The ingenuity of young and enterprising Pakistanis is coming into full display. Almost every week, lately, there is news about yet another local start-up raising multi-million in foreign investment. Various estimates suggest that Pakistani startups have raised about a quarter billion dollars in the year to date period, which is at least three times the figure seen in 2020 (which itself was a happening year on this count).
Investors are attracted by the resource mine that is local market. The middle-class is spending and it is increasingly digitally-connected. Official data show that mobile broadband subscriptions have crossed 100 million mark. Active mobile wallets are inching close to 50 million. Internet and mobile banking transactions and pre-paid e-commerce orders have more than doubled during the pandemic.
No wonder there is strong investor interest in local e-commerce startups, Fintech firms, ride-sharing and last-mile delivery services. Recent regulatory changes, especially by the central bank around setting up holding companies abroad, sending money outside, and holding sweat equity in lieu of non-monetary contributions, have also encouraged those sitting on the fence to jump in. There is also growing interest among established legacy businesses to invest in the digital ecosystem.
The billion-dollar question is: how many of the startups that have raised prominent investments lately will be able to scale profitably. The answer is a function of time, as it will be interesting to see how many of the promising entities will be able to thrive three to five years from now. Extinction doesn’t spare even the best – for over half of Fortune-500 companies in year 2000 no longer exist today. Startups are especially prone to disappear as they are in the fragile, formative stage of business.
Right now, the startup momentum remains strong, and this needs to continue. Already this fiscal, the FDI brought in by the tech sector has far outstripped the FDI fetched by established telecom operators. While the sector is doing a lot to put Pakistan on the global technology map, it is high time for the government to ask what is it that it can do (and also what it should abstain from) to ensure that the investment trend continues apace and leads to positive economic outcomes.
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