- County can become a land of opportunity for investors within present initiatives to foster entrepreneurship
Pakistan being the world’s fifth largest nation, approaching 230 million had lagged in attracting global funding compared to the MENA region up until 2019. Pakistan in 2021 raised approximately $366 million in Venture Capital (VC) funding. Compared to MENA, the ratio of 80 to 1 has now become seven to one. Within the last two years combined, funds raised through VCs have gone above $600 million.
Looking at the statistics from over a few years, Pakistan demonstrates itself as a country of interest for both local and global investors. However, the funding scene in Pakistan did face a downward trend towards the end of last year and in the first quarter of 2023. This, however, was not a reflection of its market potential, as per experts, but rather due to the central economic issues facing Pakistan. As well as due to the global developments where interest rates had globally gone up. Earlier in 2021, interest rates were almost zero, giving higher yields in the global economy, compared to recently where a rather risk free rate is 5 to 6 per cent. Regardless of a downward turn, we still see Pakistani startups attracting funding from VCs, because Pakistan holds tremendous potential for funding to flow in the country, and we see that there are many roots that have been grounded due to which Pakistan still remains as a hot space for the startup ecosystem to flourish.
Following developments are the icing on the cake for country’s startup industry sectors:
- Since the last few years, there has been a development in the infrastructure for startups, where multiple accelerators, incubators, and co-working spaces have emerged across the country, providing a supportive base to the ecosystem. These organisations provide entrepreneurs with tools of mentorship, networking opportunities, and guidance on funding, therefore laying grounds to innovate, take risks, and build products from its seeding stage until growth.
- The Government of Pakistan has introduced various policies and initiatives to support the startup ecosystem, as it recognises the importance of startups in driving economic growth and job creation. “Startup Pakistan” programme for instance was introduced to provide mentorship, funding, and other resources to entrepreneurs, with the aim to create 10,000 technology-based startups in the country by 2023. The “Digital Pakistan” campaign was launched to promote digital transformation and innovation across various sectors. Tax incentives have also been introduced. The government also implemented measures to improve the ease of doing business in Pakistan. These include minimizing the cost and time required to start a business, simplifying the process for company registration, and streamlining regulatory procedures. Tax incentives, like tax exemptions for startups for the initial years of operation, tax credits for research and development activities, and reduced tax rates for angel investors, also encourage startups and promote investment in the sector. There have also been measures taken to strengthen intellectual property protection laws by the government to safeguard the rights of innovators and startups. This lifts off the fear of intellectual property theft, and creates a conducive environment for startups to develop and commercialize their ideas. In various cities across Pakistan, there has also been an establishment of Special Technology Zones (STZs) which provide infrastructure and facilities to technology-based companies and startups. With reduced regulations and access to a skilled workforce. Such policies and initiatives by the government will foster entrepreneurship in Pakistan, playing a crucial role in attracting both local and foreign investment, making Pakistan potentially a country of choice in the MENAP region in the years to come.
- Besides external factors supporting the ecosystem, Pakistan itself has experienced a digital transformation in recent years. The widespread availability of affordable smartphones and with more than 100 million mobile broadband subscribers, the increasing internet penetration has opened up new opportunities for startups to reach a larger customer base. Due to which we see a rise of mobile app-based startups, online service providers, digital marketplaces, contributing to the overall growth of the ecosystem. With an overwhelmingly young population, with a median age of 22, Pakistan places itself as a fertile market for new enterprises and digital services.
- Pakistan has a large pool of talented individuals, particularly in the technology sector. The presence of skilled software developers, engineers, and designers can be an advantage for startups, providing them with the necessary talent to develop innovative solutions. Pakistan also has a large diaspora spread across the globe, including many skilled tech professionals. These individuals bring their expertise and knowledge back to Pakistan through collaborations, investments, and mentorship, further enriching the local tech talent pool.
- With startup success stories in various sectors, like Careem (ride-hailing), Bazaar (B2B e-commerce), Daraz.pk (e-commerce), Zameen.com (real estate), Patari (music streaming) and Etimad Online (Grocery quick e-commerce), there has been a rise in the entrepreneurial spirit among the youth. More and more young individuals are choosing to start their own businesses rather than seeking traditional employment.
Going forward it seems Pakistan has all the grounds for a fertile ecosystem. With sustained support from the government, availability of funding, and the ability of startups to leverage emerging technologies and address market needs effectively, Pakistan can become a land of opportunity for investors both locally and globally.