Unlocking the potential

All the players in the ecosystem should help cultivate local talent in a systematic fashion

Unlocking the potential

Can Pakistan be the next big thing in the world of tech startups and enterprises? By one measure, venture capital investment, it is still in the initial stages of the S-curve of entrepreneurship.

Venture capital investment in the United Arab Emirates, the regional leader, is worth $20 per capita. In Pakistan, it is $0.10. Even Bangladesh, which has a lower per capita income than Pakistan, has more venture capital per capita. Amongst its peers, Pakistan’s startup growth has lagged behind. There are fewer startups and less funding than in otherwise comparable countries, such as Nigeria.

Pakistan should have a flowering start-up scene. With 140 million people under the age of 30, a fourfold growth in data-enabled mobile phone connections in the past three years, and the economy projected to grow at ~6 percent per year through 2026, the startup environment is quite unenviable. There should have been myriad entrepreneurs, significant venture capital investment and promising start-ups with a clear path to becoming unicorns, i.e., with over $1 billion valuations. But that is not the case.

However, there are other indicators pointing towards an entrepreneurship-based growth pattern. Besides the youth bulge, Pakistan is one of the growing economies in Asia. As the country continues to develop, it is expected to have an additional 2.1 million middle-income households by 2025.

Connectivity is also increasing with the number of 3G/4G subscribers rising four-fold in the last three years and demand for digital services expanding. The country’s e-commerce market beat analysts’ predictions to cross the $1 billion mark in 2018.

Startup activity has surged as businesses emerge to satisfy unmet demand across the country. The government has taken the lead by building national and provincial incubators, introducing a three-year tax relief and making regulations to allow local venture capital (VC) firms and investors to set up shop in the country.

The private sector has followed suit, with the emergence of incubators and accelerators supported by foreign organisations, such as Google’s Nest I/O in addition to new, local VCs. Entrepreneurship is already on the rise in Pakistan, reflecting a broader global trend and increased digital consumption in the country.

Some of the biggest funding deals in Pakistan have taken place in recent years, highlighting the vast opportunity for local startups and increased investor focus on a country that is yet to produce its first high-valuation startup. Despite the smaller scale, we can see the emergence of three key components of the startup ecosystem: government engagement; support for talent; and linkages to global incubators and VCs.

These elements suggest that Pakistan is ready for a lift-off, but significant changes are required from both the government and the private sectors. Pakistan should adopt a three-pronged approach to develop the startup ecosystem: improve policies and regulation, provide access to funding and develop talent to drive innovation. Across each lever, the government and the private sector must work together to support an economy that is ready to take off.

As a first step in the right direction, the government must endeavour to design enabling policies and facilitating infrastructure. It needs to simplify procedures for doing business to encourage formalisation, e.g., building a “one-stop shop” for business registration and filing taxes. That should be followed up with the provision of investment in the enabling infrastructure. Structuring and facilitating the payments gateway can be one such initiative. Another can be modernisation of the huge public sector mail delivery system through Pakistan Post.

Secondly, the private financial institutions and individual groups should come forward. They need to provide funding in line with the international best practices. These include the development of robust investment theses leveraging local context, capturing and proactively engineering the network effects, investing at scale, managing performance with a patient growth mindset and secure investment independence in governance.

Thirdly, all ecosystem players should come forward and help cultivate local talent in a systematic fashion. The existing university network should be encouraged to grow entrepreneurship. Digital skills should be introduced through the network of vocational institutes across Pakistan, and the white-collar diaspora should be connected to innovation in the country

Despite being densely populated with a consumption-led economy and the right intrinsic drivers to attract startups, the startup ecosystem is still nascent. The good news is that the country has a burgeoning middle class and a young population that is rapidly becoming digital-savvy.

In order to take the next big leap, a robust collaborative eco-system between the government and the private sector is needed. The former can nurture an environment that facilitates the growth of startups at seed level while the latter should be looking to create value through funding. Together they can foster the kind of talent needed to engage the digital revolution in a country that is ready to take off.

The writer is Pro Rector at NUML University


Entrepreneurship is now a popular college major, with a focus on new venture creation

By Shahzada Irfan Ahmed

Sidra Qasim and Waqas Ali have set up a business and a brand. Waqas found local artisans in Okara making hand-made leather shoes. He convinced them to sell their shoes online and proposed a brand name, Markhor (the national animal of Pakistan).

Today, Markhor shoes are being shipped to several parts of the world. Waqas has been delivering customised shoes at the doorsteps of customers as far as the United States.

Sidra, a family friend, has joined hands with him. They have learned that some of the most well-known luxury brands have been working with craftsmen in developing countries like Pakistan, India and Vietnam but rarely talk about them.

Sidra says it has been a tough journey. She says nobody initially took a young person seriously. “In other words, investors, vendors, customers and potential partners did not give him what he wanted.” Waqas needed a partner who could match his ambition and make up for his shortcomings. Once Sidra came on board, she, too, faced challenges that were no less daunting. Selling shoes online has not been easy.

Sidra and Waqas are perfect examples of entrepreneurs who thought out-of-the-box, turned their dreams into reality and made profits. Both took courses to learn about the digital word and its dynamics.

By definition, entrepreneurship is both the study of how new businesses are created and the actual process of starting a new business.

Entrepreneurs are crucial to the national economy as they create jobs. Given that more than 60 percent of the country’s population is below 25 year of age, job creation is very important.

Today, entrepreneurship is a popular college major, with a focus on studying new venture creation. Educational institutions like the Lahore University of Management Science (LUMS), the Institute of Business Administration (IBA) and the Quaid-i-Azam University have started degree courses in entrepreneurship.

Arshad Bajwa, a LUMS graduate, says the LUMS Centre for Entrepreneurship (LCE) aims to formalise the institution’s support for entrepreneurship. He says the LCE aims at building a comprehensive entrepreneurial ecosystem that will bring together everything and everyone required to realise the growth potential of Pakistani entrepreneurs.

He says through its National Incubation Centre (NIC), the LCE connects donors and investors with budding entrepreneurs so that they can give practical shape to their ideas. Besides, he says, the centre is also looking for seasoned entrepreneurs to join its Mentors’ Network and guide the affiliate startups.

The initiatives

Plan 9 and Plan 10, launched by the Punjab Information Technology Board (PITB) are relevant here. Under Plan 9, potential entrepreneurs were shortlisted from all over the country and provided space and necessary facilities to develop their ideas. Those who qualified were introduced to investors who could put up money to support the theme a team had developed. This type of investment is called angel funding. It helps market the idea, set up offices and meet other expenses required to establish a business.

Economist Dr Qais Aslam believes that entrepreneurs are basically risk-takers. Technically speaking, all small businesses fall in this category. “Even big businesses are entrepreneurs till the time they are listed on the stock exchange,” he adds. Aslam says small and medium enterprises are great examples of entrepreneurship because they are surviving in tough times and finding innovative ways to sustain themselves. “For example, if we look at the manufacturers along the Lahore-Gujranwala-Sialkot belt we find entrepreneurship in their roots. They are improvising their products and finding orders in the local as well as international markets.

He says the increase in petrol and gas prices, interest rate hikes, high sales tax, power tariff escalation, etc., have put businesses under severe burden which is discouraging for entrepreneurs. “It is therefore requested of the government to offer a special relief package for entrepreneurs so that they can work on their ideas. Many a time, government representatives have said that entrepreneurship is key to economic growth and job creation.”

A technology-based business plan does not always require huge funding for its implementation. Entrepreneurship training is being provided not just by leading universities; the Technical and Vocational Training Authority (TEVTA), Punjab, is also offering micro-entrepreneurship courses. It trains people in self-employment skills. The students are also connected to lending agencies offering soft loans.

Unlocking the potential