Pakistan’s tech eco system – an overview

What’s lacking?

70pc of Pakistan’s youth is less than 30 years old and internet penetration has increased from 10pc to 18pc in 2017. It’s a low broadband penetration as out of a total of around 200 million people, only 36 million people are online

Entrepreneurship is the key for progress of the world. The big tech giants of the world, e.g. Google, Facebook or booking.com were, just a decade back, tiny startups which due to the presence of a strong ecosystem in their respective countries were able to scale at such a massive level. Startups cannot survive without a proper tech eco system established around them. Making an analogy with the natural ecosystem, the tech or the startup ecosystem is a mutually beneficial system with inter related entities working to support the startups by helping in creating new startups and scale existing ones.

In Pakistan, the entrepreneurship discourse became talk of the town just 2–3 years back. Now, Pakistan’s ecosystem has graduated from an infant to a premature stage and thanks to the efforts made by the various stake holders, the government is also giving equal importance to it which is laying the foundations of a vibrant startup community. An entrepreneurial ecosystem depends on existing infrastructure fundamentals required for startup growth e.g. broad band and mobile penetration in the country, literacy rate, government policies, the non-profit organisations working for the support of entrepreneurship in the country, numbers of incubators and accelerators in a country, the network of angel investors, and formal venture capital and equity investment companies in a country.

Pakistan is a market ripe for entrepreneurship and technological innovation. 70pc of Pakistan’s youth is less than 30 years old and internet penetration has increased from 10pc to 18pc in 2017. It’s a low broadband penetration as out of a total of around 200 million people, only 36 million people are online. But, encouragingly, the growth is fast. According to one source, every month one million mobile users are coming online through their phones every month in Pakistan. The active social media users constitute about 16pc of the total population while active mobile social users constitute about 14pc of the total population. However, active social media users are registering a growth of 35pc year on year. Similarly, like other developing markets, Pakistan is rapidly moving towards a mobile first market. According to the data by the hootsuite and we are social, two leading digital media agencies, 70pc of the Pakistan’s web traffic comes from mobile phones. Recently an interesting report was published about the Pakistan’s entrepreneurial ecosystem. According to the report, 23pc of the Pakistan’ youth want to start their own business, a no. they took from the UNDP data. But the report also states that this 23pc is clueless about the procedures and the requirements of the business.

The most important stakeholders in an entrepreneurial system are the incubators and accelerators. Making an analogy with the child incubator, incubators allow the startup to breathe and give it oxygen by providing free office space, internet, and most importantly mentorship for the first few months of its existence. They also help them in connecting with the potential investors for their startups. An accelerator is meant to accelerate an already founded startup which is in operational phase. Since 2014, many new incubators and accelerators have been formed in the country. The most important ones among them are the LCE (LUMS center for entrepreneurship), Plan 9, and the P@sha (Nest i/o). The other considerable ones are women X, we create center,Founder’s institute, Revolt and NUST technology incubation center. The federal government has also launched a national incubation center in Islamabad with the help of Mobilink. Among the accelerators are the Plan X, i2i (Invest to innovate), Telenor velocity and 10 XC. Recently, Pakistan Innovation Foundation in collaboration with innoventures has launched an accelerator as well. However, one problem is that the number of startups being churned out by these incubators is much more than those who are getting funded. Another problem is the lack of entrepreneurship training for the young startups which are incubated in these incubators. There must be formal entrepreneurship and digital marketing boot camps by these institutions for the startups which get incubated with them.

The second most important stake holder in an entrepreneurial ecosystem is the government. Encouragingly, our government, both at the provincial and the national levels, is playing a very positive role in the development of entrepreneurship. Thanks to Mr Umar Saif, Punjab was the leader in bringing the IT revolution to the country. Plan-9 and Plan X, the incubator and the accelerator of the government of Punjab respectively, are doing a commendable job. At the policy level, the federal government is taking important steps for the creation of a vibrant tech ecosystem. Startups have been exempted from income tax for the first three years. Similarly government plans to invest Rs2 billion for building an e-payment gate way in Pakistan which will facilitate all kind of e-commerce transactions. According to some sources, government is also planning to create a publicly funded venture capital fund to support the startups.

The third important pillar of the tech eco system is startup competitions and non-profits striving to foster the culture of entrepreneurship. In Pakistan, there’s been a lot of activity going on in this domain. The most important competition is the startup weekend which is a global competition having local chapters in every country and city respectively. Then there is P@sha ICT awards, startup cup, MIT enterprise forum Pakistan and others. Recently, Karandaaz Pakistan, a non-profit funded by UKAID, organised the Pakistan Fin tech disrupt challenge in which the winner, creditfix, got a prize money of US$100,000. There are notable non-profits working in this domain such as Pakistan Innovation Foundation, Invest 2 Innovate and others. Along with these non-profits, successful Pakistani entrepreneurs from Pakistani diaspora have also formed organisations such as TIE (the Indus entrepreneurs) and OPEN (Organisation of Pakistani Entrepreneurs of North America) which support entrepreneurial ecosystem in Pakistan.

The fourth and the most vital pillar of the tech ecosystem is the angel investment networks and venture capital industry. In Pakistan, a lot of development has been made since 2014 in this regard, particularly in the domain of angel investments. The old industrialist class is now giving attention to this new vehicle of investment which can give them much higher returns than their traditional industries but still they are so less in number that can be counted on the tip of your fingers. Two of them are based in Lahore namely Cres ventures founded by Mr Humayun Mazhar and Fatima Ventures of Fatima group. Along with that, Dot zero ventures which is a group of tech industry veterans and Planet N are supporting the nascent tech startups in Karachi. Some others groups or individuals are also slowly emerging such as Sarmaayacar which is a group of Pakistani IT veterans from abroad; they have recently invested a considerable amount in Patari, Pakistan’s premium online music portal.

However, ironically, there are no venture capital companies in Pakistan which are necessary to take the startups to the next level in their lifecycle. According to the Pakistani entrepreneurship ecosystem report, there are now less venture capital funds operating in Pakistan than 2014, as DYL ventures and Impakt Capital have not invested since 2014. The only venture capital fund which has opened shop in Pakistan recently is 47 ventures, managed by Mr Khurram Zafar, Executive Director LCE (LUMS Centre for Entrepreneurship) and this venture capital fund plans to invest a hefty sum of money in Pakistani startups. The scanty of venture capital companies in Pakistan represents a problem for Pakistan based startups as they have less funding available after the seed stage. However, some have been able to secure funding from regional venture capital firms e.g. Frontier Digital Ventures of Malaysia invested in the property portal,zameen.pk.

Given the present scenario, Pakistan’s startup ecosystem is inevitably making a stride towards success. We hope one day, some Pakistani startups will be able to achieve what former Pakistani entrepreneurs have been unable to do; to scale globally and form large multinationals spanning across regions and continents.