Pakistani startups becoming a centre of investment attraction
Islamabad’s newest action aims to increase ecosystem’s competitiveness as more foreign investors pour in money
Pakistani startups eye a promising future as their innovative ideas have successfully attracted international investors who have poured millions of dollars in funding to turn themes and concepts into reality.
Leading startups in education, e-commerce, fintech, healthcare, payment solutions, logistics and real estate, among others, have raised more than $150 million funding in the past 18 months despite a lack of awareness and a proper ecosystem to nurture ideas into small business ventures. It includes more than $85 million in funding raised this year so far, with around $66 million raised in 2020.
Industry experts say Pakistan’s increasing mobile phone penetration and growing young population are among the major factors for foreign funding in startups. With a population base of 220 million, the country has 85 per cent teledensity representing 183 million cellular, 98 million 3G/4G and 101 million broadband subscribers, according to latest data.
Realising startups’ potential, Pakistan’s government has now initiated reforms to set up the startup ecosystem, promote the ease of doing business, innovation and enterpreneurship in the country.
In a latest move, the National Assembly this week passed the Companies (Amendments) Bill 2021 proposed by the Securities and Exchange Commission of Pakistan to improve the overall business climate.
The bill will now be tabled in the upper house of the parliament the Senate of Pakistan.
Pakistan’s economy, in general, and the IT sector in particular, are major beneficiaries of startup fundraising in the past 18 months. The economy staged a turnaround from 0.4 per cent contraction in 2019-20 to 3.94 per cent growth in 2020-21, with IT exports surging 46 per cent during the first 10 months of the current financial year.
Experts say Pakistan is a highly-under-tapped market as banking facilities are being utilused by only 25 per cent of the population despite the fact that the country’s growing retail, e-commerce, wholesale and trade sectors require a better financial ecosystem.
Some of the startups that attracted foreign funds include Sadapay, Safepay, Bazaar, Tajir, makaan (house), Trukkin, remoteBase, sehat kahani (health story), educative, CreditBook, Seed Labs, RepairDesk and InventHub, among others. Top executives from a number of these firms spoke to Khaleej Times on Friday.
Janardan Dalmia, founder and CEO of Trukkin, said Pakistan is a growing market for startups with an immense business potential in the country.
The startup, which recently raised $7 million in Series A funding, has evolved a strategy to unlock business potential in the country by organising its logistics and supply chain systems.
“We are very positive about the Pakistani logistics market and I’m confident Trukkin solutions will attract more industry players and increase much needed transparency and efficiency for suppliers,” said Dalmia, a former banker.
Samiullah Tariq, head of research at Pakistan Kuwait Investment Company, said the startups culture is evolving in the country.
“The startup boom in the Covid era is an interesting and surprising story for rest of the world, but travel restrictions and a decrease in global air travel provided an unexpected advantage to starups in Pakistan as it sped up due diligence processes and finalised deals through video-conferencing platforms,” he said. “It’s a beginning of a new era of growth. Startups will lay down a solid foundation for IT sector growth and develop a new source of earning foreign exchange in years to come,” Tariq said.
Usman Butt, CEO of RepairDesk, said the startup ecosystem in Pakistan is developing at a very fast pace.
“We’ve created solutions for a lot of different needs within our market. Companies are now moving more into the digital space and really leveraging it well to bring a whole new level of convenience for the customer,” Butt said.
The Lahore-based startup has a primary focus on the North American market, but it is open to all other regions including the GCC.
“I believe that the market is rich with potential in the GCC area, and the chemistry would have to be right for us to truly capitalise on any opportunities we find. What’s important is building a strong relationship with our client base and understanding their needs. Without it, we probably wouldn’t be as successful as we are today,” he added.
Usama Abid, chief executive of InventHub, rated the Pakistani startup ecosystem at seven out of 10 and said his startup is exploring opportunities in the international markets including the Gulf region due to the rise of hardware design consultancy and product companies in the past year.
“Our target market is all the consumer and industrial electronics manufacturing companies. We are initially targeting North America and from there we will be going towards the Mena region and Southeast Asia as they are the largest hubs of electronics design and manufacturing,” Abid said.
About the startup’s future plans, he said it is growing at a very fast pace.
“We have raised three rounds of fundings for product development and early growth. We have just raised a small growth round from a VC and a couple of angel investors in the first week of June. Using that growth round, we are looking to ramp up our sales a bit more before we go out to raise our next major round pre-Series A, in early August,” he said.
Another Lahore-based startup, RemoteBase, successfully raised $1.4 million funding to connect Pakistani software engineers with Silicon Valley startups. Its founder and CEO Qasim Asad Salam said there is an immense amount of tech talent in Pakistan and this, combined with a hunger to learn and grow, means tremendous untapped potential.
“The Pakistani startup ecosystem was super-young until last year. Since then, we have seen startup after startup raising huge seed and Series A rounds. Never before has this happened. This goes to show that the ecosystem is maturing, which is good news for everyone,” Salam said.
“Raising funds means more runway for companies, better salaries for tech talent, and more chances at goal. The ecosystem is still far from what it is in Silicon Valley, but the pandemic and remote work has enabled companies like ours to tap into the Silicon Valley startup ecosystem right from Pakistan.”
Talha Masood, co-founder and CTO of RemoteBase, said the startup is building an end-to-end internal tool that will help it scale to thousands of engineers, all across the globe, not just Pakistan.
“We have a highly scaleable, high-growth business model that has been growing exponentially. We can easily use the existing systems we have to grow five times over the next 12 months,” he said.
Both co-founders are keen to tap the GCC market and said there is tremendous potential in the Gulf region with many countries committing themselves to tech-based industries.
“As we grow RemoteBase from a team of 50 to a team of 5,000 people, we will be looking at neighbouring countries and the Gulf region to find, hire, train and place top engineers,” they added.
They said the Gulf region continues to have a reputation as a technology haven and there is certainly room for the RemoteBase model.
“The post-Covid era will be an exciting time for the tech industry in the region. The UAE in particular with its significant and growing tech infrastructure would benefit from the flexibility of a remote model of resourcing as the market for talent grows post-Covid period,” they said.
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