The startup boom in Pakistan

Startups receive $85 million in venture capital funding this year

KARACHI:

Record levels of funding are pouring into Pakistan-based startups, boosting hopes for a brighter economic outlook for the world’s fifth-most populous country.

Startups have received $85 million in venture capital (VC) funding so far this year, outpacing the $66 million raised in 2020, and venture firms continue to build their war chest.

“A surge in venture capital investment in 2021 augurs well for innovation in the country,” said HBL COO Sagheer Mufti while talking to The Express Tribune.

“In particular, the focus on fintech and partnerships with banks provide immense opportunity for driving consumer choice and ease, employment, financial inclusion and economic growth. HBL’s investment in Finja was in this spirit,” he added.

Fintech companies have received about a fourth of the total VC investment so far this year. They are finding plenty of overseas investors eager to tap the world’s third-largest unbanked population in what is being called a “fintech revolution”.

In Pakistan, 71% of adults do not have a bank account, one of the highest rates in the world.

Islamabad-based fintech SadaPay raised $7.2 million - reportedly the largest seed round ever in the country - for a personal debit card and e-wallet that still awaits regulatory approval.

Trading app KTrade - dubbed the “Robinhood of Pakistan” - raised $4.5 million after amassing 200,000 users since its launch in 2019.

US-based mega-firm Kleiner Perkins made its first investment in the country - a $17 million round for Tajir, a B2B marketplace based in Lahore that enables small business owners to buy from manufacturers and wholesalers.

Another B2B marketplace, Bazaar, raised $6.5 million in seed capital. Abhi raised $2.1 million for its early wage access platform and is headed to Y-Combinator (along with TAG).

There is plenty of action in other sectors as well.

“The news of Pakistani tech startups receiving foreign funding is certainly a cause for celebration and marks the hopeful onset of brighter horizons owing to our massive population; we have incredible potential for growth within us,” said SI Global CEO Noman Ahmed Said while talking to The Express Tribune.

Fintech - an amalgamation of finance and technology to enhance and automate financial processes, in particular - has brought in a significant chunk of this funding.

“Pakistan’s fintech wave is just starting,” remarked TAG Innovation Founder and CEO Talal Gondal as the Islamabad-based startup announced $5.5 million in seed funding to become the country’s first digital bank.

During the recent Pakistan Startup Cup - Pakistan’s largest startup competition, an app for moms called “Scaryammi” took home the grand prize. Second place went to a building visualisation company, ‘mimAR’, and third went to an AI-based career counselling tool for high-school students called ‘MeraFuture’.

All the momentum led investor Khailee Ng to conclude earlier this year, “There will be unicorns from Pakistan”.

“With this newfound funding, we must collectively focus on bringing Pakistan at par with the Western world,” added Said. “There is absolutely no doubt that Pakistan is positively brimming with talent.”

He was of the view that as leading professionals in the tech world, it was up to them to revolutionise Pakistan’s technological landscape by honing this talent, guiding and shaping it.

“This work should begin at the university level; final projects and thesis submission should focus on upbringing creativity and new ideas that may be brought to life with support from the likes of us,” the CEO added.

The tech expert stated that IT manufacturing, in particular, should be an area of focus and encouraged by local education boards so that locally manufactured products may begin to be employed.

“Pakistan faces a severe shortage in terms of tech manufacturing and hence, it is important to maintain international standards of quality,” he emphasised.

While giving suggestions, he said that the government and State Bank of Pakistan could also encourage IT manufacturing initiatives by handing grants to the deserving projects and supporting technology companies in their efforts.

Exports of information and communication technology (ICT) and telecommunication services from Pakistan grew by an astounding 46% in the first 10 months of 2020-21 compared to the same period of last fiscal year.

“Pakistan is set to make about $2 billion from its IT exports,” he said, adding that this was also due to the facilitation and keen interest of the government in the expansion of this sector.

In comparison, India witnessed the highest-ever exports in the first quarter of financial year 2021-22 and recorded over $50 billion in tech exports. It was the world’s second-largest exporter, he said. “Keeping these statistics in mind, we must rise to the challenge and work on expansion so that we too become prominent in the tech world,” he said.

Published in The Express Tribune, July 6^th, 2021.

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