It has been a dream year for the Pakistani Startups, where it has emerged as a significant force in the overall business trajectory of the country. During the calendar year 2021, the Pakistani Startups have received investments of more than USD 233 million, which is not only the highest ever investment in any year but is also more than the combined investment received in the last five years. This investment is also more than the PKR 20 billion capital raised in PSX through IPOs. The major sectors that benefited from these investments were eCommerce [B2C and B2B], Freight and Trucking, Fintech, Health and Fitness, and Education.
All this is great, but now what? What’s next in store for the Pakistani Startups, and what should be done to keep the momentum going.
Current trends and potential
When the head of state tweets about the most significant Series B funding raised by a startup and the President gives an opening statement of the first-ever startup conference, it is for sure that Pakistani Startups are now making their existence felt. So what’s the trend, and what potential are we talking about. Let’s see each of them in detail.
- Large Market – Pakistan is currently the fifth largest population globally, with a median age of 22 years. This large population has two-fold benefits: we have a large market to serve and a young workforce to deliver. Therefore, we need to channel the young force towards the future-ready skills and get the brightest of ideas and innovation in the market to get the ball rolling.
- Untapped Sectors – Our startup ecosystem is expanding, but it’s still limited to confined industries and services. There are still many more sectors that can be explored further, such as agriculture, healthcare, etc. There are many more cherries to pick.
- Untapped Potential – There is still much more to explore in the industries and services where the investments are raised. We are still in the infant stage in eCommerce, fintech, trucking, etc. There are many more investment rounds to come, and much more expansion is required. There is still more juice to be squeezed.
- Digital Ready – There is no doubt that the Covid-19 was managed well by the current political regime of the country, and where most economies collapsed, we just felt some minor hiccups. On the contrary, Covid-19 helped increase the pace of digitalization in many sectors in Pakistan. The online marketplace has seen a boom in the country and many other digital habits that have grown exponentially due to Covid-19.
- Internet Penetration – As per a study conducted by Google and Kantar, internet penetration in Pakistan was 56% during the year 2021, of which 46% of users access the internet every day. Further, in the major cities like Karachi, Lahore, and Islamabad, about 76% of the population is connected to the internet. These are healthy numbers and show an increasing trend in the use of smartphones, which makes it easier for startups to find a digital market for their products and services.
These are just the beginning of a long journey ahead, and we should get ourselves bogged down with the limelight that we have received. We should be mindful of the challenges that may hamper the growth of the startups.
- Regulatory Support – Even though the regulatory bodies have taken some steps to make the inception of the startups easier, but there is still more support to be provided to this booming new wave of investments. Especially the taxation authorities need to play a pivotal role in providing incentives, and steps should be taken to make the taxation process simpler and more transparent to allow this new marketplace to grow and offer an excellent return to the exchequer.
- Talent – There will be lots of new opportunities available for the youth of our country. However, the new ways of business will require different skills, and unfortunately, our education sector is not well equipped in this regard. We need good remodeled business schools, engineering schools, tech universities, and many more to get our youth up to the mark of others in the world. Unfortunately, the current group of startup leaders is all qualified from foreign universities, which needs to be changed very quickly.
- Value Addition [Exports]– The current startups are all good in transforming the work into a digital platform within Pakistan. For, e.g., eCommerce startups are transforming physical stores or distribution networks into digital media, which is good, but that’s not generating additional wealth in the country. That is just converting the ways of doing business in the country. The overall output remains the same. The startups should now focus on exporting goods and services or replicating the same digital platform to other countries to bring the foreign reserves back in the country in dividends.
- Increase Due Diligence – The initial investment rounds are excellent and do not require detailed due diligence by venture capital firms. However, as the startups progress in their investment rounds increased, their financial systems will be carried out, which will be a challenge. More focus will be made on compliance which the startups should be mindful of.
The startup community needs to be careful and not get carried away with the recent hype it has gained. We all should remember that not all startups will be able to create a triumphant story of themselves; there will be some failures on the way as well. The growth and trend should be sustainable by making the house in order but not following the herd mentality and not falling into a trap that will make it another Dot.com bubble that can burst.