As originally published in Synergyzer Issue 4 – 2018

Part 1 featured stories of people who are striving to put Pakistan’s tech entrepreneurship infrastructure in to gear: The most prominent was Dr. Umar Saif, Chairman Punjab IT Board, a visionary working for the development of the ICT (information and communication technologies) industry in Pakistan, and also one of the pioneers who is creating incubators for nurturing technology startups in the country. In this issue, we dig further on such incubators and accelerators, speaking to people like Jehan Ara, President, P@SHA; running the Nest i/o and working to establish an ecosystem that will eventually become self-sustaining for technology products in Pakistan.

One question that I have asked all those I have spoken to is: Why is it that only 2% of startups in Pakistan get to be sustainable, as illustrated by the Jazz-Veon report, “Digital Entrepreneurship Ecosystem in Pakistan 2017: How Pakistan can build a world-class digital ecosystem”, carried out in collaboration with A.T. Kearney, the global management consulting firm. The answer that I have gotten specifically from Dr. Umar Saif and Jehan Ara is that the ideas and the grit are all very much there, but like everything else, there are all kinds of people vying for the crown. The major challenges are due to the absence of a proper infrastructure, policies, laws and appropriate investment that lets the idea thrive.

According to Kamran Shaukat, Co-Founder & CEO, ezbuy Pakistan, “For e-commerce to exist in any country there are four to five ingredients that need to be there in the market. You need to have the technology that can be used as a platform, connectivity, a customer base that is tech-savvy, last mile delivery and payment gateways. Although their quality is debatable, all these ingredients exist in the Pakistani market which is why the size of the e-commerce market is doubling every year.” What is applicable on e-commerce is also relevant to Pakistan’s digital innovation ecosystem in general and startups in particular, especially with the rollout of 3G & 4G mobile services.

According to the Jazz-Veon report, Pakistan ranks the third highest globally in terms of low-cost IT contractors on Freelancer.com considered to be experts in delivering quality and while the local ICT market only generates USD 500 million in revenue, the IT exports and outsourcing sector is worth USD 2 billion and growing annually at 17%. Due to this, the IT outsourcing sector has produced a number of successful companies and the PSEB (Pakistan Software Export Board) has set a target of USD 5 billion by 2020 for annual software exports. The number of startups graduating from incubators rose from 40 in 2013 to 95 in 2016 and is expected to reach 1,000 by 2020, growing at 40% a year; and 45% of these startups (in 2020) will be based on scalable ideas, up from 25% currently.

Yet, the report points out, a major number of segments in Pakistan’s digital economy are immature – with the exception of ICT – and businesses, usually SME’s, are reluctant to use technology due to lack of information, limited professional skills, and a fragmented market. And because of this, our digital startups are ‘small’ and ‘low profile’ says the report. It further gives a detailed estimate that only up to 5 startups prove to be sustainable out of the 300 launched each year: Half are quality projects, 1 out of 3 make it to an incubator, 5 go abroad for funding, and only 15 receive funding locally. The reasons for this systematic disintegration every year, as the report claims, is due to “a shortage of venture funding, a lack of payment and advertising platforms to monetize digital projects, an immature domestic market, difficulties in expanding into other countries, and the need for regulatory improvements.” These infrastructure and information challenges further translate into lack of business and management skills and an entrepreneurial mindset in startup founders.

Although a number of steps have already been taken by the government, like creating action plans that will make it easier for new businesses to register, obtain credit, trade internationally, administer contracts and settle bankruptcy-related issues; as well as creating the National ICT R&D Fund – now known as Ignite – to sponsor infrastructure development and establish incubators; a lot more needs to be done to build a self-sustaining digital ecosystem. A digital strategy needs to be chalked out and implemented focused on innovation, infrastructure development, entrepreneurship, and international collaboration; laws need to be introduced for ease of doing business, special tax regimes need to be established, intellectual property rights and online payment systems need to be strengthened. Also, legislative and legal measures are required for early-stage local and foreign investments and creating venture capital funds.

The report further suggests that the corporate sector should work towards establishing accelerators; as well as providing startups with uncomplicated commercial partnerships, mentors, help for developing products and services and exit opportunities. Besides this, the report instructs investors to provide hands-on support to investees, strengthen the local network of investors through sharing knowledge, establish a support network of international partners and launch specialist venture funds for high investment projects. Similarly, universities will benefit the industry through joint R&D ventures, establishing labs focused on the development of fast-growing digital segments including IoT, VR, AR, AI, and big data and integrating management related courses into technology faculties.

Says the report, Pakistan can build a self-sustaining digital entrepreneurial ecosystem by 2020 if these steps are followed, otherwise if development continues at its present pace, self-sustainability in this sphere will be achieved by 2025.