ISLAMABAD: The culture of startups in Pakistan is getting popular as both the number and capital portfolio of such ventures are increasing rapidly. Investments in startups in 2021 reached $364 million as investors from around the world have started putting their money into emerging businesses, WealthPK reported.
It is to mention here that these startups are financed through venture capital globally. Venture capital is an essential driver behind the development of many sectors of economies as it provides innovation platforms and promotes new firm creation, rapid business growth, entrepreneurship, competition, and job creation.
COLABS, a Pakistan-based flexible workspace, recently announced that it had raised $3 million in a seed round led by venture capitalists like Indus Valley Capital, Zayn Capital, and Fatima Gobi Ventures.
As part of this round, COLABS said it was joined by Shorooq Partners, Kinnow Capital, Muir Capital, Sai Ventures, and some key angel investors, including Turner Novak, William Hockey, and Teddy Himler.
COLABS aims to build a community of 100,000 entrepreneurs and freelancers in Pakistan, starting with 10,000 members over the next two years.
Jan BoIz, Managing Partner – IOI Capital GmbH and Investment Advisory Board Member at Sarmayacar, said that Pakistan has a huge young society and needs to train and educate them to become future business leaders.
To help the startup business to flourish, Pakistan is formulating a National Venture Capital Policy framework intended to provide an enabling environment for venture capital investments and startup financing, alleviate any inadequacies and hurdles in attracting foreign investments, and optimise the overall investment climate in the country.
In this regard, the ministry of science and technology is working with the stakeholders based on their experiences and international best practices for formulating an inclusive and forward-looking policymaking framework.
To promote the culture of startups through venture capital, the government also plans to launch a Rs1 billion venture capital fund through National Investment Trust Limited (NITL). In this respect, the State Bank of Pakistan has also removed a major hurdle in allowing the startups to get loans from foreign investors through convertible debt.
Notwithstanding the government support and foreign investments, the venture capital industry of Pakistan is confronted with some problems, which need to be addressed for its potential growth.
Pakistani society lacks the culture of entrepreneurship, as even those graduates, who join their family business, rarely invest in new ideas, and instead prefer to lead the family-owned mindset.
There is a need to promote the entrepreneurship culture among the young graduates by introducing entrepreneurship subjects in professional colleges and engineering universities.
Secondly, Pakistan lacks business and technology incubation centres. These incubators typically give initial stage support to young entrepreneurs wanting to develop their ideas into a viable commercial proposition, which may be financed and supported by a venture capitalist. Currently, only about 90 incubators in Pakistan enable interaction between entrepreneurs and investors.
It is important for the government to create new technology innovation centres and improve the existing ones, and link them with industry, financial institutions and other support services organisations.
As not much innovation goes into enterprises in Pakistan, this concept can be promoted by venture capital companies because they usually invest in innovative ideas with higher potential returns.
Not much attention has been paid to promoting research and development culture in Pakistan as even the private sector shows hardly any interest in investing in research and development. The government needs to nudge the private sector to invest in research and development.
INP
