The ongoing year has been a phenomenal year for Pakistani startups as far as investments are concerned. Pakistani startups had received an investment of $77 million throughout 2020 whereas, in just 8 months of 2021, investments in Pakistani startups have crossed $228 million. That is a growth of about 3 times over 2020 with another 4 months still to go. Annual investments in Pakistani startups can reach billion dollars by 2025 if the momentum continues like this for the next couple of years. Over the last five years or more, government, academia, and industry have launched many incubators which have produced more than a thousand startups in different dimensions.
Pakistani startups are becoming ready for the global stage. They are the next big thing and many are ready for take-off. Some of the sectors that are attracting investment include e-commerce, transport/logistics, fintech, healthech, retailtech, and edtech. 37 Pakistani startups have raised funding of $228 million this year so far. Five of them have raised more than $10 million dollars each including Airlift (e-commerce), Cheetay (logistics), Tajir (retailtech), Educative (edtech), and Finja (fintech) in series A (local) and series B (international) funding this year.
Leading international venture capitalists which have invested in Pakistani startups this year include Kleiner Perkins, Prosus, 20VC, Buckley Ventures, Y Combinator, 500 Startups, Next Billion Ventures, SparkLabs, Golden Gate Ventures, Hustle Fund, First Round Capital, Draper Associates, Global Founders Capital, Raptor Group, MSA Capital, Shorooq Partners, Visa, and Stripe. Leading local investors include Indus Valley Capital, Fatima Gobi Ventures, 47 Ventures, KASB Securities, BitRate, Invest2Innovate, Zayn Capital, Sarmayacar, HBL Ventures, and Systems Limited. So Pakistani startups are attracting investment from everywhere in the world.
After the Covid-19 situation since last year, many governments have released funds to stimulate economies, and venture capitalists are flush with cash looking around for stable investment opportunities. Second, some useful regulations have been issued by the SBP regarding startups such as sweat equity and convertible debt which has resulted in boosting foreign investment in startups. Pakistan’s banking regulator has allowed shareholding of Pakistani founders in foreign holding companies of startups in the form of sweat equity. Third, Pakistan is a 200 million-plus consumer market and e-commerce for groceries, household-related items, and food delivery has flourished after Covid lockdowns.
At present, the bulk of the investments in Pakistani startups is by foreign investors. If tax incentives are allowed by FBR to local investors such as tax credit on investments in local startups, then it will trigger local investment in startups also. If investments continue pouring in like this, then valuations of mature startups will continue to rise and Pakistan could see its first billion-dollar startup before 2025.
Retail giant Amazon has added Pakistan to the approved selling countries list. With the development and easy accessibility of internet, the trend of e-commerce had accelerated in recent years. The importance of e-commerce has increased manifold due to the Covid-19 pandemic, making it a highly vital sector of the economy.
Some Pakistani companies are already selling on Amazon from their overseas offices but the country’s inclusion in the sellers’ list will increase opportunities for SMEs. The move is claimed to assist promote more businesses and online buyers get access to Pakistani brands which may now reach all major markets through Amazon. Textile, sports, leather and surgical goods are some of the Pakistani products available for sale on Amazon. Earlier, Pakistani companies had to register from offices outside the country or produce goods for other brands available on Amazon.
Cell phone manufacturing
Around 85 percent of mobile phones are imported into Pakistan every year. The government aims to reduce major part of it with the manufacturing of mid level and low cost sets in the country. As a result of this, 21 new companies have been allowed to start local manufacturing and assembly while promoting the local industry of mobile phones for the local market and export.
According to the Engineering Development Board list, these factories include Nokia, Oppo, Infinix, Swift Biz Solutions (Digit), Techno, iTel, WAV, Alpha, RealMe, Vigotel, D-Code, CallMe, Excel, Spice, TCL, and Alcatel. Furthermore, these manufacturing units will be set up in Rawalpindi, Karachi, Lahore, Faisalabad and Islamabad.