The current crisis in the startup sector of Pakistan will help new entrepreneurs emerge on account of their learning curve during the economic downturn. The present-day situation is not alarming but is instead an opportunity out of which more startups will emerge.
These views were expressed by Foodpanda Pakistan CEO Muntaqa Peracha while talking about the prospects of startups in an interview with The Express Tribune.
“Since now you have different problems to solve, the best thing about startups is that they disrupt the existing way of thinking. So, in these circumstances, many other companies will come out like they did during Covid,” he said.
The unsettled domestic economic situation is because the global situation is tense, he noted.
“Pakistan is not suffering because we have done something wrong, we are suffering because the whole world is suffering. Our technology industry is still very young and will take time to develop. In every startup, your cycle goes up, then one day you are down and then you pick up. In these lows and highs, we have some organisations that fold, some organisations that get acquired by others, some organisations that will go from strength to strength through consolidation,” he said.
The post-Covid landscape will bring about many changes. The start-up industry will now see more young people, probably many of whom have worked in companies like Airlift, Swvl and other organisations. These budding entrepreneurs have an experience of how to raise money, how to quickly deploy that money, how to scale up very quickly and how to grow rapidly, he added.
The second benefit from the challenges they have faced is that entrepreneurs will have to change the traditional methods of operating a business. The industry as a whole will benefit from this drive towards change. Despite the fact that many startups have shut down operations, “we are sure the industry will bounce back from this and that recovery is only a matter of time.”
This sentiment was echoed by Universal Service Fund (USF) former CEO Parvez Iftikhar, who said that the startup sector will certainly bounce back in due course.
“Such setbacks are normal, in fact good, for any growing endeavour. They provide an opportunity to learn. Growth is never linear, it’s always a zig zag”, he added.
It is evident that economic activity has slowed down both globally and in Pakistan. Investors may also find it challenging to raise funds as a result of the recent economic slowdown in financial markets, said JS Global ICT analyst Waqas Ghani Kukaswadia.
On the flip side, it is also a fact that Pakistan is a large consumer market and there will always be lots of opportunities for entrepreneurs.
“Entrepreneurs will just have to modify their approach when it comes to Pakistan. We have seen this recently with two major startup ventures going south that it doesn’t matter how amazing a concept is or how much capital a business has been able to raise. If the founders of a startup are unable to comprehend how the typical Pakistani market works and how to stay afloat, startups will continue to face difficulties. Only unique concepts and funding arrangements do not ensure a company’s long-term success,” he said.
Startups are a relatively young industry in Pakistan. “We have investors with little or no experience in emerging markets which operate differently than developed markets,” said Foodpanda CEO.
On the flip side, young people who have founded companies and run them have not been exposed to proper mentoring and this has resulted in glaring blindspots. As a consequence, while some people have succeeded, others have not been able to sustain themselves in the long run. Crucially, there may have been more work done on the fundamentals if entrepreneurs starting out in the industry had gained more experience, said Muntaqa Peracha.
In order to draw in more foreign investment, the government and the State Bank have relaxed rules for attracting investment in tech-based startups and are working on regulations that will permit investors to repatriate profits and capital and ease overall corporate operations, Waqas Ghani said.
Pakistani economy will undoubtedly benefit from fostering entrepreneurship in a balanced way. There is a lot of work being done on the digital banking side already and there is definitely hope that entrepreneurship will rise again, Waqas added.
“It was difficult to predict that things will change this rapidly in the startup industry. But now people have experienced and understood the worst-case scenario. At that time, no one had any idea of the worst-case scenario. As they were raising money at the time, from mid-2020 to the first quarter of 2022, everything seemed fine. Now, people know that this is the worst-case scenario and we have to prepare for it while growing at the same time,” Muntaqa Peracha said.
Published in The Express Tribune, August 9th, 2022.
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