‘Pakistan’s startup ecosystem needs a few $100M exits’ – Tech

Pakistani startups experienced a A year that broke the record for fundraising In 2021. The momentum was relayed In 2022 too, but it came along with announcements of layoffs and closures.

Commentators have been quick to write off Pakistani companies, but many also believe that contradictory developments are normal for an economy still finding its footing.

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Among the latter group is Ali Samir Osman, managing director of Endeavor Pakistan focused on entrepreneurial growth, who recently told business registrar Instead of focusing on creating the country’s first unicorn company, the country’s tech ecosystem needed to produce quality companies as the founders achieve a successful $15-100 million exit after the acquisition.

Oosman identifies and works with high-growth entrepreneurs, helping them through the process by providing mentorship and mentorship, while supporting the fundraising and/or investment process (up to $2 million) itself.

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“If we can create the right conditions for companies to scale in Pakistan and start seeing mergers and acquisitions in the startup space, it will have a massive multiplier effect,” Usman said in an exclusive interview.

“The founders’ exit of around $100 million will restore investor confidence in the startup ecosystem in Pakistan,” he said.

According to him, the first big win in shaping the ecosystem was putting Pakistan on the radar of global investors who were willing to bet on the potential. The next big win for Pakistan’s tech future will be coming up with small to medium sums.

This can give local investors (especially angel investors) two to five times higher return on their early stage investments, attracting more locals.

Similarly, entrepreneurs will also get the chance to make a good return in a short time as a reward for risk, determination and ability to successfully implement their vision.

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He cited the example of Cloudways, which was recently acquired for $350 million. Cloudways provides small and medium-sized businesses with cloud hosting and Software as a Service (SaaS).

Azmeh Othman explained that Endeavor is driven by the belief that high-impact entrepreneurs have transformed economies.

“In Pakistan, we focus on startups across a number of sectors that cover almost every sector,” he said in the interview. “Our clients come from retail and consumer, fintech, enterprise software solutions, healthcare, education, talent, and many more.”

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Osman said that nearly 65% ​​of all transactions in Pakistan are in cash, and it remains undocumented, determining the region where the gaps are.

“It also means that technology penetration is very low in Pakistan, therefore, the economy is inefficient and there are many gaps waiting to be filled,” Osman said. “This is where startups and new business models that are leaner, faster, and smarter can step in and capture economic value.”

He was proud that things were starting to move in the right direction in Pakistan and experts predicted large-scale digitization across the majority of industries over the next ten years.

The biggest challenge for the technology sector

Usman, a former Microsoft employee, described the volatile exchange rate in Pakistan as one of the biggest challenges for investments.

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“I know an investor who has funneled money into an early stage startup that has performed well and has reported 30% growth since October 2021,” he recalls. “However, this person did not see any growth in investment in two out of four quarters because his investment was in dollars while the company grew in terms of rupees.”

He noted that investors who did not take into account the impact of the exchange rate during the injection of funds are now watching the currency closely.

He stressed that the parity between the rupee and the dollar should be stable for investors to be comfortable making investments in Pakistan.

“Instead of celebrating investment insurance, startups should look at things realistically,” he said. “Raising huge amounts of money is an achievement but it shouldn’t be the goal.”

Sometimes building a great company doesn’t require a huge fund of venture capital (VCs). Othman said that if the numbers are good and the business is validated by performance – there are many options other than venture capital financing.

He stressed the critical need for technology startups to learn how to move forward in a collaborative manner.

side flip

Usman said the failures that Pakistani start-ups have faced recently is quite normal.

“A similar trend has been seen in other parts of the world as well,” he said. “Startups and investments are created and then recognized as not doing well.”

However, he lamented that failed Pakistani startups did not reveal where they went wrong.

“They should come forward and pass on what really happened so that others can learn from them,” he said. “Failures are an integral part of the game and should not be considered a disgrace.”

According to him, this would give more confidence to investors and other founders as to which startups to fund and be wary of things that could go wrong.

Points of strength and weakness

Meanwhile, Usman said that Pakistani entrepreneurs lack the capacity for orderly growth.

“Start-up founders in Pakistan are good at unregulated growth. They are good at crowding. They know how to get things done with passion,” Osman said.

However, he said, entrepreneurs in Pakistan lack the ability to pursue orderly growth through improvement, ingenuity and expertise.

“That will come from extra time exposure and experience. Through Endeavor, we hope to bring that experience, expertise, learning and sharing to the Pakistani ecosystem.”

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