Emerging Entrepreneurship in Pakistan

Posted on September 27, 2007
Filed Under >Babar Bhatti, Science and Technology
34 Comments
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Babar Bhatti

In the last few years the entrepreneurial class in Pakistan has been on the rise – for the very first time I’d argue. This trend has been recognized by the media both in Pakistan and abroad as well as by quite a few bloggers. The interesting thing is that the trend of rising enterpreneurship continues inspite of the growing political challenges and unstable business environment. Wall Street Journal recently wrote about it as well. Here we take a look at some of the successes, what is driving them and the existing support structure for these innovative group.

There was a time not too long ago when the only three successful career options used to be engineering, medical or civil service. The lure of ‘Sarkari Nokri’ (Government Jobs) and climbing the grade ladders was overwhelming. There were few multinational companies (MNCs) around. Those who wanted to do something different usually went abroad to try out their luck. Then in the 90s we witnessed soaring IT demand and the shift towards offshore outsourcing for services. Computer science became the new popular field of choice. The telecommunication boom of the recent years has provided many exciting opportunities.

Evidence:

Let’s talk about a few of the new breed of young entrepreneurs. Due to my own interests this is going to be limited to technology. I am not discounting other areas of active entrepreneurial activities. In fact the entertainment and fashion industries – and to some extent business about lifestyle – have gone through a tremendous transformation; but that is a topic which someone more qualified should write about.

Examples of successful new companies come from all over but I’ll categorize them based on geography. Some of these companies are based in US and may have operations in Pakistan [Scrybe, Pix Sense, Peanut Labs, Mobile complete, Techlogix, TRG, Cavium Networks] – they have successfully tapped the venture capital market of the US which is well-known to provide funding for promising new ideas and products. Other successful startups are local to Pakistan [NetSol, Rozee, Alchemy, Inov8, BrightSpyre]. Some Pakistani entrepreneurs have identified gaps in the Pakistani market space and are importing business models from abroad [Lootmaar, Naseeb.com] – its all about opportunities in the nascent booming market.

What are the drivers of this trend? For one thing the advances of the information age have encouraged innovation everywhere regardless of location. Technical Advances in communication (Internet, cheaper calls, blogging, online collaboration) allow companies and individuals to leverage resources around the globe. There is also an important factor of expat/diaspora involvement where the expats want to give something back and utilize their skills back home. All this is paving the way for the world to take a second look at Pakistan as a major market (Pakistan is the third largest growing country for mobile phone subscribers) and a viable outsourcing destination.

Support:

Do we have a venture capital system, Silicon valley style in Pakistan? Far from it. But VCs from US are accessible to those players who have the right setup, as I mentioned above. In particular expat Pakistanis have started paying attention to the opportunities back home, very much like their Indian and Chinese counterparts. The patent laws and intellectual property are not at par with the international standards/expectations. On the other hand there is plenty of activity in Pakistan to support and educate the upcoming entrepreneurs. Incubators such as Folio3 are playing an important role in nurturing and establishing startups. Events such as TIECon 2007 with the Business plan challenge (won by LUMS) serve as an important networking and learning resource. Organizations such as OPEN have also extended their network and support to startups in Pakistan. A good example is the Business Acceleration Program which is sponsored by OPEN and MIT EF Club of Pakistan. Hopefully our schools/universities will latch on to this trend and foster the innovative spirit of students.

I do not think (I could be wrong) that traditional media outlets in Pakistan have contributed as much as they should have in this area. However the social networking – whether its through the Internet or mobile phones – is making its impact felt. Even with a small number of active online users the blogger community in Pakistan has been doing quite well. The word of mouth referrals and viral marketing is very much relevant in Pakistan. As an example, a debate was recently triggered among bloggers with interest in entrepreneurship (see here, here and here) about choosing the traditional career path of working for a well-established company or going independent with one’s own ideas.

Related Excerpts:

1. From Wall St Journal: In Turbulent Pakistan, Start-Ups Drive a Boom
Many critics also contend that substantial amounts of U.S. assistance — estimated at more than $1 billion a year — may be the biggest underlying reason why Pakistan’s economy is doing well. But the economy is also sprouting from the bottom, thanks to seed capital from abroad and more credit-friendly banks. Last fiscal year, Pakistan received a record $5.1 billion in foreign direct investment, the government says. Overseas remittances, which are what Pakistanis are returning from bank accounts overseas, hit $5.5 billion in the same period, also a record.

2. Issues and Challenges: lack of skilled resources, political situation in the country. From the BBC Article ‘Pakistan raring to go in IT sector’. Pasha’s Ashraf Kapadia on IT skill shortage.

“At the moment, we just have adequate number of people to meet the industry’s demands. If we continue with our current rate of growth, we would need another 25,000 people over the coming year. We can get about 2,000 from Tier-1 universities like Lahore, Karachi and Islamabad, and another 10,000-15,000 from other universities. But more needs to be done to ensure that skilled people are available to meet the demand of new work.”

Links and References:

(1) BBC South Asia
(2) Telecompk.net
(3) Wall Street Journal [Registration Required]
(4) jehanara
(5) Venturebeat.com
(6) NED to NADAQ
(7) Ravi.LUMS.edu.pk
(8) Greenwhite.org

Photo Credits: kauonetwo and !!sahrizvi!! at Flickr.com

34 responses to “Emerging Entrepreneurship in Pakistan”

  1. Ali A Moiz says:

    Hi Babar,

    Thanks for the post. I am a co-founder of Peanut Labs, and you have certainly identified an emerging trend: Pakistanis are waking up to entrepreneurship. I hope this continues and we continue to see more young, promising companies get started.

    If anyone would like to contact me about entrepreneurship in Pakistan, feel free to email me at ali [at.] peanutlabs.com

  2. Salman Munir says:

    Rants of a start-up – http://www.shophive.com

    – Majority of the business back in ’05 refused to acknowledge internet as a viable platform for conducting business.
    – Complete dismissal about providing pricing & inventory data
    – Banks would ask you question for opening accounts
    – It took us 1 complete year to fight for our account with Citibank to accept Credit Cards (ain’t worth it though)

    By Grace of God! its a successful venture with everyday surpassing the previous. We’ve learnt a zillion things on the way, but there was no Text book to read. Its a reverse of international, applied and successful models but we are proud of it being 100% Pakistani and made for Pakistan. :)

  3. Jawwad Farid says:

    Dear Azaad

    If you break down the economy, the primary drivers are still agricultur, textiles, large scale manufacturing, construction to some extent and services.

    On the capital creation front, just the banking system alone creates more than 1.6 billion dollars (100 billion PKR) in profits that have formed the basis for creating bank owned mutual funds, insurance companies and payment networks. It is instructive to note that as recently as 2000, the same group of institutions was responsible for a fairly significant strain on the national economy on account of capital losses.

    To be fair things are still not balanced. Both Telco and Financial services have created significant job opportunities in larger cities for individuals with the right educational background. But if you are a kid out of small government school in the interior regions, it is still a fairly difficult upward drive.

    The securities and exchange commission now processes close to 2000 new applications for private limited companies every year. The existing base of registered private limited companies is just above 50,000. Please note that these are private limited companies, not govt. owned entities. Some of them are dormant, some are dying or aleady dead, but the one’s that are around and the new one’s that get formed are the primary drivers of job creation in the cities. I run a small shop that employees 40 people directly and supports another 12 vendors on a monthly basis. That is 40 jobs that didn’t exist 5 years ago.

    The phenomenon that Babar is pointing out is not just 2 companies in Lahore or Karachi. It represents a 1000 companies just within the technology sector that are pushing innovation and technology to make a living. At an average of 20 employees that is 20,000 jobs and its not just programmers and developers. 10 of the 40 jobs we have are support staff. An accountant from Rahim Yar Khan, a typist from Hazara and 6 poens from interior Sindh and Baluchistan.

    The best part is that most of us have nothing to do with the government sector. We may still do some contracting work as vendors and suppliers for state owned institutions, but a large part of our capital is generated from within the private sector and deployed within the private sector.

    As far as the media is concerned. Bad news sells better. It was true in NYC and California, it is true all the way back home in Karachi. Just my two cents worth.

  4. Jawwad Farid says:

    Dear Kadir Sahib

    I have run small businesses in New York, Southern California, London and Karachi. I would just like to add four points:

    a) In my humble opinion it has been far easier and profitable to run and grow a business in Karachi than in NYC or California. You can call it the home ground advantage.

    b) There are certainly problems and issues but when you compare them with the returns successful ventures earn in our markets, one is adequately compensated. As they say in urdu, Isi kay to paisay hain (that is what the money is for)

    c) Please don’t get offended, but there are times one cannot blame the operating environment for failure. Sometimes it is the business model, at times it is timing or luck, and yet again on occassions it is some esoteric combination of factors that leads to success or failure.

    d) As far as networks, wastas’, waseela’s, references and linkages are concerned, they are as much part of business development in the US or Europe as they are a part of growing a business in Pakistan. The process is more formal and structured in the US then it is in Pakistan, but the underlying principles are the same.

    What we have here is a lot more than what others have. And it is not just limited to technology. There are many examples outside of IT that point to the profitability potential of running a well thought out and executed business in Pakistan.

    Our primary problem is our fatalistic point of view or the Hamlet syndrome. I lost more than a full life time’s worth of earning of my parents in one short year in southern California. That doesn’t give me the right to bad mouth California, give up on the dream, or even start another venture down south a few years later. Why should the rules be any different for Pakistan?

  5. Babar says:

    Kadir, I acknoweldg the problems in Pakistan. But for a change I chose to focus on some success stories. It does not mean that things are fine for entrepreneurs and professionals in Pakistan. Actually some of these may be exceptions. However I wanted to encourage the trend of trying out new ideas, which is taking hold among the (relatively) young generation.

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