Is Pakistan our next big Asian market to start-up tech
Pakistan’s young and tech-savvy population, market of over 220 million people and increasing levels of local capital are creating opportunities for tech entrepreneurs, as Miriam Partington reports.
“Pakistan’s tech ecosystem has been slowly gaining momentum in the last few years,” says Hena Husain, founder of London-based communications startup The Content Architects. “It’s home to a strong tech talent base and it’s still competitively affordable, which makes it ideal for early-stage founders like myself.”
Hena’s company works with a development team based in Karachi, Pakistan’s business center and best-known tech hub. It was here that transportation startup Careem — acquired by Uber for $3.1 billion (€2.8 billion) in March 2019 — wrote its first lines of code and where a cluster of software engineers has formed gradually over the years.
Hena says that the growth in Karachi’s tech market is “accelerating” by the day, which reflects a broader trend across Pakistan.
The country was named one of the fastest-growing economies in Asia in McKinsey & Co’s latest report on the Pakistani ecosystem. The same report revealed that 720 startups had been created since 2010 — 67% of which are still in operation — with 100 successfully raising funding.
For many familiar with Pakistan’s startup scene, it’s hard to pinpoint exactly what triggered its growth.
According to Iskander Pataudi, a Pakistani-born tech professional working in Berlin, the tech scene emerged organically. Tech is booming around the world, and Pakistan is an untapped market. It was only a matter of time before investors started to take notice.
“A few Pakistani tech startups have raised huge funding rounds at a time where our economy is just keeping its head above water,” he says. “This makes sense, considering we have a huge market of young, digitally-savvy consumers and increased 3G and 4G connectivity.”
Iskander adds that May 2018 marked one of the “first and only exits Pakistan has seen so far” when the e-commerce platform Daraz was acquired by China’s Alibaba Group for an estimated $200 million. This was an early indicator that “something was about to happen.”
Since then, Airlift, an app-based bus service founded just 11 months ago, raised a Series A funding round of $12 million in August 2019, led by US-based venture capital (VC) firm First Round Capital.
‘An unlocking of capital’
According to Rabeel Warraich, founder of Pakistan-based venture capital fund Sarmayacar, the string of startup success stories — combined with a more stable political landscape under President Imran Khan and decreasing levels of corruption nationwide — has increased “investors’ confidence that Pakistan holds huge potential for exiting businesses.”
“Tech startups that were once considered risky investments are more commonly looked upon by venture capitalists as ‘high-yield opportunities,'” he adds.
This newfound confidence has led to an increase in the availability of local capital. While Pakistan’s startup scene and VC market is still nascent, the number of funds — such as i2i Ventures and Fatima Gobi Ventures — and active angel investors have increased significantly since 2018.
And, while startups in Pakistan raised a meager $18.8 million in funding in 2019 overall, more capital is expected to flow into startups from overseas in the ensuing years.
Egyptian ride-hailing company Swvl, for instance, recently shared plans to invest $25 million in Pakistan’s tech scene over the next two years to fund preseed startups and create 10,000 jobs.
The launch of the “Digital Pakistan” initiative in December 2019 headed by former Google executive Tania Aidrus revealed an ambitious agenda to increase access and connectivity, enhance digital education and introduce a new era of e-governance.
Other objectives include cultivating a business environment that supports entrepreneurship and innovation.
In the latter half of 2019, Pakistan passed six reforms to this end. Measures taken to ease the regulatory environment for businesses included introducing a three-year tax relief and creating an online one-stop registration system.
A growth in opportunity
According to many Pakistani nationals living overseas, new avenues of opportunity are opening up in their homeland.
Sonya Barlow, a British-Pakistani entrepreneur living in the UK, hopes to launch a version of her social enterprise Like-Minded Females in Pakistan this year. Based in London, the initiative provides skill workshops, mentoring and corporate training to a diverse network of women.