I’ll add one more feather to my cap I’m
also the CTO of Florio a venture backed
healthcare startup in the US and I do
this all by being in Nepal in fact my
other company leave all that I was
introduced with works with American
startups to scale up the innovate this
is a big part of my presentation today
for the next 15 minutes I want you to
take a leap of faith with me I’ll walk
you through the exercise of creating the
first billion-dollar software company in
the next five years and along the way
we’ll try to create as many jobs as
possible first a few disclaimers
leapfrog is not worth $1,000,000 and it
has been around for more than five years
but the simplicity of the analysis is
what makes me continue to dream before I
start on my presentation I want to
acknowledge Charlie Munger as the
inspiration for my talk in 1996 he gives
a similar method to with a group of
audience to walk through the process of
creating a two trillion dollar company
by 2034 and essentially he was
dissecting the business model of
coca-cola and I was so impressed with
this talk that I gave him the best form
of flattery could think of that of
imitation so Charlie outlined five
simple principles in his talk I’m not
going to go through the deals of those
suffice it to say that I’m going to be
using them liberally in the course of my
exercise so the big questions first
we’re not going to create a billion
dollar company by having a generic name
like Nepal Tech or the outsourcing
company next door so we’ll come up with
a very worthy name a very powerful name
called Rinku named after Alan Turing who
is the father of AI and theoretical
computer science and once we have him
we’ll make sure we deserve and that the
name is associated with
quality will make sure every single of
our client becomes a referral now in
order to get a billion dollar valuation
we have to list in the right big bourse
Nasdaq here will take will be inspired
by another company out of Sri Lanka
Virtusa which is also listed in Nasdaq
ins and is worth more than a billion
dollars finally the right market will
focus on software services for the US
market it is the largest market in the
world in 2016 there was more than 1.3
million software jobs that went
unfulfilled and you cannot become an
expert by focusing or trying to do
everything so we’ll focus on data
engineering which encompasses both data
science and machine learning data is the
backbone of everything today there is a
big demand for data engineers and
machine learning skills
software skills linearly with people
given our goal to create as many
software jobs as possible focusing on
top software services is a no-brainer
I’ve only great great insights by
thinking of problems in Reverse
hence the maxim invert always invert in
our case let’s look at the three
canonical examples TCS mine 3 and
Virtusa TCS is the largest of them by a
mile but other two companies my entry
and Virtusa are about the size that we
aspire to the important thing for us is
the multiple that their market cap is of
their operating income for TCS that
multiple is 24 for mine 3 that multiple
is 22 and for Virtusa that mine that
so let’s talk those numbers in Reverse
for a bill market cap with the operating
income multiple of 20 we need to have an
operating profit of million dollars
let’s assume an operating profit margin
of 25 percent that is what we’ve seen in
our real life that means we need a
revenue of 200 million dollars let’s
further break down the two hundred
million dollars annual revenue in order
to a certain quality will always
maintain a ratio of one u.s. engineer
for every 10 Nepali engineers in our
company will charge $35 an hour for an
offshore engineer and $100 for a
us-based engineer now these rates are
reasonable maybe a little bit on the
higher side but we’ll stick to the place
for two reasons
number one we’re in a growing and a high
value field data engineering number two
will present ourselves as the experts
and low price often gets equated with
poor quality will assume the utilization
of 85 percent because not everybody in
our company will always be working with
for a revenue of 200 million dollars
annually we’ll find that you need 225
hundred engineers in Nepal now the big
question is whether a company with 2,500
engineers is possible in Nepal and the
answer is yes every year 12,000
graduates come to the job market with
degrees in science and technology with
that many people entering the job market
creating a company with 2,500 engineers
even with attrition and competition with
other software companies in Nepal is
possible in fact we’ll be okay even if
you had to double the number so big
things happen when a lot of factors come
into being at the same time let’s look
at the positive factors for us number
one
the need for Hugh’s unmet demand as I
already said u.s. is the largest market
in the world and there were 1.3 million
jobs in 2016 that would unfulfilled now
software underpins a lot of industry
today that is why there’s a lot of need
for software engineers worldwide next
the supply pull needs to be big enough
we talked about that 12,000 graduates in
the job market every year in addition
software is the highest paying jobs in
Nepal is one of the highest paying jobs
and all the people who join the software
industry get to work on cutting edge
technologies with such job and such pay
there will be more students joining the
job and choosing computer science is
their measure this is the kind of
positive feedback loop that we all love
and the general trend of work also
favors our business model more and more
work is being done remotely
I talked about some of the business
models that we follow today in our
companies so today engineers work from
anywhere and anytime
tying all this need a core group of
people that are obsessed with technology
that have the right credibility and the
right experience with the companies in
tech sector it will help our cause if
they have a wide network and that
they’ve gone to the right colleges in
the u.s. finally Nepal’s image as a
place to do business at present this is
neutral at best this is one of those
factors that can really hurt if it’s
so let’s do a quick pre-mortem
pre-mortem is the opposite of
post-mortem post-mortem is after the
fact when the patient has already died
pre-mortem looks as the result in the
future and tries to explain why say in
five years our idea of creating a
billion-dollar software business there’s
a horrible death so let’s look at all
the factors that could contribute to
that result so number one nobody wants
is going to wrinkle this may be because
they don’t get enough pay compared to
other industries or that the work itself
is not interesting this is certainly not
the story of software industry today
number two the business model itself is
invalid that could happen if the
arbitrage between the labor salary in
the US and in Nepal shrinks rapidly our
history tells us that the gap is still
going to be wide for many more decades
it Cola it could also be that an
automated or semi-automated platform
dysentry mediates the business and
obsoletes companies like to wrinkle I
don’t think this is a possibility simply
because there are companies like up work
today that connects freelancers directly
with employers but freelancing is a hard
job
it does not scale and you’re working
from project to project
finally Nepal continues to have an Mis
problem remember the days of blackouts
rolling blackouts and frequent ones they
could come back to inhibit our ability
to execute flawlessly now that we know
all the ways we could fail let’s follow
the maxim of the guy who said tell me
where I’m going to die so that I will
make sure I never go there so we will
work relentlessly to make sure these
possibilities don’t happen either by our
own efforts or in conjunction with
authorities who should care for our
success because we are successful
Nepal has a lot in our cell shareholders
will make the money but Nepal will also
benefit handsomely number one lots of
jobs high-paying jobs 24 25 hundred
engineers is a lot of jobs and they
create a lot of lot more downstream jobs
and that is 2,500 potential
entrepreneurs and job creators I’m sure
many of our employees will go on to
hundreds of more software companies and
just as importantly this is the story we
need for Nepal to have an image makeover
remember how excess of Infosys has a
India it has only been 30 years that
India has been known as the source of
tech talent we’d like our story and our
capabilities to be the way businesses
around the world know Nepal and finally
there is the benefit to the ecosystem if
the company can invest a million dollars
sponsoring workshops conventions and
lobbying for the right change in the
policy it will mean a lot to the
ecosystem and whitie global startup
lives was in Nepal they were here for
months this was happened due to end cell
and the whole ecosystem benefited all of
these and more are needed for us to move
up the value chain the examples of few
countries are more instructive Sri Lanka
which has less population than Nepal has
Virtusa 20000 engineers this company has
really put Sri Lanka on the technology
map Vietnam has FTP FPT 10,000 engineers
nobody put Vietnam and Technology in the
same sentence before FPT came into the
picture and now Japanese people think of
Vietnam as the first option when they
the question is not can it be done the
question should be why has it not been
done so far Nepal for too long our story
has been that of dependency and foreign
aid
I hope the story changes to that of
Nepali resilience and Nepali
capabilities
perhaps I oversimplify but I know the
narrative has changed to that of
business I’ll leave you with the final
story in 1967 Lee Kuan Yew travelled to
Malta the sois canal had been closed for
many months because of Israeli and
Palestinian sick before but the dock
workers in Malta were being paid by the
British government they were pretty
happy playing water polo in the drydock
was there filled with water the
continuing charity had Archard a sense
of dependency not a spirit of
self-reliance Lee was convinced Sri
Lanka should not sorry Singapore should
not seek foreign aid and we all know how
that is worked out for Singapore there
is a fitting lesson for all of us and
want to close my talk on thank you [Applause]
also the CTO of Florio a venture backed
healthcare startup in the US and I do
this all by being in Nepal in fact my
other company leave all that I was
introduced with works with American
startups to scale up the innovate this
is a big part of my presentation today
for the next 15 minutes I want you to
take a leap of faith with me I’ll walk
you through the exercise of creating the
first billion-dollar software company in
the next five years and along the way
we’ll try to create as many jobs as
possible first a few disclaimers
leapfrog is not worth $1,000,000 and it
has been around for more than five years
but the simplicity of the analysis is
what makes me continue to dream before I
start on my presentation I want to
acknowledge Charlie Munger as the
inspiration for my talk in 1996 he gives
a similar method to with a group of
audience to walk through the process of
creating a two trillion dollar company
by 2034 and essentially he was
dissecting the business model of
coca-cola and I was so impressed with
this talk that I gave him the best form
of flattery could think of that of
imitation so Charlie outlined five
simple principles in his talk I’m not
going to go through the deals of those
suffice it to say that I’m going to be
using them liberally in the course of my
exercise so the big questions first
we’re not going to create a billion
dollar company by having a generic name
like Nepal Tech or the outsourcing
company next door so we’ll come up with
a very worthy name a very powerful name
called Rinku named after Alan Turing who
is the father of AI and theoretical
computer science and once we have him
we’ll make sure we deserve and that the
name is associated with
quality will make sure every single of
our client becomes a referral now in
order to get a billion dollar valuation
we have to list in the right big bourse
Nasdaq here will take will be inspired
by another company out of Sri Lanka
Virtusa which is also listed in Nasdaq
ins and is worth more than a billion
dollars finally the right market will
focus on software services for the US
market it is the largest market in the
world in 2016 there was more than 1.3
million software jobs that went
unfulfilled and you cannot become an
expert by focusing or trying to do
everything so we’ll focus on data
engineering which encompasses both data
science and machine learning data is the
backbone of everything today there is a
big demand for data engineers and
machine learning skills
software skills linearly with people
given our goal to create as many
software jobs as possible focusing on
top software services is a no-brainer
I’ve only great great insights by
thinking of problems in Reverse
hence the maxim invert always invert in
our case let’s look at the three
canonical examples TCS mine 3 and
Virtusa TCS is the largest of them by a
mile but other two companies my entry
and Virtusa are about the size that we
aspire to the important thing for us is
the multiple that their market cap is of
their operating income for TCS that
multiple is 24 for mine 3 that multiple
is 22 and for Virtusa that mine that
so let’s talk those numbers in Reverse
for a bill market cap with the operating
income multiple of 20 we need to have an
operating profit of million dollars
let’s assume an operating profit margin
of 25 percent that is what we’ve seen in
our real life that means we need a
revenue of 200 million dollars let’s
further break down the two hundred
million dollars annual revenue in order
to a certain quality will always
maintain a ratio of one u.s. engineer
for every 10 Nepali engineers in our
company will charge $35 an hour for an
offshore engineer and $100 for a
us-based engineer now these rates are
reasonable maybe a little bit on the
higher side but we’ll stick to the place
for two reasons
number one we’re in a growing and a high
value field data engineering number two
will present ourselves as the experts
and low price often gets equated with
poor quality will assume the utilization
of 85 percent because not everybody in
our company will always be working with
for a revenue of 200 million dollars
annually we’ll find that you need 225
hundred engineers in Nepal now the big
question is whether a company with 2,500
engineers is possible in Nepal and the
answer is yes every year 12,000
graduates come to the job market with
degrees in science and technology with
that many people entering the job market
creating a company with 2,500 engineers
even with attrition and competition with
other software companies in Nepal is
possible in fact we’ll be okay even if
you had to double the number so big
things happen when a lot of factors come
into being at the same time let’s look
at the positive factors for us number
one
the need for Hugh’s unmet demand as I
already said u.s. is the largest market
in the world and there were 1.3 million
jobs in 2016 that would unfulfilled now
software underpins a lot of industry
today that is why there’s a lot of need
for software engineers worldwide next
the supply pull needs to be big enough
we talked about that 12,000 graduates in
the job market every year in addition
software is the highest paying jobs in
Nepal is one of the highest paying jobs
and all the people who join the software
industry get to work on cutting edge
technologies with such job and such pay
there will be more students joining the
job and choosing computer science is
their measure this is the kind of
positive feedback loop that we all love
and the general trend of work also
favors our business model more and more
work is being done remotely
I talked about some of the business
models that we follow today in our
companies so today engineers work from
anywhere and anytime
tying all this need a core group of
people that are obsessed with technology
that have the right credibility and the
right experience with the companies in
tech sector it will help our cause if
they have a wide network and that
they’ve gone to the right colleges in
the u.s. finally Nepal’s image as a
place to do business at present this is
neutral at best this is one of those
factors that can really hurt if it’s
so let’s do a quick pre-mortem
pre-mortem is the opposite of
post-mortem post-mortem is after the
fact when the patient has already died
pre-mortem looks as the result in the
future and tries to explain why say in
five years our idea of creating a
billion-dollar software business there’s
a horrible death so let’s look at all
the factors that could contribute to
that result so number one nobody wants
is going to wrinkle this may be because
they don’t get enough pay compared to
other industries or that the work itself
is not interesting this is certainly not
the story of software industry today
number two the business model itself is
invalid that could happen if the
arbitrage between the labor salary in
the US and in Nepal shrinks rapidly our
history tells us that the gap is still
going to be wide for many more decades
it Cola it could also be that an
automated or semi-automated platform
dysentry mediates the business and
obsoletes companies like to wrinkle I
don’t think this is a possibility simply
because there are companies like up work
today that connects freelancers directly
with employers but freelancing is a hard
job
it does not scale and you’re working
from project to project
finally Nepal continues to have an Mis
problem remember the days of blackouts
rolling blackouts and frequent ones they
could come back to inhibit our ability
to execute flawlessly now that we know
all the ways we could fail let’s follow
the maxim of the guy who said tell me
where I’m going to die so that I will
make sure I never go there so we will
work relentlessly to make sure these
possibilities don’t happen either by our
own efforts or in conjunction with
authorities who should care for our
success because we are successful
Nepal has a lot in our cell shareholders
will make the money but Nepal will also
benefit handsomely number one lots of
jobs high-paying jobs 24 25 hundred
engineers is a lot of jobs and they
create a lot of lot more downstream jobs
and that is 2,500 potential
entrepreneurs and job creators I’m sure
many of our employees will go on to
hundreds of more software companies and
just as importantly this is the story we
need for Nepal to have an image makeover
remember how excess of Infosys has a
India it has only been 30 years that
India has been known as the source of
tech talent we’d like our story and our
capabilities to be the way businesses
around the world know Nepal and finally
there is the benefit to the ecosystem if
the company can invest a million dollars
sponsoring workshops conventions and
lobbying for the right change in the
policy it will mean a lot to the
ecosystem and whitie global startup
lives was in Nepal they were here for
months this was happened due to end cell
and the whole ecosystem benefited all of
these and more are needed for us to move
up the value chain the examples of few
countries are more instructive Sri Lanka
which has less population than Nepal has
Virtusa 20000 engineers this company has
really put Sri Lanka on the technology
map Vietnam has FTP FPT 10,000 engineers
nobody put Vietnam and Technology in the
same sentence before FPT came into the
picture and now Japanese people think of
Vietnam as the first option when they
the question is not can it be done the
question should be why has it not been
done so far Nepal for too long our story
has been that of dependency and foreign
aid
I hope the story changes to that of
Nepali resilience and Nepali
capabilities
perhaps I oversimplify but I know the
narrative has changed to that of
business I’ll leave you with the final
story in 1967 Lee Kuan Yew travelled to
Malta the sois canal had been closed for
many months because of Israeli and
Palestinian sick before but the dock
workers in Malta were being paid by the
British government they were pretty
happy playing water polo in the drydock
was there filled with water the
continuing charity had Archard a sense
of dependency not a spirit of
self-reliance Lee was convinced Sri
Lanka should not sorry Singapore should
not seek foreign aid and we all know how
that is worked out for Singapore there
is a fitting lesson for all of us and
want to close my talk on thank you [Applause]
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