Entrepreneurs upbeat on Pakistan’s budding start-up ecosystem

Say country offers copious opportunities with minimal capital requirement

KARACHI: The worsening macroeconomic indicators have sparked pessimism in the business segment of the country with a majority of big investors either freezing their investments or divesting their shares as interest rates remain high.

However, it is not all doom and gloom as new entrepreneurs, particularly start-ups, are still adopting a positive stance, citing copious opportunities and minimal capital requirement.

In an interview with The Express Tribune, TelloTalk CEO Shahbaz Ali Jamote emphasised that the start-up ecosystem in Pakistan was highly supportive.

“Although starting a new business in any market around the world is difficult, in Pakistan, we have an edge with a population topping 210 million which we [enterpreneurs] consider as an opportunity,” he said.

He pointed out that although internet penetration picked up quite late in Pakistan compared to other regional countries, it proved to be beneficial because now the country was emerging as a growing market and foreign investors were keenly following the developments.

He elaborated that investors, who were interested to pump money into India and Bangladesh around a decade ago when their start-up ecosystem was developing, were now expressing interest in Pakistan.

“Our market is young and we don’t have a competitor in the region, which is good for us,” he boasted.

The entrepreneur added that start-ups in Pakistan were raising considerable funds and the amount awarded in every successive round was always greater than what the start-ups secured in the previous rounds.

He said setting up his messaging application was quite easy because he had the right experience to understand the need of the market.

Meanwhile, PriceOye Co-founder and CEO Adnan Shaffi pointed out that there was virtually no competition in Pakistan’s start-up segment due to which many successful start-ups emerged in the past few years.

“Internationally, the start-up market is highly competitive, hence, a massive amount of capital is required for most ventures, however, in Pakistan, owing to the absence of competition, capital requirement is minimal,” he said.

The CEO recalled that he had started his first venture in 2008 with an investment of just Rs1,200 and sold it later for a much higher price.

Pakistan has a nascent start-up ecosystem and there are opportunities in every field and every sector of the economy. “Food delivery, ride-sharing and e-commerce have already been tapped, however, countless opportunities still exist in other fields,” he said.

Talking about the infrastructure for starting his current venture, which is his third initiative, he said he only required a laptop and a stable internet connection and ran the business in the early days from his home.

He encouraged fresh graduates to opt for entrepreneurship rather than salaried jobs, which would be beneficial in the longer run for the country as well.

 

What else is needed?

Jamote said the ecosystem had turned value-based and companies were judged by the number of users rather than the profit they made, hence, he held the view that funding should increase to enhance the outreach of start-ups to more users.

He lamented that many companies with a promising potential were sold by their founders to foreign enterprises because they were unable to raise the required funds in Pakistan.

On the other hand, Shaffi pointed out that the country lacked proper digital payment infrastructure due to which the growth of e-commerce segment had turned lethargic compared to the regional countries.

According to him, digital payments complement the e-commerce sector of an economy.

 

Government support

TelloTalk CEO said the government had started taking interest in the start-up segment because it saw them as an opportunity for the export of services and enhancing services trade.

“The government seems determined to facilitate start-ups in every way,” he said, adding that the country also made money when a start-up became successful.

Shaffi said until 2018, the country did not even have an e-commerce policy but last year, the policy was approved by the cabinet.

He was optimistic that implementation of the policy would prove to be beneficial for the entire start-up segment. “Pakistan will soon record growth in the number of start-ups,” he said.

 

Challenges

Both the officials were of the view that lack of proper laws to attract foreign investors was a key hurdle.

They voiced concern that foreigners doubt their investment would be insecure in Pakistan hence many companies opt to establish foreign holding companies to gain confidence of international investors.

“Many companies are operating from Pakistan but are registered in some international country solely due to absence of proper laws,” said Shaffi.

He added that though the government has laid laws to determine which company is a start-up and provided it tax exemptions as well, however, other public departments were not complying which is a potential loophole in the system.

National Incubation Center Director Shahjahan Chaudhary told The Express Tribune that Pakistani start-ups were performing very well and the country had witnessed three to four big companies emerge just in the past year.

He appreciated that the Security and Exchange Commission of Pakistan (SECP) had updated its regulations to support start-ups and voiced hope that the Federal Board of Revenue (FBR) and the State Bank of Pakistan (SBP) would also take steps in this regard.

“All start-ups are associated with these three departments and the culture can thrive further if all three of them turn the ecosystem conducive in the country,” he said.

He expressed concern that presently, start-ups are liable to pay many taxes (such as withholding tax, sales tax, property tax) on federal and provincial level, which is the biggest constraint to their swift functioning.

Nevertheless, he said start-ups emerging in Pakistan, being run by talented individuals, are very competent and with the right environment, they are good to succeed at a global level as well.