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Pakistani Investors: Invest in Local Technology Startups NOW!


I believe that the technology entrepreneurship ecosystem in Pakistan is at a tipping point! There are a number of factors at play that make Pakistan so ripe for both local and international investors looking to invest in the tech space:

  • Quickly growing internet adoption currently estimated to be 25 million internet users and 15 million mobile internet users;
  • Cheap smart phone devices costing under $50;
  • 3G and 4G rollouts;
  • Massive amounts of marketing and media spend by companies like Rocket Internet, Schibsted, and Naspers that’s targeted to make Pakistani consumers comfortable transacting online;
  • Development of platforms like The Foundation at LUMS Center for Entrepreneurship and Plan9 that are supporting passionate entrepreneurs during their formative years;
  • Slow but steady investments flowing into startups at seed (e.g. Kima Ventures investment into Eyedeus Labs) and early stage (Frontier Digital Venture’s US$3.5 Million investment into PakWheels.com) from local and foreign angels as well as early-stage funds;
  • Some exits happening in the tech space are gradually building investor confidence. Although service companies, TRG, NETSOL and most recently Systems Limited have had local IPOs (Systems was over subscribed by almost 3 times). Product companies like Mixit and Gameview Sudios have provided exit to their investors and founders through global acquisitions. GenITeam and Tapinator provided exit to investors through OTC trades;
  • Tens of millions of dollars being poured into developing pervasive electronic and online payment infrastructure in Pakistan (you have to take my word for it, but telcos and major banks will soon start announcing these plays);
  • Successful entrepreneurs returning from abroad and providing mentoring to startups and building bridges for them outside of Pakistan;
  • Gradual realization by seasoned businessmen and young aspiring entrepreneurs alike that internet has a massive equalizing power and they can tap into a global market of billions through online channels;
  • Low cost of starting a technology business due to easy access to cloud computing platforms; massive distribution channels like the PlayStore, AppStore and Facebook; ability to create very targeted online marketing campaigns; inexpensive outsourcing of development tasks to freelancers; and quick feedback from customers to iterate and improve the products and services;
  • Ease of doing a tech business in Pakistan compared to the red tape and bureaucracy that has to be dealt with while setting up an industry (in fact, software exports still enjoy a complete tax holiday in Pakistan);
  • Excellent leverage on HR that tech (product) businesses provide compared to any other business and we all know that good HR is a constraint anywhere in the world;
  • And lastly, because tech businesses are not as widely impacted by security, electric power shortfalls, gas load-shedding and others infrastructure issues plaguing the rest of the industries in Pakistan.

You inject a bit of capital to catalyze all this further in the 6th most populous (196 Million) country in the world, and we can have a perfect storm that can turn the Pakistani technology startups of today into the giant global businesses of tomorrow!

How long will you keep pumping money in sugar and textile mills? Let me share something that might shed some light on the opportunity that I am ranting about. The following chart compares the annual profit before taxes of a single games company based in Finland, a country with half the population of Lahore and about the same nominal GDP as Pakistan, employing only 120 people (which recently took over Nokia’s old R&D facility) with multiple publicly listed companies in Pakistan belonging to various industrial segments. Here are some eye opening inferences in case they are not readily evident:

  • One mobile gaming company in a country with half the population of Lahore makes more profit before taxes than ten of the largest cement companies in Pakistan
  • One mobile gaming company in a country with half the population of Lahore makes more profit before taxes than two companies that distribute natural gas to the entire Pakistan
  • One mobile gaming company in a country with half the population of Lahore makes more profit before taxes than five power generation companies and two oil refineries combined
  • One mobile gaming company in a country with half the population of Lahore makes more profit before taxes than nine of the top textile mills, five automobile companies and 5 sugar mills combined
Mobile Gaming vs Multiple Industries

Comparison of profit before taxes (FY2013) of a single mobile gaming company with various industries in Pakistan

Here is another chart to drive home the point.

  • One mobile gaming company in a country with half the population of Lahore makes more profit before taxes than any one of the largest banks in Pakistan
  • One mobile gaming company in a country with half the population of Lahore makes 6 times more profit before taxes than National Bank of Pakistan
One Mobile Gaming vs Multiple Banks

Comparison of profit before taxes (FY2013) of a single mobile gaming company with various banks in Pakistan

Alright, so I have used one of the most successful games development companies for comparison, but that is besides the point. The point is, the next big games development company could as easily be Mindstorm Studios based right here, in Lahore. The fact that it’s based in Pakistan does not minimize its chances of success. It’s as good an investment opportunity as Supercell of Finland!

One of the incubated companies at the LUMS Center for Entrepreneurship, interaCta, has developed tech to make all TV and radio broadcast interactive without the need of additional hardware, just requiring smart phones. Imagine the implications! It can disrupt the TV, Radio, Advertisement, Ratings industries just to name a few. A potential acquirer wouldn’t care whether the tech was developed at Xerox or LUMS. Eyedeus Labs, another team of LUMS students, recently raised money from Kima Ventures. They are looking to disrupt online video advertisement market by introducing non-intrusive advertisement methods in the videos that do not distract the viewer. Then there is Savaree, BizCloutJewelryDesignPro, P for Plan and the list goes on. All of these are great investment opportunities seeking capital. And these are just a few of the seed stage investment opportunities.

I repeat. This is a great time to enter Pakistan. Equity in technology companies is relatively cheap, assets are portable (predominantly intellectual property) in case one gives too much weight to country risk, operations are already on cloud platforms outside of Pakistan for many, and exit opportunities exist globally. The fundamentals of the on-ground businesses are already very strong. The Karachi Stock Market index has been growing north of 40% for the past few years (30%+ in $ terms) and broke the highest ever 32,000 KSE 100 index points barrier a few days ago. Most of that is driven by foreign investment into rock solid businesses by investors who can see past the FOX news propaganda and realize that the nation, that is often deemed to be on the brink of extinction since its founding in 1947, is as resilient as it is resourceful!

It is time local investors join the party as well. Pakistan is a gold mine of opportunities for the truly visionary, local investors with large balls and an appetite for risk looking for big rewards – people who can consider and invest in the opportunities lurking underneath the veil of ‘mostly perception based’ geo-political and security issues. If you are it, sign up as an investor at http://lce.lums.edu.pk/contact-form for starters.

Disclaimer: I advise, mentor or have some sort of a non-compensatory advisory relationship with almost all the local startups listed in this article.
Khurram Zafar (19 Posts)

Executive Director, LUMS Center for Entrepreneurship | ex-CIO at Lahore Stock Exchange | Senior Policy Adviser, Government of Punjab | Visiting Faculty, Entrepreneurship, Graduate School of Computer Science, Information Technology University of Punjab | Board Member, Plan9 Technology Incubator | Entrepreneur | Tech & Agri Investor | Poker Player | Poet | Magician | Dad of three | Follow me on Twitter by clicking here!


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