- Says 20 unicorns are possible in the country by 2030
Pakistan, the fifth most populous country in the world, is struggling to revive its International Monetary Fund (IMF) programme to unlock a $1.1-billion tranche to respond to its short-term economic woes.
As rupee depreciated to historic low levels and inflation touched a fresh peak, there’s little expectation that this distress will alleviate anytime soon. These problems have jointly brought the country’s economy to almost a standstill.
If surveys with a few thousands respondents are to be believed, most Pakistanis see a bleak future.
In such circumstances, there are over a dozen foreigners, including three from America, who arrived in Pakistan to attend the official launch of Endeavor Catalyst subsidiary on Friday. To be precise, there were four businessmen from Turkiye and two each from Saudi Arabia, Egypt and UAE who attended the launch.
Mentioning major challenges faced by Pakistan and talking about whether the country is an investment avenue, Endeavor Catalyst Managing Partner Allen Kinsey Taylor responded with a confident “absolutely yes”.
“That’s why we are here. I visited Pakistan in November 2018, and 4.5 years later in March 2023, I have exactly the same belief that I had then. Over the next 10, 15 or 20 years, there will be amazing things built here in the technology sector. There are incredible entrepreneurs,” Taylor said while talking exclusively to Business Recorder.
Endeavor identifies and works with high-growth entrepreneurs, helps them through the process by providing mentoring and guidance while supporting their fund raising process and/or investing (up to $2 million) itself.
Taylor said Pakistan has its ups and downs but the era where it is going, the up and down part is tilted towards up.
“Over the next ten years, we really do believe in the potential of entrepreneurs,” he said.
Why investment in startups reduced as compared to 2021
According to statistics compiled by Data Darbar, a website that tracks investment flows into the country’s tech ecosystem, Pakistan’s startups raised $366 million in 2021.
The year 2022 started off well with investment in the first quarter amounting to $172 million however, the numbers dropped to $15 million in the last quarter. Cumulatively, the number came at $347 million which was 5% lower than the previous year.
The drop in investment might have little to do with the issues faced by Pakistan.
Taylor said venture capitalists were more interested in Pakistan in 2021 compared to 2023 because of the global environment.
He said that the interest rates have gone up globally.
“There were more VCs investing in markets like Pakistan, Egypt and Nigeria because they were looking for yield in the global economy because interest rates were zero in 2021.
“In today’s environment, the risk free rate is 5-6%. We now have less people looking to invest in emerging or frontier markets,” he said.
“So the only people who will be investing here in the near term are what I would call true believers. Funds like us believe in the long-term potential of emerging markets.”
He added that his firm would motivate other funds to enter Pakistan as well. He told Business Recorder that he had helped such funds move into markets such as Latin America and South East Asia.
Why doesn’t Pakistan have a unicorn yet?
A unicorn is a high-growth billion dollar company. Despite being the fifth most populous country, Pakistan doesn’t have a unicorn so far. It may perhaps be the only country out of the top ten most populous nations without a unicorn.
“Pakistan’s ecosystem is not bad,” said Taylor, “it’s just young.”
Taylor said that in 2018 when he arrived in Pakistan, things were just beginning to evolve in the tech space. “It takes years to build a billion dollar company.”
He said that in 2013, there were only 39 businesses that fit under the category of a unicorn. There are more than 1,000 firms today with 51% of them being in the US.
“Pakistan will have a unicorn and it will have more than one,” Taylor projected. “But it will happen when the company is 5, 6 or 7 years old and not when it's brand new.”
Taylor claimed that Endeavor’s launch in Pakistan was hallmark for its startup ecosystem.
“We believe this is the beginning of something big.”
“I will make a prediction that by 2025, Pakistan will have a unicorn and by 2030, we can have tens or twenty of them. It is what we think is possible.”
Should foreigners have faith in Pakistan and invest here?
Working in over 40 different countries, Taylor said global investors must recognise and invest in human talent in Pakistan.
“I believe that long-term thinking of foreign venture capital should recognise the potential that is here in Pakistan, the size of the market but also the potential of the human talent, the entrepreneurial talent. The caliber of entrepreneurs here is world class,” Taylor said.
Taylor said that he wants global investors, foreign investors and venture capitalists to spend time in Pakistan with founders and see their talent.
“They will see what I see. The human potential here, the market potential here. In some degree what we are missing here is smart connected capital that they could help break.
"Pakistan is one of the last markets where potential has not been realized yet."
For the people who have invested in countries such as China, India, Brazil and Indonesia, Pakistan is one of the markets where potential hasn’t been tapped yet, says Taylor.
“The type of investment venture capitals do is long term and it has high risk and high reward,” he said.
“We are not trying to invest about today and exit in six months or a year. We are investing in young companies that will help them grow and scale, 5, 7 or 10 years from now. We think that there’s a possibility that we will make a very good investment.”
“The fundamental belief is that the reward upside is so large that it is worth the risk,” he said.
Taylor cited a pleasant experience of investing in Brazil and Turkey where depreciation was high as 60%.
“The companies we were investing in grew by up to 3000%. So, if we can do something like that, then these challenges are nothing,” he said.
How does Endeavor see Pakistan?
Endeavor's international selection panel has so far selected Bazaar from Pakistan while its local chapter in the country has picked another three -- PostEx, Abhi and Sadapay -- that will progress to the final stage.
Endeavor Pakistan Managing Director Ali Samir Oosman said there are five more in the process and nearly 100 more in the pipeline.
Although Pakistan has just recently been added to the Endeavor’s list of markets, Allen Taylor says the country can break into top 5 markets for it in next five years.
"In the next five years, there will be Brazil, Indonesia, UAE and Egypt and it can be Pakistan too in the top 5 markets for Endeavor in the next five years."
The article, originally published March 11, 2023, was modified on March 12, 2023 to reflect Endeavor's updated selection process