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Opinion: Why Pakistani startups are the next big thing

Aspen

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Sep 18, 2019
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THE INDONESIA OPPORTUNITY THAT MOST MISSED

A decade ago, Indonesia was one of the best opportunities for startup founders and early-stage venture capital. It was the largest untapped market, with plenty of large greenfield opportunities for startups. At the same time, there was little competition for both startups and VCs investing in them.

Founders and VCs who saw the Indonesia opportunity early, did incredibly well, like Nadiem Makarim of Go-Jek, who built a startup now worth close to $10B, and VCs like East Ventures, whose first two funds boast a net IRR of 70% and 65%. Indonesia has 5 unicorns today, with more in the making. Only five countries in the world have more.

“As a pioneering investor in early-stage tech startups, we believed there was great potential here, but few could see it or understand what we were trying to do. We had to prove to the world that Indonesia had an untapped technology sector waiting to be unleashed.” – Willson Cuaca, Co-founder East Ventures

WHY PAKISTANI STARTUPS ARE NEXT?

Pakistan today, a Muslim-majority country with a population of 217M and consumer spending of $257B (as of 2018) is quite similar to Indonesia in 2009, a Muslim-majority country with a population of 236M and consumer spending of $322B.

Like Indonesia back then, Pakistan today isn’t on the radar of top global VCs and attracts only tens of millions of dollars in VC a year, less than what a hot Silicon Valley startup raises in their series B. This has started to change with First Round Capital’s first investment in Asia in more than a decade is leading a $12M Series A round in a Pakistani startup, Airlift, that is building the decentralized mass transit system (FD: I am an investor in Airlift and a member of First Round’s Angel Track).

I believe Pakistan is the largest untapped market and the best opportunity for startups and early-stage VC in the world today. And here’s why Pakistani startups are the next big thing.

114M PEOPLE UNDER 25 WILL CREATE DEMOGRAPHIC DIVIDEND FOR DECADES AHEAD



Pakistan’s population of 217M people makes it the 5th largest country, slightly ahead of Brazil. It’s an incredibly young population; 114M people are under 25, more than even in the US.

Here’s why that matters. For at least the next two decades, three young people will join the workforce for every person entering the retiring age. The multiplier on productivity is actually going to be higher than 3 as the younger Pakistanis are better educated and more tech savvy. Regardless of other macroeconomic factors, this is going to be a huge tailwind propelling Pakistani economy forward. Pakistan looks set to reap massive demographic dividends for decades.

A side effect of such a young population is that metrics like GDP per capita and broadband penetration are understated relative to other countries, because the denominator includes a much higher percentage of children.

122M STRONG MIDDLE CLASS WILL CREATE SEVERAL MULTI-BILLION DOLLAR MARKETS

Pakistan’s middle class, estimated to be at 82M currently, is projected to grow to 122M by 2025, according to a study done by Oglivy & Mather. This places Pakistan as having the largest absolute increase in middle class from 2015-2025, after China and India. Pakistan is more urban and has a higher median income and household wealth than India (India’s average is higher but most of the wealth generated in the last couple of decades has gone to the top).



The large and expanding middle class has led to a consumer-led spending boom in Pakistan. Consumer spending has grown 5.7x to $257B between 1998-2018, at a CAGR of 9%. This has created many large markets where even a 1% penetration by a startup would represent $100M+ revenue. Existing penetration of technology remains low for most verticals so it’s all up for grabs.



PAKISTAN’S TECH TALENT BASE IS ONE OF THE STRONGEST IN THE WORLD

I’ll start with a little known fact – 20% of Kayak’s R&D was in Pakistan at the time of their IPO, contracted out to Arbisoft, one of the leading software services firm in Pakistan.

There are three current unicorns that have significant teams in Pakistan: Careem, being acquired by Uber for $3.1B, Afiniti, with a $1.6B valuation and KeepTruckin, valued at $1.25B. Between these three companies alone, there are thousands of people who have experienced first-hand building a high-growth successful startup. Many of these employees have left to start or join startups and this trend is expected to accelerate after the Careem acquisition closes.



Pakistan has a large and growing technical talent base of 360K software developers, estimated by A.T. Kearney. That is more than Indonesia, Egypt or UAE have. There are more than 35 incubators and accelerators that have encouraged a lot more people to start something of their own. 300 startups were formed just in 2018 and this number is expected to climb to more than a 1000 .

Then there’s the Pakistani diaspora which is one of the largest in the world. More than 10,000 Pakistanis working in tech in Silicon Valley according to an estimate. Some of them are considering a return to Pakistan to raise their children back home or take care of aging parents. This is quite similar to what happened in India in the second half of the last decade. Having evangelized this for last 6 months, I’ve already met with former employees of Uber, Microsoft and DoorDash who have done exactly this recently. Imagine if just 5% of those 10K return and decide to get involved with the Pakistani startup ecosystem as founders, advisors or investors.

WHY NOW?

“Why Now?” is arguably the most important questions one can ask when evaluating a new market. For Pakistani ecosystem, there are two clear reasons for why it’s hitting an inflection point in 2019 and didn’t do so earlier.

75M BROADBAND SUBSCRIBERS, A CRITICAL MASS OF USERS

Pakistan has witnessed off-the-charts growth in broadband subscribers in recent years, and now has 75M broadband subscribers, 96% of these being mobile; that’s more than the entire population of the UK.



The number of broadband subscribers has grown 25x since 2013, and continues to grow at a rapid clip. If you tried launching a consumer startup as recently as 5 years ago, it would have been impossible to acquire a large user base. Today, startups can acquire 10s of millions of users, most of whom are young, urban and early adopters of technology. This is reflected in the much faster growth rates being experienced by startups.

RECENT EXITS & LARGE ROUNDS HAVE GALVANIZED THE STARTUP ECOSYSTEM

Last 18 months saw more acquisition & fundraising activity for Pakistani startups than the previous 10 years combined. That’s a clear sign of the Pakistani startup market having hit an inflection point.

Firstly, the acquisition of Daraz by Alibaba for somewhere between $150M-200M highlighted the potential of ecommerce in the country. Six months later, EasyPaisa getting valued at $410M+ in the 45% buyout by ANT Financial, showed how valuable the fintech sector was. Both Daraz and EasyPaisa had only captured a fraction of these markets at the time of these deals.

At the same time, three unicorns with Pakistani founders and a significant team presence in Pakistan, all hit massive new milestones. Afiniti, a startup developing artificial intelligence for use in customer call centers, was valued at $1.6B in its series D round late last year. KeepTruckin, building trucking fleet management solutions, raised $149M in its series D round, valuing at $1.25B in Apr 2019. And the most exciting development was Careem’s $3.1 Billion acquisition by Uber in March 2019. Careem’s early tech and product was developed in Pakistan, the CEO Mudassir Sheikha is a Pakistani and Pakistan is one of its largest markets. One of the largest tech acquisitions of all time, slightly ahead of Apple’s acquisition of Beats, this was a seminal event that has galvanized the Pakistani startup ecosystem. Ex-Careem employees are already out there starting new companies and joining high-growth startups.



Zameen/EPMG, one of the earliest and largest Pakistani startup success stories, raised a massive $100M Series D round in February 2019. They have now expand to 40 cities across the UAE, Pakistan, Bangladesh, Morocco, Spain and Romania, and have over 2,000 employees.

Finally, what’s most exciting is that Pakistani startups have crossed the seed to Series A chasm. Three of the largest Series A rounds in Pakistan have all happened in the last 8 months: Bykea’s $5.7M Series A in April, Cheetay’s $7.8M Series A in September, and Airlift securing $12M in Series A funding in November. Airlift’s large series A is particularly amazing because the startup only launched 8 months ago. This would be remarkable even for a Silicon Valley startup and is illustrative of how quickly startups can capture share in the completely untapped Pakistani market.

Airlift Series A round is led by First Round Capital, a leading Silicon Valley VC, known for early bets on Uber and Square. First Round has not invested in Asia in more than a decade, not in China nor in India nor in Indonesia. Yet they chose to invest in a Pakistani startup given the opportunity they saw. I believe this is not a one-off event and is reflective of how primed Pakistani startup ecosystem is to take off after a long time of slow build-up.

WHAT’S AHEAD: WAPISTANIS AND VC DOLLARS FLOWING TO PAKISTAN

To sum it up, Pakistan is the largest market untapped by startups and venture capital today. Pakistanis form one of the biggest tech talent pools in the world and have done well across the globe, founding several unicorns (at least six by my count) and having played a leading role in many others. With this talent advantage, Pakistani startups are well-positioned to dominate all major industries in Pakistan and also expand to MENA, a $3.6 trillion economy that’s also relatively early in the startup cycle.

What took Indonesia a decade, Pakistan will do it faster because the broadband penetration is at a much higher baseline, because capital moves faster to global opportunities today than it did a decade ago and because Pakistan has a larger talent base both at home and among the diaspora.

We’ll see more and more capital flowing to Pakistan in the next few years. And many in diaspora will return, called Wapistanis, a portmanteau of Wapis (meaning to return in Urdu) and Pakistani (hat tip to my friend Rabeel Warraich). This will kick off a virtuous cycle of more capital and more Wapistanis coming back that is going to transform the startup ecosystem and economies of Pakistan and the region.

It’s an exciting time to be in Pakistan.

https://www.menabytes.com/pakistani-startups-next-big-thing/
 

GHALIB

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THE INDONESIA OPPORTUNITY THAT MOST MISSED

A decade ago, Indonesia was one of the best opportunities for startup founders and early-stage venture capital. It was the largest untapped market, with plenty of large greenfield opportunities for startups. At the same time, there was little competition for both startups and VCs investing in them.

Founders and VCs who saw the Indonesia opportunity early, did incredibly well, like Nadiem Makarim of Go-Jek, who built a startup now worth close to $10B, and VCs like East Ventures, whose first two funds boast a net IRR of 70% and 65%. Indonesia has 5 unicorns today, with more in the making. Only five countries in the world have more.

“As a pioneering investor in early-stage tech startups, we believed there was great potential here, but few could see it or understand what we were trying to do. We had to prove to the world that Indonesia had an untapped technology sector waiting to be unleashed.” – Willson Cuaca, Co-founder East Ventures

WHY PAKISTANI STARTUPS ARE NEXT?

Pakistan today, a Muslim-majority country with a population of 217M and consumer spending of $257B (as of 2018) is quite similar to Indonesia in 2009, a Muslim-majority country with a population of 236M and consumer spending of $322B.

Like Indonesia back then, Pakistan today isn’t on the radar of top global VCs and attracts only tens of millions of dollars in VC a year, less than what a hot Silicon Valley startup raises in their series B. This has started to change with First Round Capital’s first investment in Asia in more than a decade is leading a $12M Series A round in a Pakistani startup, Airlift, that is building the decentralized mass transit system (FD: I am an investor in Airlift and a member of First Round’s Angel Track).

I believe Pakistan is the largest untapped market and the best opportunity for startups and early-stage VC in the world today. And here’s why Pakistani startups are the next big thing.

114M PEOPLE UNDER 25 WILL CREATE DEMOGRAPHIC DIVIDEND FOR DECADES AHEAD



Pakistan’s population of 217M people makes it the 5th largest country, slightly ahead of Brazil. It’s an incredibly young population; 114M people are under 25, more than even in the US.

Here’s why that matters. For at least the next two decades, three young people will join the workforce for every person entering the retiring age. The multiplier on productivity is actually going to be higher than 3 as the younger Pakistanis are better educated and more tech savvy. Regardless of other macroeconomic factors, this is going to be a huge tailwind propelling Pakistani economy forward. Pakistan looks set to reap massive demographic dividends for decades.

A side effect of such a young population is that metrics like GDP per capita and broadband penetration are understated relative to other countries, because the denominator includes a much higher percentage of children.

122M STRONG MIDDLE CLASS WILL CREATE SEVERAL MULTI-BILLION DOLLAR MARKETS

Pakistan’s middle class, estimated to be at 82M currently, is projected to grow to 122M by 2025, according to a study done by Oglivy & Mather. This places Pakistan as having the largest absolute increase in middle class from 2015-2025, after China and India. Pakistan is more urban and has a higher median income and household wealth than India (India’s average is higher but most of the wealth generated in the last couple of decades has gone to the top).



The large and expanding middle class has led to a consumer-led spending boom in Pakistan. Consumer spending has grown 5.7x to $257B between 1998-2018, at a CAGR of 9%. This has created many large markets where even a 1% penetration by a startup would represent $100M+ revenue. Existing penetration of technology remains low for most verticals so it’s all up for grabs.



PAKISTAN’S TECH TALENT BASE IS ONE OF THE STRONGEST IN THE WORLD

I’ll start with a little known fact – 20% of Kayak’s R&D was in Pakistan at the time of their IPO, contracted out to Arbisoft, one of the leading software services firm in Pakistan.

There are three current unicorns that have significant teams in Pakistan: Careem, being acquired by Uber for $3.1B, Afiniti, with a $1.6B valuation and KeepTruckin, valued at $1.25B. Between these three companies alone, there are thousands of people who have experienced first-hand building a high-growth successful startup. Many of these employees have left to start or join startups and this trend is expected to accelerate after the Careem acquisition closes.



Pakistan has a large and growing technical talent base of 360K software developers, estimated by A.T. Kearney. That is more than Indonesia, Egypt or UAE have. There are more than 35 incubators and accelerators that have encouraged a lot more people to start something of their own. 300 startups were formed just in 2018 and this number is expected to climb to more than a 1000 .

Then there’s the Pakistani diaspora which is one of the largest in the world. More than 10,000 Pakistanis working in tech in Silicon Valley according to an estimate. Some of them are considering a return to Pakistan to raise their children back home or take care of aging parents. This is quite similar to what happened in India in the second half of the last decade. Having evangelized this for last 6 months, I’ve already met with former employees of Uber, Microsoft and DoorDash who have done exactly this recently. Imagine if just 5% of those 10K return and decide to get involved with the Pakistani startup ecosystem as founders, advisors or investors.

WHY NOW?

“Why Now?” is arguably the most important questions one can ask when evaluating a new market. For Pakistani ecosystem, there are two clear reasons for why it’s hitting an inflection point in 2019 and didn’t do so earlier.

75M BROADBAND SUBSCRIBERS, A CRITICAL MASS OF USERS

Pakistan has witnessed off-the-charts growth in broadband subscribers in recent years, and now has 75M broadband subscribers, 96% of these being mobile; that’s more than the entire population of the UK.



The number of broadband subscribers has grown 25x since 2013, and continues to grow at a rapid clip. If you tried launching a consumer startup as recently as 5 years ago, it would have been impossible to acquire a large user base. Today, startups can acquire 10s of millions of users, most of whom are young, urban and early adopters of technology. This is reflected in the much faster growth rates being experienced by startups.

RECENT EXITS & LARGE ROUNDS HAVE GALVANIZED THE STARTUP ECOSYSTEM

Last 18 months saw more acquisition & fundraising activity for Pakistani startups than the previous 10 years combined. That’s a clear sign of the Pakistani startup market having hit an inflection point.

Firstly, the acquisition of Daraz by Alibaba for somewhere between $150M-200M highlighted the potential of ecommerce in the country. Six months later, EasyPaisa getting valued at $410M+ in the 45% buyout by ANT Financial, showed how valuable the fintech sector was. Both Daraz and EasyPaisa had only captured a fraction of these markets at the time of these deals.

At the same time, three unicorns with Pakistani founders and a significant team presence in Pakistan, all hit massive new milestones. Afiniti, a startup developing artificial intelligence for use in customer call centers, was valued at $1.6B in its series D round late last year. KeepTruckin, building trucking fleet management solutions, raised $149M in its series D round, valuing at $1.25B in Apr 2019. And the most exciting development was Careem’s $3.1 Billion acquisition by Uber in March 2019. Careem’s early tech and product was developed in Pakistan, the CEO Mudassir Sheikha is a Pakistani and Pakistan is one of its largest markets. One of the largest tech acquisitions of all time, slightly ahead of Apple’s acquisition of Beats, this was a seminal event that has galvanized the Pakistani startup ecosystem. Ex-Careem employees are already out there starting new companies and joining high-growth startups.



Zameen/EPMG, one of the earliest and largest Pakistani startup success stories, raised a massive $100M Series D round in February 2019. They have now expand to 40 cities across the UAE, Pakistan, Bangladesh, Morocco, Spain and Romania, and have over 2,000 employees.

Finally, what’s most exciting is that Pakistani startups have crossed the seed to Series A chasm. Three of the largest Series A rounds in Pakistan have all happened in the last 8 months: Bykea’s $5.7M Series A in April, Cheetay’s $7.8M Series A in September, and Airlift securing $12M in Series A funding in November. Airlift’s large series A is particularly amazing because the startup only launched 8 months ago. This would be remarkable even for a Silicon Valley startup and is illustrative of how quickly startups can capture share in the completely untapped Pakistani market.

Airlift Series A round is led by First Round Capital, a leading Silicon Valley VC, known for early bets on Uber and Square. First Round has not invested in Asia in more than a decade, not in China nor in India nor in Indonesia. Yet they chose to invest in a Pakistani startup given the opportunity they saw. I believe this is not a one-off event and is reflective of how primed Pakistani startup ecosystem is to take off after a long time of slow build-up.

WHAT’S AHEAD: WAPISTANIS AND VC DOLLARS FLOWING TO PAKISTAN

To sum it up, Pakistan is the largest market untapped by startups and venture capital today. Pakistanis form one of the biggest tech talent pools in the world and have done well across the globe, founding several unicorns (at least six by my count) and having played a leading role in many others. With this talent advantage, Pakistani startups are well-positioned to dominate all major industries in Pakistan and also expand to MENA, a $3.6 trillion economy that’s also relatively early in the startup cycle.

What took Indonesia a decade, Pakistan will do it faster because the broadband penetration is at a much higher baseline, because capital moves faster to global opportunities today than it did a decade ago and because Pakistan has a larger talent base both at home and among the diaspora.

We’ll see more and more capital flowing to Pakistan in the next few years. And many in diaspora will return, called Wapistanis, a portmanteau of Wapis (meaning to return in Urdu) and Pakistani (hat tip to my friend Rabeel Warraich). This will kick off a virtuous cycle of more capital and more Wapistanis coming back that is going to transform the startup ecosystem and economies of Pakistan and the region.

It’s an exciting time to be in Pakistan.

https://www.menabytes.com/pakistani-startups-next-big-thing/
problem with desi babu inspector culture is biggest hindrance in establishment of foreign industries in our part .
 

Indos

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problem with desi babu inspector culture is biggest hindrance in establishment of foreign industries in our part .
Those Indonesian unicorns are owned by Indonesian nationals and they are local companies, not foreign ones.
 

Arsalan

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THE INDONESIA OPPORTUNITY THAT MOST MISSED

A decade ago, Indonesia was one of the best opportunities for startup founders and early-stage venture capital. It was the largest untapped market, with plenty of large greenfield opportunities for startups. At the same time, there was little competition for both startups and VCs investing in them.

Founders and VCs who saw the Indonesia opportunity early, did incredibly well, like Nadiem Makarim of Go-Jek, who built a startup now worth close to $10B, and VCs like East Ventures, whose first two funds boast a net IRR of 70% and 65%. Indonesia has 5 unicorns today, with more in the making. Only five countries in the world have more.

“As a pioneering investor in early-stage tech startups, we believed there was great potential here, but few could see it or understand what we were trying to do. We had to prove to the world that Indonesia had an untapped technology sector waiting to be unleashed.” – Willson Cuaca, Co-founder East Ventures

WHY PAKISTANI STARTUPS ARE NEXT?

Pakistan today, a Muslim-majority country with a population of 217M and consumer spending of $257B (as of 2018) is quite similar to Indonesia in 2009, a Muslim-majority country with a population of 236M and consumer spending of $322B.

Like Indonesia back then, Pakistan today isn’t on the radar of top global VCs and attracts only tens of millions of dollars in VC a year, less than what a hot Silicon Valley startup raises in their series B. This has started to change with First Round Capital’s first investment in Asia in more than a decade is leading a $12M Series A round in a Pakistani startup, Airlift, that is building the decentralized mass transit system (FD: I am an investor in Airlift and a member of First Round’s Angel Track).

I believe Pakistan is the largest untapped market and the best opportunity for startups and early-stage VC in the world today. And here’s why Pakistani startups are the next big thing.

114M PEOPLE UNDER 25 WILL CREATE DEMOGRAPHIC DIVIDEND FOR DECADES AHEAD



Pakistan’s population of 217M people makes it the 5th largest country, slightly ahead of Brazil. It’s an incredibly young population; 114M people are under 25, more than even in the US.

Here’s why that matters. For at least the next two decades, three young people will join the workforce for every person entering the retiring age. The multiplier on productivity is actually going to be higher than 3 as the younger Pakistanis are better educated and more tech savvy. Regardless of other macroeconomic factors, this is going to be a huge tailwind propelling Pakistani economy forward. Pakistan looks set to reap massive demographic dividends for decades.

A side effect of such a young population is that metrics like GDP per capita and broadband penetration are understated relative to other countries, because the denominator includes a much higher percentage of children.

122M STRONG MIDDLE CLASS WILL CREATE SEVERAL MULTI-BILLION DOLLAR MARKETS

Pakistan’s middle class, estimated to be at 82M currently, is projected to grow to 122M by 2025, according to a study done by Oglivy & Mather. This places Pakistan as having the largest absolute increase in middle class from 2015-2025, after China and India. Pakistan is more urban and has a higher median income and household wealth than India (India’s average is higher but most of the wealth generated in the last couple of decades has gone to the top).



The large and expanding middle class has led to a consumer-led spending boom in Pakistan. Consumer spending has grown 5.7x to $257B between 1998-2018, at a CAGR of 9%. This has created many large markets where even a 1% penetration by a startup would represent $100M+ revenue. Existing penetration of technology remains low for most verticals so it’s all up for grabs.



PAKISTAN’S TECH TALENT BASE IS ONE OF THE STRONGEST IN THE WORLD

I’ll start with a little known fact – 20% of Kayak’s R&D was in Pakistan at the time of their IPO, contracted out to Arbisoft, one of the leading software services firm in Pakistan.

There are three current unicorns that have significant teams in Pakistan: Careem, being acquired by Uber for $3.1B, Afiniti, with a $1.6B valuation and KeepTruckin, valued at $1.25B. Between these three companies alone, there are thousands of people who have experienced first-hand building a high-growth successful startup. Many of these employees have left to start or join startups and this trend is expected to accelerate after the Careem acquisition closes.



Pakistan has a large and growing technical talent base of 360K software developers, estimated by A.T. Kearney. That is more than Indonesia, Egypt or UAE have. There are more than 35 incubators and accelerators that have encouraged a lot more people to start something of their own. 300 startups were formed just in 2018 and this number is expected to climb to more than a 1000 .

Then there’s the Pakistani diaspora which is one of the largest in the world. More than 10,000 Pakistanis working in tech in Silicon Valley according to an estimate. Some of them are considering a return to Pakistan to raise their children back home or take care of aging parents. This is quite similar to what happened in India in the second half of the last decade. Having evangelized this for last 6 months, I’ve already met with former employees of Uber, Microsoft and DoorDash who have done exactly this recently. Imagine if just 5% of those 10K return and decide to get involved with the Pakistani startup ecosystem as founders, advisors or investors.

WHY NOW?

“Why Now?” is arguably the most important questions one can ask when evaluating a new market. For Pakistani ecosystem, there are two clear reasons for why it’s hitting an inflection point in 2019 and didn’t do so earlier.

75M BROADBAND SUBSCRIBERS, A CRITICAL MASS OF USERS

Pakistan has witnessed off-the-charts growth in broadband subscribers in recent years, and now has 75M broadband subscribers, 96% of these being mobile; that’s more than the entire population of the UK.



The number of broadband subscribers has grown 25x since 2013, and continues to grow at a rapid clip. If you tried launching a consumer startup as recently as 5 years ago, it would have been impossible to acquire a large user base. Today, startups can acquire 10s of millions of users, most of whom are young, urban and early adopters of technology. This is reflected in the much faster growth rates being experienced by startups.

RECENT EXITS & LARGE ROUNDS HAVE GALVANIZED THE STARTUP ECOSYSTEM

Last 18 months saw more acquisition & fundraising activity for Pakistani startups than the previous 10 years combined. That’s a clear sign of the Pakistani startup market having hit an inflection point.

Firstly, the acquisition of Daraz by Alibaba for somewhere between $150M-200M highlighted the potential of ecommerce in the country. Six months later, EasyPaisa getting valued at $410M+ in the 45% buyout by ANT Financial, showed how valuable the fintech sector was. Both Daraz and EasyPaisa had only captured a fraction of these markets at the time of these deals.

At the same time, three unicorns with Pakistani founders and a significant team presence in Pakistan, all hit massive new milestones. Afiniti, a startup developing artificial intelligence for use in customer call centers, was valued at $1.6B in its series D round late last year. KeepTruckin, building trucking fleet management solutions, raised $149M in its series D round, valuing at $1.25B in Apr 2019. And the most exciting development was Careem’s $3.1 Billion acquisition by Uber in March 2019. Careem’s early tech and product was developed in Pakistan, the CEO Mudassir Sheikha is a Pakistani and Pakistan is one of its largest markets. One of the largest tech acquisitions of all time, slightly ahead of Apple’s acquisition of Beats, this was a seminal event that has galvanized the Pakistani startup ecosystem. Ex-Careem employees are already out there starting new companies and joining high-growth startups.



Zameen/EPMG, one of the earliest and largest Pakistani startup success stories, raised a massive $100M Series D round in February 2019. They have now expand to 40 cities across the UAE, Pakistan, Bangladesh, Morocco, Spain and Romania, and have over 2,000 employees.

Finally, what’s most exciting is that Pakistani startups have crossed the seed to Series A chasm. Three of the largest Series A rounds in Pakistan have all happened in the last 8 months: Bykea’s $5.7M Series A in April, Cheetay’s $7.8M Series A in September, and Airlift securing $12M in Series A funding in November. Airlift’s large series A is particularly amazing because the startup only launched 8 months ago. This would be remarkable even for a Silicon Valley startup and is illustrative of how quickly startups can capture share in the completely untapped Pakistani market.

Airlift Series A round is led by First Round Capital, a leading Silicon Valley VC, known for early bets on Uber and Square. First Round has not invested in Asia in more than a decade, not in China nor in India nor in Indonesia. Yet they chose to invest in a Pakistani startup given the opportunity they saw. I believe this is not a one-off event and is reflective of how primed Pakistani startup ecosystem is to take off after a long time of slow build-up.

WHAT’S AHEAD: WAPISTANIS AND VC DOLLARS FLOWING TO PAKISTAN

To sum it up, Pakistan is the largest market untapped by startups and venture capital today. Pakistanis form one of the biggest tech talent pools in the world and have done well across the globe, founding several unicorns (at least six by my count) and having played a leading role in many others. With this talent advantage, Pakistani startups are well-positioned to dominate all major industries in Pakistan and also expand to MENA, a $3.6 trillion economy that’s also relatively early in the startup cycle.

What took Indonesia a decade, Pakistan will do it faster because the broadband penetration is at a much higher baseline, because capital moves faster to global opportunities today than it did a decade ago and because Pakistan has a larger talent base both at home and among the diaspora.

We’ll see more and more capital flowing to Pakistan in the next few years. And many in diaspora will return, called Wapistanis, a portmanteau of Wapis (meaning to return in Urdu) and Pakistani (hat tip to my friend Rabeel Warraich). This will kick off a virtuous cycle of more capital and more Wapistanis coming back that is going to transform the startup ecosystem and economies of Pakistan and the region.

It’s an exciting time to be in Pakistan.

https://www.menabytes.com/pakistani-startups-next-big-thing/
Can you or someone else share why these start-ups move out of Pakistan after finding success? As per my info Zameen.com moved to UAE, Daraz was sold as well. Careem we all know started by a Pakistani and early developments were also in Pakistan but then moved to UAE. What might be reason for that?
 

Fireurimagination

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Pakistan does have great potential but unfortunately it's obsessed with religion, extremism, terrorism and stuff like that. Won't be surprised to see Pakistan miss the bus.
 

ps3linux

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Can you or someone else share why these start-ups move out of Pakistan after finding success? As per my info Zameen.com moved to UAE, Daraz was sold as well. Careem we all know started by a Pakistani and early developments were also in Pakistan but then moved to UAE. What might be reason for that?
There are multiple reasons, many a times stake in these startups is purchased by international firms its a choice between ours and the liberal society of UAE, friendly tax and legal environment. Bureaucracy is corrupt there as well but for them national interests come thus they ensure a business friendly work environment while for our babus personal interest comes first, they probably are as corrupt as Indian and Afghan.

The other reason is ease of doing business in Forex, and repatriation of profits. Mideast offers a much better choice. Then there is a small nuisance of AML in Pakistan considering the fact that most of the foreign investors of these startup are Private Equity firms, due to the noose around Pakistan's virtual neck of being greylisted by FATF the laws are being implemented in a tough manner, whereas UAE in addition to Cayman Island, BVI, panama and few others are rightly the money laundering capitals.
 
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Indos

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Pakistani diaspora in IT sector must comeback, they have expertise and money to initiate the first business.
 

Aspen

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Can you or someone else share why these start-ups move out of Pakistan after finding success? As per my info Zameen.com moved to UAE, Daraz was sold as well. Careem we all know started by a Pakistani and early developments were also in Pakistan but then moved to UAE. What might be reason for that?
I actually made a separate post about that, its worth reading, I linked it below

https://defence.pk/pdf/threads/5-lessons-from-my-first-6-months-as-a-vc-in-pakistan.670173/

MEENAH TARIQ

Partner at Karavan, a Pakistan-focused early-stage VC. She is also an advisor on entrepreneurship at the World Bank, where she is helping design the Women Entrepreneurs Financing Initiative for Pakistan. Previously, she was the Head of Strategy and Accelerator at Invest2Innovate Pakistan.

It is humbling to know how much I did not know before I became a partner six months ago at Karavan, a VC fund actively investing in Pakistan. I have had the privilege of being in the front row seat to witness the exponential growth of Pakistan’s entrepreneurship ecosystem for the last five years, but this was from the ‘other side’ of the table as the head of an accelerator program (Hey Invest2Innovate!) closely working with startups, most of them struggling to raise any funding at all. My learning thus far has been exponential—through the course of making investments, going through the due diligence process and saying no to founders, and connecting and collaborating with other VCs and angel investors operating in Pakistan. In this article, I distill some of these lessons and observations.

1) DON’T BURN WHAT YOU DON’T HAVE

Positive conversations or even actual term sheets don’t equal money in the bank. I have witnessed, with at least two startups, how real and how risky this situation is. Startups that receive a term sheet or are in the midst of seemingly extremely positive conversations with investors, receiving a lot of attention and sometimes even promises, will amp up their burn rate to start materializing aggressive growth. They’re excited and can’t wait to put into motion the strategies they’ve designed for scale post fundraising. Except, all too often, the money gets delayed—investors may face regulatory issues (a very real concern in Pakistan), investors may not have money in their own bank yet (another very real concern), or at the very last minute, the investor has trouble convincing his/her investment committee, or just changes their mind because of a change in the external market environment.

Whatever the reason, the end result is the same: a startup that was hitherto doing well suddenly left in a lurch, with very little money in the bank, looking at a very real risk of liquidation. It’s terrible to witness, but I’ve seen it happen and it will happen again. So, startups, don’t start burning cash until the funds you’ve been promised actually land in your account.

2) THE DESPERATE NEED FOR PROFESSIONALISM

Over the last three years, we have seen capital allocators in the ecosystem evolve, and the supply side of the fundraising equation professionalize. Previously funding was coming from family offices or high net worth individuals, who had their own interests and other work responsibilities. Now VCs have entered the picture who focus exclusively on working with startups. This means we’ve seen more deliberate efforts towards developing a deal pipeline, conducting professional due diligence, and reviewing legal and regulatory structures to deploy capital. With more VC funds coming into the market, the balance of power is slowly but surely shifting, so VCs have to ‘sell’ themselves to get to be a part of increasingly lucrative deals. Investors cannot get away with offering bad terms, taking too long, or being in any way unprofessional to startups, which is a fantastic change.

On the side of the startups, there is still a lot of work to be done. In the past six months, I have come across many startups that, while attractive, were simply not investment or deal ready. There is still a gap when it comes to polished decks, and more importantly, well thought out assumptions, strategic vision, and financial dashboards that can stand scrutiny. The weight of this work, then, falls to the investor if we want to deploy any money at all—this takes longer and translates to a lot of hand-holding. Capital flows not to the best business, but the most polished/prepared entrepreneur.

I understand there is a lot of pressure on an entrepreneur who is managing operations, ensuring continued growth, and also navigating multiple fundraising conversations and due diligence processes. But the latter simply cannot be relegated to the back burner until it’s too late and you’re already almost out of cash. Startups should not wait till they’re desperate. This work needs to start early and needs to be dealt with professionally. If you have a co-founder, it’s a good idea to make one person responsible for these conversations and follow-ups. If you’re a single founder, assign a team member some tasks, or bring someone on board to manage operations while you clear your plate to fund-raise. Take it seriously.

The absolute worst I have experienced is when you’re deep in due diligence with a startup, working on their investment documents enthusiastically because the founders say they need money in the bank a month from now, and then they ghost you. There are fewer VCs in the country right now than you can count on both hands. Basic unprofessional behavior with one does not bode well for an entrepreneur who is looking to grow and scale. It is completely okay, and your prerogative, if you want to take funding from a particular investor or not, or when. Everyone is busy, and we all understand that. Simple courtesy demands that you drop them a line with an update and close the conversation on good terms so that it’s a relationship you can revisit at a later time.

3) INVESTORS AS SALES AGENTS

A good investor in today’s ecosystem has to be a fantastic sales agent for the company. The number of VCs and angels in Pakistan has substantially increased over time, but the overall capital available and ticket sizes remain small, which means there’s a lot of lobbying that has to happen. If someone decides to raise a $5 million round from Pakistan today that would probably require a hundred percent of the VC and angel community to come together and write checks, to close the round. This means getting an investor who has local and international access to additional funding, and the means to mobilize them, is crucial.

As an investor, this means going all out to sell portfolio companies—and to begin doing so the minute you write your check, not wait for when the next round is being raised. Talking up portfolio companies so that they become a part of local folklore, and start getting international attention, so there’s actual fear of missing out among investors by the time the next round comes along. We’ve seen great case studies of this strategy working, and it’s definitely a new-age way of doing things compared to even deals made two years ago with barely a word from the investors beyond perhaps a local press conference. But it’s not unheard of in more developed ecosystems and is a strategy that local investors need to get behind.

4) FLUFF AND SMOKE

In the last six months, I have constantly heard talk of ‘lies’ being propagated. Startups (and some investors) point to investors announcing large funds without having actual funds/commitments; investors point to intermediaries co-opting past fundraises of incubated companies into their ‘this is how much money our incubatees have raised because we rock’ announcements; investors questioning the traction numbers startups are quoting; and startups preemptively putting out press releases and announcements of having raised considerable funding while actually still trying to close the round (not even having the commitments, much less money in the bank).

Everyone seems to be talking about all of this, but also, not talking about any of this. It’s like three years ago when there were some startups getting a lot of awards and prizes (money and funding wasn’t a big thing back then) and people knew they hadn’t built a company behind the infinitely sellable idea, but no one called anyone else out on it. It’s all a part of the learning curve, and this journey of exponential growth that our startup ecosystem is on.

There will be fluff and there will continue to be lies, from all stakeholders, with the situation to perhaps actually worsen as those exaggerating get rewarded for it and with more individuals jumping on the bandwagon to use the same playbook. But then it will get better, as the fluff settles, more accountability is created, and companies built with integrity will survive. It is also a fact that gossip is juicy, and while the negative news is a small portion of the whole, it starts to seem much larger because of the greater amount of attention it gets.

Will the negativity impact the national narrative in the long run or the hype around the fluff help the ecosystem grow faster? I’m going to wait and watch. My gut says that there are still more genuine players in this game than not, and overall, the hype around the narrative being crafted will still create incremental, if not exponential, gain.

5) THE NEED FOR PROFESSIONAL ANGELS

The more I tried to map the stakeholders and the pockets of money across a spectrum of ticket sizes and startup stages, the clearer it is that the pipeline that we’re all aiming for will dry up very fast if not enough work is done upstream or helping companies grow to the seed stage. This work falls to the startups and the intermediaries for them to polish good ideas and fledgling businesses into deal ready, bankable businesses from a VC perspective. But there is also a massive capital gap upstream. It’s too risky for VC money, and that’s where we need angels to come in.

Professional angels who feel strongly about the startups they invest in but are also not exploitative and allow for cap structures that will attract VC money down the line. Angels that understand this asset class to some extent and can move fast. In my research, I’ve found that the interest among high net worth families and individuals around investing in startups has increased significantly over the past year. Someone (experienced angels, or perhaps intermediaries) needs to start engaging with them and lobby to create angel networks and syndicates that can take a professional, educated approach to angel investing, allowing for the growth of the pipeline and the ecosystem as a whole.

Overall, I remain ridiculously hopeful about the growth of our ecosystem. Our market is primed to take off—the work that the ecosystem put in, including all intermediaries and the early wave of investors, in the last seven years created the foundation for the massive leap that we have witnessed in the last six months. Better political conditions and a sense of hopefulness, fast technology adoption rates, along with the expectation of a youth dividend from the 65% population under the age of 30, has made reverse brain drain possible. Success stories are coming to the forefront, attracting better talent and more cash than ever before. We have simply got to keep building together, with integrity, accountability, and a genuine desire to do better, to see even bigger success come out of Pakistan and create value for everyone involved.

https://www.menabytes.com/first-six-months-as-a-vc-pakistan/
 

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