Venture Capital and Private Equity For Bhutan’s Digital Economy

According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2025, “Venture capital and private equity funds are emerging as key players in the digital economy.” This trend is reshaping how digital innovation is financed and scaled globally—and it carries timely relevance for Bhutan’s aspirations in digital transformation, youth employment, and economic diversification.

Understanding Venture Capital and Private Equity in the Digital Economy

Venture capital (VC) refers to funding provided to early-stage, high-potential startups—particularly in sectors such as fintech, e-commerce, artificial intelligence, and digital services. These companies are typically young, unprofitable, and risky at inception, but hold the potential for rapid growth. In addition to capital, VC firms bring strategic guidance, mentorship, and access to networks, enabling startups to scale effectively.

Private equity (PE), on the other hand, targets more mature businesses that require capital for restructuring, expansion, or digital transformation. PE firms often acquire a controlling interest and focus on operational efficiency, scalability, and long-term value creation before exiting the investment.

In the digital economy, both VC and PE funds play vital roles. VC supports digital innovation by nurturing startups, while PE accelerates digital transformation by scaling or modernizing existing companies and infrastructure.

Why VC and PE Are Critical to the Digital Economy

Venture capital and private equity funds are more than just financial investors—they are strategic drivers of the digital age. Their contributions include are huge beginning with fueling innovation by providing early-stage capital where traditional financing is unavailable. They shape markets by influencing which technologies and platforms are scaled or mainstreamed.

They create employment and economic value through investment in high-growth sector, digitize traditional industries by supporting tech upgrades and operational modernization and accelerate economic inclusion by backing entrepreneurs and startups across geographies.

In emerging markets, their role is particularly transformative—providing the capital and expertise needed to leapfrog into digitally enabled development.

Relevance and Opportunity for Bhutan

Bhutan stands at a pivotal moment in its economic journey. With a growing pool of tech-savvy youth, rising entrepreneurial interest, and government focus on digital transformation, the conditions are ripe for developing a robust digital economy. However, one of the most significant barriers remains access to risk capital.

Venture Capital can help through seed funding for startups in fintech, e-commerce, e-health, edtech, and agritech. They can accelerate scaling of Bhutanese innovation with access to global networks and mentorship and reduce dependence on government grants or donor funding, which are often limited or slow-moving.

On the other hand, Private Equity can help by investment in digital infrastructure, such as data centers, cloud services, and cybersecurity platforms. Digitization of key sectors, including tourism, agriculture, and manufacturing, to improve competitiveness is another area, They play a role in strategic guidance for traditional businesses seeking to adopt technology and modern business practices.

Currently, Bhutan’s digital development is primarily financed through public budgets and international development aid. While critical, these funding streams are finite and cannot keep pace with the speed of digital innovation. VC and PE offer a complementary, market-driven financing model that unlocks private sector participation and innovation-led growth.

Strategic Benefits for Bhutan

A digital economy supported by VC and PE investment could deliver wide-reaching benefits, such as job creation in high-value and future-ready sectors, youth engagement and retention, helping reverse rural-urban and international migration trends, entrepreneurial ecosystem development, enabling Bhutanese innovators to build global solutions and by attracting impact investors focused on ESG (Environmental, Social, and Governance) principles, aligning with Bhutan’s strong cultural and environmental values.

Furthermore, Bhutan has the potential to position itself as a niche player in South Asia’s digital landscape, especially in areas like green technology, sustainable tourism platforms, and digital health solutions.

Enabling the Next Phase of Bhutan’s Economic Evolution

Venture capital and private equity are not merely sources of capital—they are enablers of transformation. For Bhutan, fostering an environment that attracts and leverages VC and PE funding can unlock untapped entrepreneurial potential, modernize traditional sectors, build resilient digital infrastructure, stimulate private sector growth and diversify the economy beyond hydropower and tourism

To fully realize this potential, Bhutan must create a conducive ecosystem for innovation and investment—with investor-friendly policies, digital readiness, and a national strategy that encourages collaboration between government, entrepreneurs, and global capital providers.

Nidup Lhamo from Thimphu