Has economic turmoil placed the Pakistani businesses and startups on the back foot

The country's enterprising class appears to be growing more risk averse over time

Pakistan’s startup ecosystem has been through a lot over the past few years. From being pitched as the next big thing in the emerging markets ecosystem to a dearth of funding over the past two years, the nascent market has had its ups and downs.

This has triggered a certain behavioural shift in the market which I observed recently at a conference in Silicon Valley. In my interactions with a few Pakistani entrepreneurs present there, there was a certain realisation. All the three co-founders were simultaneously juggling between multiple things. It appeared as if they were hedging their bets, and most of the young entrepreneurs find themselves in a similar kerfuffle when they embark upon their journey. They are trying to fend off the risk posed by scarcity of resources, the possibility of failure and the market climate. 

This is precisely where the startup founders in Pakistan have gone wrong, and it is not limited to just the founders. Pakistan as a country has become highly risk averse in terms of business, from the founders to the investors to the government.

The founder’s case is simple: for early-stage startups, if you are a “techie” co-founder, you should not take on management responsibilities until your product has matured enough. Only after going through the grind and reaching your 40s and 50s, and having tried your hand at multiple things, should you consider transitioning to a different role. The processing power before that simply does not exist. 

Contrary to popular belief, the problem of the modern Pakistani founder is not that of a lack of effort. In fact, they might be putting in too much effort.

Simply put, if you have one problem deeply entrenched in your subconscious, you continue to work on it regardless of any distractions or obstacles that may arise. However, while juggling with other managerial tasks and failing to prioritise, a solution to that problem might never be found.

If the passion is there for the product, founders do not go on blaming the market and investor sentiment. One can be apprehensive of the situation but it must never be an excuse. Think of it this way, what else is the job of the entrepreneur? It is literally finding solutions. If the problem is that the founders have a strong affinity for their product, but the market conditions are unfavourable, they should view it as just another obstacle that needs to be overcome.

When the 2008 crisis hit, I was in New York City, navigating the Series-D for my startup. The entire market was crumbling, yet the company had 1 billion dollar worth of term sheets on the table. Why? Simply because there was a product market fit that was performing well. The team could have easily said that the climate was bad and would have decided to tackle the crisis first. However, the focus remained on building the product. Even in the midst of the calamity-stricken market, we were able to successfully raise funds.

Venture funds drying up, currently, is a shared concern for startups across the globe. Even the markets in the US are a bit wayward right now. Employees over there are being laid off as well. Yet, our local founders have figured out a hack to the never ending search for VC funding. If their company does well, there are international companies owned by Pakistani origin entrepreneurs that will be interested in financing. 

This is where defensiveness becomes apparent. Pakistani founders are often enticed by the hype surrounding international funding rounds, as they can have a significant impact on valuation, ultimately leading to a smoother path towards an IPO. However, at an early stage, founders should not be preoccupied with the thought of an exit. Instead, they should remain focused on building the company, as this will eventually open doors for better exit opportunities.

There is no doubt that immense potential lies untapped in Pakistan. Evident from the fact that it is the only country among its neighbours that is yet to take off. But I would reiterate the fact that Pakistanis in general have become very defensive. 

When it comes to the government, it is a completely different setting. Let’s take tourism as an example. During the process of opening up our own resort in Shigar valley, I was in contact with a few Pakistani diplomats who gave assurances about the political situation. My apprehension is that when you go to Africa, one does not look at who is in power. Nobody talks about the political situation. The only concern should be around the security of the investor’s assets. Pakistanis as a nation have intertwined security with politics and it is unfortunate that politics has also become a violent discourse. People highlight the negatives and that does not attract positive sentiment.

Look at the number of school shootings in the US, you will realise that Pakistan is also not that unsafe. Not to imply that the country does not have problems of its own. But we are not even remotely comparable to that country when it comes to an investment framework. 

Probably the biggest factor behind it is that Pakistan has an image problem that stems from terrible marketing and a lack of branding. The country needs a Chief Marketing Officer who can spread the positive word around the world. 

As for the government, it only needs infrastructural tweaks to make business feasible. Again tourism serves as a perfect example. The Skardu airport, for instance, is beautiful, but the condition of washrooms at that airport is appalling to say the least. It is just a small problem possibly costing 1-2 million rupees to resolve. Spend that and it will reduce a pain point for the tourists.

95% of the tourists at our resort in Shigar valley are Pakistanis. 75% of them commute for almost 12 hours before reaching there. For them, the primary problem is not politics, it is the unavailability of basic sanitation and other facilities during the journey. These are just examples but with the same philosophy, all the industries can flourish and with proper help, there is no reason why Pakistan cannot create a unicorn.

For a country boasting a population of over 250 million, the path forward is an upward trajectory. However, in order to achieve progress, it is imperative to dispense with the idea of a saviour and instead concentrate on diligent effort. The key lies in investing in our own inherent capabilities; this is the singular solution for success.

Osman Rashid
Osman Rashid
The writer is a Pakistan-born silicon valley investor and is the co-founder and the former CEO of ed-tech unicorn “Chegg”

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