Commentators were quick to dismiss the Pakistani companies, but many also believe the contrasting developments are normal for an economy still discovering its footing.
Among the latter group is Ali Samir Oosman, CEO of the business growth-focused company Endeavor Pakistan, who recently said business registrar that instead of focusing on creating the nation’s first unicorn, the country’s tech ecosystem needed to produce quality companies where the founders had a successful exit with an amount of $15-100 million after acquisition.
Oosman’s firm identifies and works with high-growth entrepreneurs, helps them through the process by providing mentorship and guidance, while supporting their fundraising process and/or investing (up to $2 million) itself.
“If we can create the right conditions for companies to scale in Pakistan and start to see mergers and acquisitions in the startup space, it will translate into a massive multiplier effect,” Oosman said in an exclusive interview.
“The founders’ exits with around $100 million will restore investor confidence in the Pakistani startup ecosystem,” he said.
According to him, the first big victory in shaping the ecosystem was putting Pakistan on the radar of global investors who were willing to bet on the potential. The next big win for Pakistan’s tech future will be small to medium dollar exits.
This can potentially give local investors (especially angel investors) a two to five times higher return on their initial investments, attracting more locals.
Similarly, entrepreneurs will also have the opportunity to make a good return in a short time as a reward for their risk, guts and ability to successfully execute their vision.
He cited the example of Cloudways which was recently acquired for $350 million. Cloudways provides small and medium-sized businesses with cloud hosting and software-as-a-service (SaaS) facilities.
Explaining his determination, Oosman said Endeavor is driven by the belief that high-impact entrepreneurs have transformed economies.
“In Pakistan, we are targeting startups in a number of sectors that cover almost all verticals,” he said in the interview. “Our clients come from retail and consumer, fintech, enterprise software solutions, healthcare, education, talent, and many others.”
Oosman said nearly 65% of all transactions in Pakistan are in cash and remain undocumented, pinpointing the area where there are gaps.
“This also means that technology penetration is quite low in Pakistan and therefore the economy lacks efficiency and there are many gaps waiting to be filled,” said Oosman. “This is where new start-ups and smarter, faster, more agile business models can come in and capture economic value.”
He appreciated that things have started to move in the right direction in Pakistan and experts have projected large-scale digitization in most industries over the next 10 years.
The biggest challenge for the technology sector
Oosman, a former Microsoft employee, called Pakistan’s volatile exchange rate one of the biggest challenges for investments.
“I know an investor who put money into an early-stage startup that did well and reported more than 30% growth since October 2021,” he recalled. “However, this person did not see any investment growth in two of the four quarters because his investment was in dollars while the company grew in rupee terms.”
He cited that investors who did not take into account the impact of the exchange rate while investing money are now watching the currency closely.
He stressed that the rupee-dollar parity should be stable so that investors would feel comfortable making investments in Pakistan.
“Instead of celebrating getting an investment, startups should look at things realistically,” he said. “Raising huge amounts of funds is an achievement, but it shouldn’t be the goal.”
Sometimes building a great business doesn’t require a lot of venture capital (VC) funding. If the numbers are good and the business is validated through performance, there are plenty of options beyond venture capital funding, Oosman said.
He underlined the great need for technology start-ups to learn how to do things collaboratively.
Oosman said the failures Pakistani startups faced recently are quite normal.
“A similar trend was also seen in other parts of the world,” he said. “Startups are set up, investments are made, and then you know they didn’t do well.”
However, he regretted that the failed Pakistani startups did not reveal where they went wrong.
“They should come forward and convey what really happened so that others can learn from them,” he said. “Failure is an integral part of the game and should not be taken as a stigma.”
According to him, this would give investors and other founders more confidence regarding which startups to fund and wary of where things could go wrong.
Strengths and weaknesses
Meanwhile, Oosman said Pakistan’s entrepreneurs lack the capacity to achieve structured growth.
“Pakistan startup founders are good at unstructured growth. They are good at rushing. They know how to do things with passion,” said Oosman.
However, he said that entrepreneurs in Pakistan lack the ability to achieve structured growth through optimization, finesse and experience.
“That will come from exposure and experience over time. Through Endeavour, we hope to bring that experience, knowledge, learning and sharing to the Pakistan ecosystem.”