Pakistan Entrepreneurship Ecosystem Report 2016 – An Industry Handbook

While the world largely recognizes 2016 as the year when the Americans elected Donald John Trump as their President, it has been a year of some achievements of localized and indigenized new initiatives for the entrepreneurial sector in Pakistan.

  • In 2016, Bloomberg declared the Pakistani Stock Exchange as the best of the Asian Markets and the fifth-best performing stock index in the world.
  • American stock index MSCI reclassified Pakistan from Frontier Markets Index to the Emerging Markets Index.
  • The 2016 Doing Business report by the World Bank Group ranked Pakistan 122 out of 189 economies, in the process of starting a business in the country.
    According to the 2014 issue of the report, in South Asia six out of eight economies completed 11 reforms simplifying the process of starting a business. Pakistan was not among these six countries.

The comparison of 2014 & 2016 evaluation of startup formalization reflects a shift in trend. This transformation of entrepreneurial ecosystem in the country, necessitated the urgency to assess the current entrepreneurship landscape in Pakistan, and to analyze the opportunities available, as well as the challenges facing Pakistani entrepreneurs.

Invest2Innovate (i2i), a start-up accelerator in Pakistan, stepped in to answer the call. Having developed the first edition of the Pakistan Entrepreneurial Ecosystem Report in 2014, commissioned by the World Bank’s Consultative Group to Assist the Poor (CGAP), no one has been more in touch with the startup scene than i2i.

Collecting and converting data into meaningful information, i2i has launched the second edition of their 2014 report, Pakistan Entrepreneurship Ecosystem Report (PEER) – 2016.

Pakistan Entrepreneur Ecosystem Report 2016

In an ecosystem marked with absence of an established structure to ensure transparency and facilitation of business formalization, data acquisition is a feat in itself. But Kalsoom Lakhani, CEO i2i, aims to take no prisoners. In her words:

We are currently working on a data product that actually measures the amount of investment raised in the space, what sectors, and stage and doing it in comparison to India, Brazil & South Africa so we can predict trends for the future.

PEER maps the number of startup competitions, incubators, university programs, co-working spaces and forums, and analyzes the gaps & challenges entrepreneurs continue to face in the country. It presents the rise of local entrepreneur leaders, highlights the challenges in the policy environment, observes the investment from the Pakistani diaspora, and points out the range of support organizations, incubators and accelerators accessible to entrepreneurs. This comprehensive qualitative picture of the business landscape is a useful source if one wants to study the opportunities and challenges in the start-up space.

In a predominantly undocumented economy, to have an industry insight like PEER 2016 is nothing short of having a crystal ball. The report, which is based on the Aspen Network of Development Entrepreneurs (ANDE) ecosystem diagnostic toolkit, identifies, documents, connects and empowers local startup ecosystem leveraging the players and challenges.

The second edition of PEER (available for download) is especially significant in the scenario where the local startup sector has experienced a boost owing to an increasing global push for development of more robust entrepreneurial ecosystems.

Analyzing the deal flow and exit of private equity funds in Pakistan, the report shares the statement issued by the United States Agency for International Development (USAID):

By investing in Pakistani private businesses, the United States is supporting private sector growth and job creation – and Pakistan’s role as a robust and fast-growing economic partner among its neighbors and within the global economy.

With internet penetration increasing considerably over the last four years to 17.8%70% of Pakistan’s 180 million population under 30 years of age, and 23% of youth looking forward to start their own businesses, Pakistan has a largely younger demographic ripe with potential.
Pointing out this potential, and identifying the available avenues of incubators, accelerators & coworking spaces for the new startup players, PEER reflects upon the room for improvement in these areas and urges the entrepreneurial ecosystem stakeholders to collaborate.

The report shares the list of most notable educational institutes describing their entrepreneurship-related activities and highlights that “the link between university incubators and the private sector via technology transfers also needs to be strengthened”.

In its in-depth analysis PEER identifies an “early stage capital gap” in the start-up space. It documents the existing fellowships and appreciates the role of corporations in supporting entrepreneurs through funding or support on value chain & service delivery of their products or services.
The report identifies prominent angel investors, notable venture capitals, & reliable private equities and determines that the financing side of this industry sector is in a major need of a face-lift. To bridge the financing gap, the report suggests motivating the fence-sitting financiers; prospecting the philanthropic capital, diaspora funding, and government’s matching funds for investors. It shares Khurram Zafar’s – who runs LCE – observation:

One thing that needs to be done is investor education – no one has made a concerted effort to do anything about that yet.

Observing the role of media in Pakistan’s burgeoning startup space, PEER points at the number of technology and entrepreneurship blogs and websites dedicated solely to covering Pakistan’s startup ecosystem. PakWired features prominently in the list.

While a number of gaps and challenges continue to persist in Pakistan’s entrepreneurial framework, the increased amount of activity since i2i’s last edition of this report in 2014 is not only encouraging, it’s validating. While there are challenges that very much remain, experts interviewed for this 2016 report unanimously noted how positive they were about the future of Pakistan’s entrepreneurship ecosystem.

In a nutshell, PEER 2016 is the handbook for anyone venturing into Pakistan’s entrepreneurial ecosystem. It observes the existing trends of investment and entrepreneurial development; acknowledges the increased support players, available opportunities & further avenues; and recommends course for the policy shifts in the public and private domains to augment the count of angel investors and private equity funds, in addition to a better trained human capital.

Lakhani, rightfully pleased with the report, shares:

This report is a compilation of the years of knowledge that we have gathered as part of i2i’s Insight Lab. It captures the trends, observations and challenges from the ecosystem and gives action points for the stakeholders to act on. We hope this will be used as a tool for years to come to in better decision making and connections around the ecosystem.

To go through the findings of the report, you can find the complete document here.

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