The Faces of Nepal’s Tech Scene

Nepal’s technology sector is a tale of two contrasting realities. The first is a bright and widely publicized success story. The country’s IT services exports reached an impressive US$515 million in 2022, becoming the leading export, growing by more than 20% at the end of 2024.¹This is the face of Nepali technology that the world knows: a reliable and cost-effective business process outsourcing (BPO) hub that attracts international clients with its skilled and English-speaking workforce.⁴

But behind this success story lies another, lesser-known but potentially more valuable reality. It is the story of Pokhara-based Yarsa Games, whose mobile game Ludo has been downloaded more than 200 million times on Android devices alone – an audience larger than the populations of Germany and France combined.⁶This is the story of Incessant Rain Animation Studios, a Kathmandu-based studio that has created visual effects (VFX) and animation for global hits such as Mr. Robot, Lemony Snicket’s A Series of Unfortunate Events, and LEGO and Angry Birds projects.⁷

These “hidden champions” prove that Nepal has world-class creative and tech talent. But are they anomalies or the first signs of a nascent industry? This article explores whether Nepal can move beyond its reputation as an outsourcer to become a global creator of its own intellectual property (IP) in gaming, animation, and creative software. We examine systemic issues and, drawing on international success stories, offer a clear and actionable roadmap for building a globally competitive creative tech sector. The core tension lies in the contrast between a successful but less valuable model services and a struggling but more valuable model of creation products/IP The success of the first proves the potential of the workforce, making the difficulties of the second a mystery to be solved.

Current Landscape: Pockets of Excellence in an Emerging Ecosystem

The foundation for a creative industry in Nepal already exists, but it is fragmented and lacking cohesion. However, individual companies are showing remarkable results, proving the potential for growth.

The vanguard of mobile gaming

The undisputed leader in this field is Yarsa Games. Founded in 2016, it has grown to employ over 100 people, 70 of whom work in the gaming division.⁶Their journey from creating a few unsuccessful card games to the global hit Ludo illustrates the high-risk, high-reward nature of the industry and the power of persistence. After many failures, they stumbled upon a huge success that changed their trajectory.⁶Their ambitious goal of reaching 500 million users by 2025 is a sign of their global ambition.⁹

Other key players include Bhoos Entertainment and Tesla Tech, makers of another hugely popular mobile game, Callbreak.⁶Their focus on digitizing traditional card and board games is a smart strategy that taps into a culturally relevant and established market. Games like Marriage and Ludo Legend resonate with local and regional audiences, as evidenced by the more than 6.2 million downloads of Bhoos games.¹¹

Animation and Visual Effects Center

Incessant Rain Animation Studios (IRAS) is a benchmark for high-quality creative services. Their impressive portfolio includes work on international projects for major clients, including VFX for the series Watchmen and Da Vinci’s Demons, as well as animations for brands such as LEGO and Minecraft.⁷Most importantly, IRAS has taken a strategic step by opening the Incessant Rain Academy. This is a direct response to the talent shortage as the academy trains artists for careers in VFX, animation and game development by bringing in consultants from the Hollywood ecosystem.⁸This is a clear example of how the private sector is solving a problem that the public sector has failed to solve.

Hybrid Indie Studios and Service Providers

Companies like Arcube Games & Animation and Neo Digital are demonstrating a hybrid business model.¹³On the one hand, they create their own indie games (such as Arcube’s Naakaa and polyTricks or Neo Digital’s Hindu mythology-themed RPG Bramo). On the other hand, they offer a wide range of services to clients, including 3D animation, virtual reality, and advergame development.¹³

This dual model is not just a business strategy, but a survival mechanism. In a funding-starved ecosystem, working with clients provides the stable cash flow needed to fund riskier, passion-based projects to create original IP. This highlights the “capital dilemma” discussed below.

Ecosystem in the shade

Beyond these big players, there is a large informal ecosystem of small studios and freelancers.¹Conflicting data on the number of animation studios – Lusha indicates 8¹⁶, while Studio Hog claims that there are 0¹⁷— are indicative of the problem itself. This “data gap” shows that the industry is so fragmented and informal that even basic metrics are unreliable. The lack of transparency makes it difficult for investors to assess the market and for policymakers to develop effective measures.

Table 1: Nepal’s Creative Technology Vanguard – Key Players and Achievements

Obstacles to the World Stage

Despite the existence of “pockets of excellence,” there are four main obstacles that prevent them from coalescing into a dominant industry.

The Paradox of the Personnel Reserve

Nepal faces critical shortageexperiencedcreative and technical specialists, despite the fact that more than 10,000 IT specialists graduate every year.¹⁸The main factors are the brain drain (skilled professionals moving abroad) and fierce local competition from the high-paying BPO/outsourcing sector.¹⁹Creative startups simply cannot compete on salaries with firms serving American and European clients.³This dynamic creates a “gravity well of talent” that draws top talent from the country’s nascent creative industries into the more mature services sector.

The problem starts at the education level. Although ICT policies in education exist, their implementation is weak. Schools lack infrastructure, and teachers lack training and motivation.²¹Training programs are often out of date, forcing companies to spend months training new employees.¹⁹Moreover, the government’s quota system for admission of students to Nepali IT colleges actively restricts the supply of talent, while foreign-affiliated colleges have more freedom, exacerbating the problem.³

Infrastructure gap

Although internet penetration has increased significantly ⁴, the creative industry doesn’t just need access. It needs high speed, reliable and affordable connection, which remains a problem.¹Frequent power outages are also a major obstacle.²⁴

There are no specialised facilities. The government IT park in Banepa, intended as an innovation hub, has not lived up to expectations.²⁵There is a lack of high-end, specialized facilities such as render farms, motion capture studios, and sound stages, which are critical to producing high-quality games and animation. Due to these infrastructural limitations, most development is concentrated in the Kathmandu Valley.¹⁹

The Dilemma of Capital

Access to funding is one of the top five challenges for all Nepalese startups.²⁴Creative technologies, being inherently riskier than service businesses, face an even more challenging environment. There is a severe shortage of seed, initial and venture capital.²⁶

The Foreign Direct Investment and Transfer of Technology Act (FITTA) allows 100% foreign ownership of technology companies, which is a positive development.²⁸However, the minimum investment requirement of 20 million Nepalese rupees (around US$150,000) is a significant barrier for creative seed-stage startups seeking smaller initial investments from foreign angel investors.²⁸

In addition, a significant portion of revenue from IT services exports comes through informal channels such as hundi to avoid taxes and bureaucracy.²This money is not formally reinvested, which deprives the formal economy of capital and makes it impossible to measure the true size of the industry. This indicates a deep mistrust of the formal financial system.

Political puzzle

Government initiatives such as Digital Nepal and IT Decade are positive but too general.¹⁸They lack specific, targeted measures to address the unique needs of the creative industries (e.g. IP protection, R&D grants, venture capital). There is a strategic mismatch: the government is applying service industry thinking and policy framework to the creative, product-based industries.

Laws are often outdated (such as the transport law that hampered ride-sharing startups) or lacking for new technologies such as AI and the Internet of Things.¹⁹This creates a climate of uncertainty that discourages innovation and investment. Kathmandu’s designation as a UNESCO Creative City of Cinema is a major symbolic victory.³⁰However, without a concrete action plan and budget, it risks remaining just a title. The plan must go beyond tourism and focus on building a basic creative ecosystem.³¹

Roadmap for Creative Tech Revolution in Nepal: A Four-Pillar Strategy

The way forward requires a focused national strategy. Building on the successes of Poland and Vietnam and the cautionary lessons of Finland, a concrete strategy can be proposed with four pillars.

Pillar 1: Building a World-Class Talent Ecosystem

Problem to be solved: The paradox of the personnel reserve.

• Suggested solutions:

• Radical education reform: It is necessary to move from policy documents to actions. Create public-private partnerships in which industry leaders (such as IRAS, Yarsa) will work with universities to develop curricula so that graduates have marketable skills.¹²
• Eliminating counterproductive quotas: Immediately lift the government-imposed quotas for the admission of IT students to domestic universities so that the supply of talent can meet demand.³
• Creation of the “Creative Talents Fund”: Establish a public foundation inspired by the Finnish Arts Promotion Centre (Taike)³³, which will provide small grants to individuals and teams to enhance their skills, participate in international workshops and develop early stage prototypes.
• Promotion of creative professions: Launch a national campaign similar to the Polish campaign to promote programming³⁴to present game development and animation as viable and prestigious career paths, shifting the cultural mindset away from traditional professions.

Pillar 2: Laying the Foundation: Targeted Policies and Infrastructure

Problem to be solved: Political puzzle and infrastructural gap.

• Suggested solutions:

• Launch of Nepal Games and Animation Fund: Create a special state fund based on the model of the very successful Polish GameINN program.³⁴The fund will co-invest in R&D for ambitious projects to create original IP, sharing the risks with private studios.
• Introduction of “Refund for Original IP”: Shift tax incentives from general IT services to incentives for the creation and export of original intellectual property. This could be a cash refund for production costs incurred in Nepal, similar to the Finnish incentive for audiovisual production.³⁵
• Modernization of IP and corporate law: Accelerate the creation of clear, modern rules on intellectual property, digital commerce and new technologies to create a predictable and secure business environment.¹⁹
• Privatization and specialization of IT parks: Instead of one state-owned IT park, create a policy to encourage small, private, specialized creative hubs (e.g. GameDev Hub or Animation Cluster) with subsidized access to high-speed internet and reliable electricity.¹⁹

Pillar 3: Fueling the Engine: Creating a Conducive Investment Climate

Problem to be solved: The dilemma of capital.

• Suggested solutions:

• Tiered minimums for FDI: Reduce the minimum foreign investment threshold from ~US$150,000 to a more affordable level (e.g. US$25,000) specifically for registered creative technology startups.²⁸This will open up access to critical angel and seed funding from abroad.
• Creation of the NEPSE-Tech index: Work with the Nepal Stock Exchange to create a dedicated index for technology and gaming companies, similar to the Warsaw Stock Exchange’s WIG-Games index.³⁷This will provide a clear path to liquidity for investors and founders.
• Formalization of investment channels: Simplify the process of legally receiving foreign payments for startups and repatriating profits for investors.²This will help combat reliance on informal channels and attract more capital into the formal, taxable economy.

Pillar 4: Promoting the Story: Building a Global Brand ‘Made in Nepal’

Problem to be solved: Low global visibility and fragmented market access.

• Suggested solutions:

• Launch of the Himalayan Game Fest: Create a flagship international conference on game development and creative technologies in Kathmandu, modeled on Finland’s Slush.³⁹It will become a marketplace where Nepali talent can meet global publishers, investors and the press.
• UNESCO status activation: Transform “Creative City of Cinema” from a title into an action plan.³¹Use it as a platform for international film and animation workshops, co-production markets and to brand Kathmandu as a hub for creative talent.
• International promotion funding: Create a state program similar to the Polish sectoral promotion program⁴⁰, which will provide grants to Nepalese studios to participate in major international exhibitions such as GDC (Game Developers Conference) and Annecy (for animation).
• Lessons from Finland’s ‘Supercell Syndrome’⁴¹:
  The branding message should be based on variety And sustainabilityNepali ecosystem, and not just being home to one or two hits. Promoting a wide range of talent, from mobile games to VFX, will help avoid the trap of being too one-dimensional.

Table 2: Strategic Roadmap for Creative Technology Industry in Nepal

Conclusion: Beyond Outsourcing Is a Creative Everest to Conquer

Nepal is at a critical crossroads. It has proven its technical execution capabilities through a successful outsourcing industry. It now faces a choice: remain a service provider, competing on cost, or move up the value chain and become a creator of high-value, globally recognized intellectual property.

The way forward does not lie in hoping or waiting for new “accidental champions.” It requires a targeted, four-part national strategy that focuses on developing talent, implementing targeted policies, stimulating investment, and building a global brand. The success of countries like Poland and Vietnam shows that this is not a pipe dream; it is a matter of strategic choice and consistent execution.

The journey from a service economy to a creative power is like climbing a new Everest. It is difficult, requires a great deal of preparation and the combined efforts of government, industry and the education sector. However, the view from the top – a thriving, innovative and globally respected creative economy – is a prize worth climbing.

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