Only 6 out of 723 startups in Pakistan raised funds beyond $500,000

Out of a total of 723 start-ups launched since 2010, only 68 have been able to raise funds. Only 6 have been successful in raising funds greater than $500,000. 67% of these are still active while 53% are linked to an incubator/accelerator.

Planet N in collaboration with Karandaaz Pakistan and LUMS organized a workshop on 24th Jan 2017, chalking out a roadmap for the start-up ecosystem in Pakistan. The idea was to connect entrepreneurs with industry experts.

Based on the highlights of the workshop, Planet N’s Research & Analytics Group has drafted a report mapping the entrepreneurial landscape in Pakistan keeping in view the various hindrances faced by entrepreneurs, investors, and other stakeholders in Pakistan and proposing various solutions to ease and encourage startups in the country.

As per the report, Pakistan’s two-third population of 180 million people are under 30 years old and seem determined for change. According to UNDP, 23 % of the youth wants to start their own business in Pakistan but the current landscape, procedures and requirement offer a big hurdle making it difficult to materialise the execution of ideas.

According to estimates in the report, a total of 723 start-ups have been initiated after 2010 having a Pakistani founder. Out of these 68 have been able to raise funds and only 6 have been successful in raising funds greater than $500,000. 67% of these startups are still active and 53% are linked to an incubator/accelerator.

Although challenges continue to persist in the country, the experts in the industry seem positive for the startup ecosystem of Pakistan. Understanding the difference between the micro and macro environment of the ecosystem is very important in order to see the emergence of success stories in Pakistan.

At  the micro level, the number of players will continue to increase, but stakeholders should work together to increase the number of success stories of entrepreneurial startups.The foundation for entrepreneurship education needs to be rooted beginning at the primary level. This will help develop and sustain an entrepreneurial culture in Pakistan by using the structured approach to formal education system. Furthermore, the curriculum needs to be designed to teach skills and competencies that are flexible enough to not only benefit someone starting his own business but also be applicable in most workplace situations. Furthermore, supporting a formal and structured entrepreneurial education can only be materialised if there is a trained and certified body of teaching faculty made available.

To add to this, the proposed educational modules should focus on developing and enhancing  creative and critical thinking along with building confidence and a can-do attitude in addition to with enhancing risk management skills of pupils.

On the macro side of support, there is a dire need for government to address the regulatory issues. As entrepreneurs are a special breed with special needs, a labyrinth of law complexities deters a lot of budding entrepreneurs. A proposed solution is that laws need to be tailored as per the requirements of entrepreneurs to create a conducive environment for them to succeed.

The main objective of professional entrepreneur is to create economic value. An important requirement of the process is Intellectual property laws as well as bankruptcy laws. These are fundamental to offering protection to new innovative ideas. Not only are the processes that protect new innovative ideas delayed and inefficient but ineffective exit strategies lead to high risk startups suffering huge financial losses in case the idea fails to take off. Hence most startups prefer registering their ideas abroad. In order to avoid such brain drain, government needs to strengthen IPO laws and draft bankruptcy laws for protecting high risk ventures in order to provide cushion to small firms when they suffer huge financial losses.

Furthermore, a new tax bracket needs to be devised specially for fresh startups with tax concessions or tax holidays at least in the initial period of startups.

Last but not the least, the law enforcing agencies in Pakistan should create an enabling and encouraging environment by providing funding to startup founders and small business owners. In order to generate funds, crowd funding and public-private fund creation present viable solutions to muster funds for startups.

As angel investors are a huge part of the eco-system, the government needs to devise a  framework allowing fiscal incentives and tax breaks to encourage them to invest in startups.

It can be comprehensively concluded that the success of start-ups lies in various stakeholders collaborating and working together.

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