Technological
Booming Start-up Ecosystem of Pakistan
The startup ecosystem of Pakistan is growing every day. At some point in the
journey of a startup, the question about investments comes up. This is the point
where the founders have to decide whether they want to scale their businesses
with or without an investment. While we’re still in the early stages of the
ecosystem, we see that the building blocks are very much there. I haven’t come
across a single ecosystem that is perfect before different stakeholders get
involved. So, we can’t expect the ecosystem to be perfect and that’s an
opportunity because there are a lot of things to be fixed as well. The most
important building block is inculcating the mindset in the youth that
entrepreneurship is a viable career choice. We’ve made tremendous strides in
that regard during the last 3-5 years. Government, donor agencies, universities
and other stakeholders have supported this. The second big component is the
uptake of 3G and 4G and an increasing digital penetration. The final piece is that
some of the underlying businesses, as a result of increasing Internet penetration,
are seeing increased traction. VCs and capital coming into this asset class is
increasing – this will enable startups to grow exponentially. We’re yet to see a
flurry of companies emerging, there are some that have already reached that
level. One such example is of [Link], the premiere real estate website,
which now has a very decent valuation.
When you look at the entrepreneurial ecosystem of Pakistan, there’s good news
and there’s bad news. The good news is that when you compare it with the
condition that was there 5 years ago, there are at least 25 accelerators and
incubators in existence in Pakistan. The locations where people can go and
learn about being entrepreneurs didn’t exist previously in Pakistan – that’s the
good news. The not-so-good news is that we have limited seed capital available.
There are hardly any VCs or angel investors available – local or international. The
lack of capital is causing a high degree of failure of startups. The natural
percentage of startups failing globally is 90% in any case; with the dearth of
capital available, our percentage goes up. Unfortunately, our local family offices
– individuals of high net worth are not investing in startups at all. Lack of capital,
at the moment, is a real showstopper for Pakistan’s ecosystem. The second
thing is that the ecosystem does not support startups in the sense that getting a
simple bank account is a challenge for startups. There are no significant tax
benefits for people who are investing and those people who are receiving the
investment.
The entrepreneurial ecosystem has grown significantly over the last five years –
there are more competitions, startups, support organizations, investors, you
name There are multiple events happening every weekend – that activity is
something to be proud of. However, while the increased activity is certainly
exciting, and the government’s move of launching National Incubation Centres
signaled an investment by the public sector in the startup landscape, the
business-enabling environment is still very, very poor, and very debilitating to
entrepreneurs and investors alike. The taxation policies still need to be improved
significantly, the issue of payments and how money flows in and out of the
country are all massive problems – the list goes on. The poor enabling
environment ultimately creates a ceiling for the potential growth of the overall
ecosystem – we can have all this incredible activity happening on the ground,
but it can only grow so far thanks to these regulatory barriers.