Significance of financing start-up entrepreneurs in Pakistan

Published on: February 16, 2019 2:14 AM

The rationale of including Pakistan among the emerging markets of the world is that 64 percent of its population is under 30 years-old. The young masses of the country can develop into a real economic strength, if engaged productively. In business terms, a start-up is an individual, entity or a concern that has recently started business operations.

Start-up businesses have multi-level impact on the economy, for example turning an idea into something tangible, achieving product-market fit and creating long term value to the business etc. Start-ups become money-making engines for owners, stockholders and employees. Past start-up Alibaba has triggered the growth of SMEs in China and a huge number of Google employees have become worth more than $5 million.

Around 120 million young people, including skilled and educated entrepreneurs and 60 million 3G/4G connections in the country, present a tremendous economic growth opportunity

Bootstrapping i.e. self-starting without external finance is generally very difficult for the start-ups.  Therefore, seed funding from family, friends, angel investors, venture capitalists and crowd investors etc. is vital for start-up businesses. Let us highlight a number of start-up entrepreneurships that have achieved success in Pakistan by utilising the initial funding from various sources:

*             Zameen: It is the best funded start-up in Pakistan with the venture capital of US $ 31.1 million. Zameen has emerged as the largest real estate marketplace of Pakistan.

*             Slide: Slide is lock-screen app that provides free top-ups to the users when they view contents. It has accumulated seed financing of US $ 4.6 million.

*             Well: It is a lifestyle and health start-up store selling fitness supplement and herbal products. Well attracted US $ 1 million from angel investors.

*             Finja: This start-up is popularising the use of mobile wallets by infusion of US $ 1 million from bridge round.

*             KarloCompare: It provides comparison services to its consumers for personal finance products. KarloCompare raised angel capital of US $ 20000.

*             RepairDesk: RepairDesk runs mobile repair shop with making available relevant inventory. The operating software maximizes the productivity. It was started with a seed finance of US $ 40000.

 

Tips to secure finance for Start-ups:

Only mom would like to finance your dream selflessly, but the investors would fund only your future revenues. Therefore, the following tips for securing the necessary funds for fledgling business may work:

1. In their business model, the real founder of the start-up must be able to demonstrate to the targeted investor, a very clear path to prosperity and outsize returns.
2. Co-relating the nature of your business to some personal experience of the investors is handy in securing investment.
3. Infusing passion into ideation of the business can impress the investors.
4. The honest picture of the business should be evidenced with the detailed record.
5. Strong relationships and meaningful networking can also woo investors.
6. The ability of being adaptable and coachable is very attractive to the angel investors.

Role of the Government in funding start-up entrepreneurships:

Around 120 million young people, including skilled and educated entrepreneurs and 60 million 3G/4G connections in the country, present a tremendous economic growth opportunity. Though start-ups are in abundant supply but Pakistan already faces the scarcity of capital and the price of getting capital from private sources is very high because of their predatory nature. Here, the government of Pakistan can learn from global best practices like Start-up Loan Scheme of United Kingdom, Early Stage Venture Fund of Singapore and Startup India scheme, in order to sponsor the new entrepreneurs with necessary capital.

In this context, certain policy measures are proposed as under:

1. Ignite National Technology Fund owned by the GOP issues grants to start-ups, starts innovative projects, runs incubators, imparts training in digital skills and spreads awareness of its initiatives to the public, industry, media, academia and the policy makers. This institution should be made more effective by hiring experienced mentors from abroad with first-hand exposure of creating and managing start-ups in the developed countries.
2. The government should establish an institutional framework at with hierarchy at federal, provincial, divisional, district and tehsil level, for start-up funding to the deserving business entrepreneurs while taking into account the traction gained and the prospects of revenue & growth.
3. Funding support should be given to professional incubators and accelerators in helping start-ups enter the global markets. Idea Gist, the largest international digital incubator, is already working efficiently with US $ 50 million startup fund to develop incubation capacity of managers in Pakistani universities. Government should ensure continued support to such initiatives.
4. An exclusive set-up should be in place for extending grants to the individuals and companies who research a new idea or test or develop a ‘novel’ product or service.
5. Federal government should establish a Venture Capital Limited Company with primary function to draw foreign investors to boost local venture capital market with tax benefits.
6. A special Tourism Startup Fund can be established to promote tourism sector businesses.

Pakistan is thriving with young digitally conscious graduates who aspire to develop and grow. They are mindful of the success stories of Daraz, Careem and Uber. Therefore, start-up frenzy is widespread in Pakistan. We look forward to the government for a key role in tapping this potential.

The writer is Country Manager JSC Subsidiary Bank NBP Kazakhstan

Published in Daily Times, February 16^th 2019.