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Twinkle, Twinkle Little Stars

The season for start-ups is ripe in Pakistan. Challenges created by the pandemic can be turned into opportunities.

By Daniyal Talat | April 2021

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A start-up is a young business created by one or more entrepreneurs to create and sell a new product or service.There is no single definition of a start-up. One of the first tasks of a start-up is to collect a large sum of capital to further improve the product. To do so, they need to make a strong case, if not a concept, that supports their point that their concept is genuinely unique or a major improvement over something in the market. If we talk about Pakistan, the nation was named one of the Asia’s fastest-growing economies in McKinsey & Co’s new study on the Pakistani ecosystem. The same study found that 720 start-ups have been produced since 2010, 67% of which are now in operation with 100 successfully raising funds. Hena Husain, founder of London-based communications start-up The Content Architects says, “Pakistan’s tech ecosystem has been slowly gaining momentum in the last few years.”

For those who are familiar with Pakistan’s start-up scene, it is hard to tell exactly what sparked its rise. The tech sector rose organically, according to Iskander Pataudi, a Pakistan-born tech specialist working in Berlin. Tech is booming all over the world and Pakistan is an untapped market. It was only a matter of time before consumers begin to take care of it. Of late, many Pakistani start-ups have started picking up, while a few have raised capital from both foreign and domestic markets. Though some start-ups in Pakistan have left a mark at the local and international levels, the country’s progress towards promoting its start-up companies is far below its immense potential. On the surface, Pakistan’s position in the World Bank’s Ease of Doing Business report jumped from 136th place in 2018 to 108th in 2019.

Asif-javedThe economy of Pakistan is always on ventilator. Compared with its exports, its imports are many, so there is a significant commercial deficit. What is needed is short-term and long-term steps to cope with these challenges. Pakistan is capable of developing high-quality entrepreneurs and is thus a natural major source for risk capitalists. There are good start-ups in the country. These include Zameen.com (29 million USD), Pakistan’s best-supported start-up that enables properties in major cities to be owned and leased. Airlift ($14.2 million) is a public transportation app that offers the option to ride on fixed routes, Rozee.pk ($8.5 million), post employment for his current business.Today, Rozee.pk is a website for employers and job seekers. Bykea (5.7 million dollars), is a trip grinder and distributi on business on demand and Inov8 is a ground-breaking approach for B2B payment established in 2004, which represents 5.4 million dollars. It is focused on mobile banking, E-commerce, and industry-free banking.

Pakistan has a promising start-up ecosystem. As a young entrepreneur, you launch a company that will make you survive a full lifespan. Sadly, age can contribute to social expectations seeking to make young people more accountable than money. When coping with contradictory social actions and other resistance to ageing, you must also face all the scrutiny from someone who wishes to become a businessman. In their twenties, people have no time to build their bank accounts and even to finish paying off their student loans. It is doubtful that banks or financial institutions will lend to people who are already building loans and equity that can be used in the case of credit defaults. Other sources of start-up funding, such as risk capital or angel investment, are incredibly hard to access because investors are normally searching for start-ups with momentum and a high potential for success. For emerging entrepreneurs with little personal resources, very little sources of funding are available.

While young entrepreneurs encounter many obstacles, even though the odds are stacked against their aspirations, they should not be discouraged. Young entrepreneurs must instead gain external funding and inspiration. Although a contractor struggles, the lessons learned can be the knowledge that an entrepreneur needs to succeed in his/her next company. True entrepreneurs will find ways to overcome these barriers. Your place in the world of business depends on how you travel through the barriers and don’t believe you can automatically make a buck; it will take few years before the organization makes money consistently.

The rising economic uncertainty during Covid-19 has caused a lot of start-ups to reconsider their strategy for the future. Survey data shows that 52% of the respondents postponed their expansion plans and 61% cancelled already scheduled hiring decisions during Covid-19. Considering this, analysts have recommended that start-ups intend to succeed by bootstrapping and saving as much financial capital as possible.

This is also a challenge for future fund-raising, according to analysts. Venture capital in Pakistan faces a far greater challenge as a high-risk asset class. Many local investors would more likely give priority to their current portfolio companies rather than investing in new ones. While we have never experienced a pandemic of a magnitude that has literally paralysed 80% of the world, past economic recessions have taught us that this period is also a time for opportunity. Companies like WhatsApp, Venmo and Uber were all born soon after the 2008 recession. All eyes are on Pakistan as how can start-ups in in this country use this period to be adaptive and innovative to not just survive the current pandemic but thrive even afterwards.

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