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Pakistani startups fuelling economic engines

Dubai - In the first half of 2021, 72 per cent of investors in Pakistani startups were foreign, while 43 per cent of all investors were based in the United States.

Pakistan, just like other emerging markets, is writing a new story of developing young entrepreneurs and startups, fuelling the growth that has grabbed attention from some of the top global investors, mentors and accelerators.

The spotlight is on fintech, e-commerce, logistics and FMCG, among others.

Aatif Awan, founder of Indus Valley Capital, said: “Pakistan has the fastest-growing startup ecosystem in the Menapt region. Venture capital [VC] funding in 2021 has already exceeded $200 million, which is greater than the last five years combined. Some of the top global VCs like First Round Capital, Kleiner, Prosus and now 20VC and Buckley Ventures have already invested in Pakistan, highlighting the potential of Pakistan’s market and talent base.”

In the first half of 2021, 72 per cent of investors in Pakistani startups were foreign, while 43 per cent of all investors were based in the United States.

The Pakistan Venture Investment Report for the first half of 2021 from Magnitt reports that VC investment in Pakistan saw an increase of 18 per cent from that in 2020. The Pakistani VC ecosystem in the first six months of 2021 grew fourfold year-on-year, with Pakistani startups accounting for seven per cent of total deals made in emerging venture markets (Mena, Turkey and Pakistan).

Shane Shin, founding partner at Shorooq, said: “Many people have been surmising Pakistan as a country yet far away to hit the inflection point for startups and VCs. Yet as a firm who has been following the Pakistan ecosystem for several years, we are confident the timing is ripe and this is evidenced by the exponentially growing startup ecosystem in Pakistan.”

Around 37 per cent of total funding in Pakistan in the first half was acquired by seven fintech startups, up from no fintech deals in in the year-ago period. The e-commerce sector acquired 30 per cent of all deals and 36 per cent of capital raised, outperforming the sector across Mena.

“Pakistan’s digital journey is now picking up momentum, particularly in fintech, FMCG and e-commerce especially dark stores,” said Nadeem Hussain, an investor and chairman of Planet N Group of Companies. “Pakistan is witnessing exponential growth compared to last year... it is now being viewed as the new market and a 210 million population with 55 per cent under 25 digitally empowered.”

Nameer Khan, an influencer and chairman of the Mena Fintech Association, said: “Just like Egypt, the Pakistani startup ecosystem is another regional opportunity that has impressively made its entry on the world map of the vibrant emerging technological ecosystem. The eruption in and surge in VC investments from Asia, the Middle East and leading investors from Silicon Valley is itself an early indicator of the opportunity both in terms of population size and the nascency of the startup ecosystem which is now maturing at a rapid pace. Being able to address this opportunity from the UAE further solidifies UAE’s cogent role of being a gateway to the region.”

There have been two crucial game-changers that have acted as rocket fuel, says Junaid Iqbal, partner at Mentors Fund and an initial founding team member of Careem. “The founder quality has improved drastically, fuelled by talent trained at successful startups or mid-career execs leaving their jobs, and capital is not a constraint anymore. The entire retail value chain is being disrupted estimated at a $100 billion market... super exciting space.”

“Within a country of 220 million, Internet penetration is exponentially growing: What was just 24 per cent a couple of years ago stands doubled. In metros, it even goes up to 76 per cent. Pakistanis are heavy Internet users with up to 85 per cent accessing it every day... and with more young people [60 per cent of the population under the age of 30], the adoption of newer Internet-based solutions is very rapid. From an income class perspective, Pakistan is to become the third fastest-growing country within the middle-income class by 2025 [China and India being at the top],” said Shams Pasha, brand strategy lead at Airlift Technologies.

Even Pakistani Prime Minister Imran Khan took note of Airlift’s achievement.

“We welcome the recent investment of $85 million by leading VCs of the world in Airlift, a company led by young Pakistanis. Pakistan has huge potential and we are open for business. My govt is fully committed to creating opportunities,” he said in a tweet.

“Despite being in the nascent stage of the ecosystem, Pakistan is attracting more investor’s trust day-by-day. Most of the Pakistani startups have been successful so far in scaling their business while exceeding result expectations soon after the financing. This has been causing a domino effect. As a result in the first half alone, Pakistani startups have surpassed $100 million, compared to just $60 million and that in all of the last year combined,” Pasha added.

“I think Pakistan is now the hottest ecosystem for investors especially in the fintech industry. This has been cause by several factors mainly regulatory. This is a perfect example of how regulation can make or break an ecosystem and I believe that the opening of the Pakistani ecosystem is still young and many more changes and investments are still to be seen,” added Ambareen Musa, CEO and founder of Souqalmal.com. — sandhya@khaleejtimes.com