveling through Nepal to get to China.

Such large scale thinking would make it possible to raise large sums of money with which to build something cutting edge. Like bullet trains, for example.




Sunday, August 10, 2014

33-33-34

A tech startup shares its ownership widely as it grows and matures. I think 33-33-34 is a healthy ratio, although many permutations and combinations are possible: 33 to the founders, 33 to the investors in various rounds, and 34 to the team.

Some venture capitalists think their share ought be 40 per cent. Some of them collude with the founders to leave very little for the team. Some of them gobble up even more than 40. I know of one case where the founders had been watered down to around one per cent. That company died soon after.

Round 1 investment is also known as the seed round, or friends and family round. Usually people who have known you a few years put in some money. Venture capitalists are people too. There are all kinds. That includes the bad apples. Vulture capitalists are venture capitalists with bad character. Often times the vulture capitalists have a tendency to water down the early stage investors, and this is with successful companies.

If you are going to give away 33 per cent of the company to investors in various rounds, a good figure for round 1 might be 5. So say you raise 100K in round 1 to give away 5 per cent of the company. It is a good idea to add an anti-dilution clause in there so this 5 per cent stays 5 per cent in all future rounds.

But the anti-dilution clause not used right can backfire. Say you gave away 20 per cent of the company for 50K in round 1 and added an anti-dilution clause to the agreement. You just made it super hard to raise future rounds of money, to attract co-founders. If you gave away 50 per cent for 50K, and added an anti-dilution clause to it, the company is pretty much dead. The person who put in 50K just lost 50K.

I believe Mark Zuckerberg made this mistake starting out. He gave away a huge chunk of his company to his Harvard roommate who put in the first 100K. VCs who came in later had to incorporate a whole new company to dilute away that first guy who made no contribution beyond that first monetary investment. He was an angel investor, not a Co-Founder. Much of the drama in the Facebook movie resulted from this first misstep.

The anti-dilution clause is not the norm right now. Most first round investors might start out with some good sounding number like 20 or even 30. But in future rounds they get diluted to the point they might not make any money.

Another key concept is vesting. If you have a 5% equity, and it is scheduled to vest over five years, and you leave the team after one year, you only walk away with 1% equity. The other 4% goes back to the company. This vesting schedule is for team members, not the investors.

Launching a tech startup is kind of like launching a rocket. The first 100 meters are probably the hardest. Various rounds of fundraising can be compared to various stages of a rocket’s ascent.

A tech startup is a high risk venture. No risk, no gain. You could fail. If you do not raise round 1 money, you will have failed already. You could raise round 1 money and still fail. You could raise round 1 money, do the work, successfully raise round 2 money, and still fail. You could raise round 1, round 2 money, do the work, and still fail. You could raise rounds 1, 2 and 3 and fail. You could do very well for two years, even three years, get a lot of good press, get featured in the New York Times and TechCrunch, and The Kathmandu Post and Vishwa Sandesh and still fail.

My point being fundraising is important, press and hype are important, but ultimately it is about the business fundamentals. Unless you give it the very best shot you can, you will fail, guaranteed. A hundred million dollars is no joke. Heck, a million dollars is no joke. Less than five per cent of the people in America make more than 100K a year.

Fundraising can feel challenging. But once you have money in the bank, team building can be hard. Because ultimately how good you do depends on how good your team is.

There are such huge swathes of the economy that are waiting to be digitized that it still feels like the wild, wild west in the software industry. Big money is waiting to be made.There is a lot of wealth creation in the future. Understanding the ins and outs of equity is necessary to doing well with your startup. Most of the most treasured members of your team will join you for the equity you might give them. It is not salary. Chances are you will pay them below market rate salaries.