According to McKinsey, Pakistan, home to over 200 million people, is one of the fastest growing economies in the world. With 64% of the population below the age of 30 and 23 being the median age, Pakistan has one of the youngest populations in the world with a growing middle-class. Therefore, it’s no surprise that smart phone users are growing substantially as well.
There are still numerous challenges that pose a hurdle to an entrepreneurial mind-set such as security concerns, power shortages and an up-and-coming digital infrastructure. Despite these challenges huge strides have been taken and a lot talent is emerging from the country.
While Pakistan has the right intrinsic drivers to house high-valuation start-ups, the country needs dedicated effort to realize its full potential.
As we contemplate where the ‘next big thing’ might come from in 2022, it’s worth paying close attention to the frenzy of business activity in Pakistan.
The first half of 2021 was truly unprecedented for Pakistani start-ups. According to data compiled by Data Darbaar, total investment into the country’s ecosystem topped $125 million across 35 unique deals during this period, almost doubling the total raised in all of 2020 when 48 total deals were completed.
There were also tantalising glimpses of big name VC investors in the country last year, notably Kleiner Perkins leading Tajir’s $17 million Series A in June 2021.
Add to this, the recent ‘zero’ tax announcement by the Prime Minister for freelancers and individuals in the IT industry will also bring more talent to the front. By launching National Tijarat (business) Portal, the government has taken steps to remove barriers for the youth to explore the tech industry. The leadership’s vision is for the country to reach $50 billion in tech export in a few years. Not an unexpected task I feel.
So, what’s the appeal of Pakistan suddenly? In one word: opportunity.
People have woken up to the fact that Pakistan has one of the world’s largest youth markets. It also has one of the largest unbanked populations, with about 100 million adults without a bank account.
Additionally, 3G/4G phones have become affordable and access to the internet is now widespread. Pakistan has 85% tele-density, with 183 million mobile phones, 98 million 3G/4G phones, and 101 million internet subscribers.
You don’t have to be a financial genius to see this is a market ripe with potential for making serious profit.
Another reason for the sudden acceleration is that the Pakistan government is working hard to improve infrastructure and make it easier for start-ups and investors to operate. Last year, Pakistan was the fourth biggest positive mover in the World Bank’s ‘Ease of Doing Business Index’.
National and provincial incubators have been set up on the government level and introducing tax relief for three years is certainly a great incentive in this space for companies setting up in Pakistan. Regulations are being put in place for venture capitalist firms and investors to launch their set-up in Pakistan. Private sector is looking into creating more opportunities for investments in this segment.
As the first quarter of 2022 comes to an end, the future of new digital businesses coming from the most unexpected country in the world, looks extremely bright.
If you’re wondering where all these exciting new start-up CEOs are coming from it’s worth looking back to Pakistan’s first start-up wave back in 2013 when three unicorns emerged: Careem, the vehicle hiring company with a Pakistani founder AI software company Afiniti; and fleet management company KeepTrucking.
These companies ignited the country’s start-up ecosystem, training thousands of individuals on how to set up and develop their own. Many of today’s entrepreneurs and founders of Pakistani start-ups are ex-employees of these firms.
It will be fascinating to see what they create.