The current crisis in the startup sector in Pakistan will help new entrepreneurs to emerge due to their learning curve during the economic downturn. The current situation is not alarming but is rather an opportunity from which other startups will emerge.
These views were voiced by Foodpanda Pakistan CEO Muntaqa Peracha while talking about the prospects for startups in an interview with The Express Tribune.
“Since you now have different problems to solve, the best thing about startups is that they disrupt the existing way of thinking. So under these circumstances many other companies will come out like they did during Covid,” said he declared.
The unstable domestic economic situation is due to the fact that the global situation is tense, he noted.
“Pakistan is not suffering because we did something wrong, we are suffering because the whole world is suffering. Our technology industry is still very young and will take time to develop. Every time you start your cycle goes up, then one day you’re down and then you’re up again. In those lows and highs, we have some organizations that fold, some organizations that are acquired by others, some organizations that are going to get stronger through consolidation,” he said.
The post-Covid landscape will bring many changes. The start-up industry will now see more young people, many of whom have likely worked at companies like Airlift, Swvl and other organisations. These budding entrepreneurs have experience of how to raise money, deploy that money quickly, scale very quickly, and scale quickly, he added.
The second benefit of the challenges they have faced is that entrepreneurs will have to change the traditional ways of operating a business. The industry as a whole will benefit from this dynamic of change. Despite the fact that many startups have ceased operations, “we are sure that the industry will rebound and recovery is only a matter of time.”
That sentiment was echoed by former Universal Service Fund (USF) CEO Parvez Iftikhar, who said the startup sector would certainly rebound in due course.
“Such setbacks are normal, in fact good, for any growth business. They provide an opportunity to learn. Growth is never linear, it is always zigzag,” he added.
It is evident that economic activity has slowed both globally and in Pakistan. Investors may also find it difficult to raise funds due to the recent economic downturn in financial markets, said JS Global ICT analyst Waqas Ghani Kukaswadia.
On the other hand, it is also a fact that Pakistan is a big consumer market and there will always be plenty of opportunities for entrepreneurs.
“Entrepreneurs will just have to change their approach when it comes to Pakistan. We’ve seen it recently with two big startup companies heading south, no matter how amazing a concept is or how much capital a company has been able to raise. If startup founders are unable to understand how the typical Pakistani market works and how to stay afloat, startups will continue to face difficulties. Only unique financing concepts and agreements do not guarantee the long-term success of a business,” he said.
Startups are a relatively young industry in Pakistan. “We have investors with little or no experience in emerging markets that operate differently from developed markets,” the Foodpanda CEO said.
On the other hand, the young people who have founded and run businesses have not been exposed to proper mentorship, resulting in glaring blind spots. As a result, while some people have been successful, others have not been able to sustain themselves long term. Importantly, there might have been more work on the fundamentals if entrepreneurs new to the industry had gained more experience, Muntaqa Peracha said.
In order to attract more foreign investment, the government and the State Bank have relaxed rules to attract investment in technology startups and are working on regulations that will allow investors to repatriate profits and capital and facilitate global operations of the company, said Waqas Ghani.
Pakistan’s economy will undoubtedly benefit from a balanced promotion of entrepreneurship. There is already a lot of work being done on the digital banking side and there is certainly hope that entrepreneurship will rise again, Waqas added.
“It was hard to predict that things would change so quickly in the startup industry. But now people have experienced and understood the worst case scenario. At that time, no one had the faintest idea of the worst-case scenario. Since they were raising funds at the time, from mid-2020 to Q1 2022, everything seemed to be going well. Now people know this is the worst case scenario and we have to prepare for it while growing up,” said Muntaqa Peracha.
Published in The Express Tribune, August 9e2022.
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