Spending in wrong areas

LAHORE: After raising funds, most startups forget why they started the venture and start spending in the wrong areas, instead of on the people and process development, said Aly Fahd, founder of Paklaunch, a platform supporting Pakistan’s entrepreneurial and investment ecosystem.

Highlighting one of the most common mistakes made by the startup founders, he said that the team growth is the most crucial part of any project.

“The venture grows or dies based on the team working on it, so it is important to make good early hiring decisions and empower them,” he added.

Fahd emphasised that staying focused on the strategy and understanding your customers are also extremely important. Paklaunch, the first-ever platform established to support the Pakistani entrepreneurial and investment ecosystem, was launched in 2022.

“I started Paklaunch as a single WhatsApp group with a few other Pakistani-American friends based in San Francisco to explore investment opportunities in Pakistan. The community has grown to over 300k members across various platforms and is now open to non-Pakistanis. We have helped 80+ startups raise close to $80 million,” he remarked.

Fahd moved to the United States in 2001 after finishing his degree from the Ghulam Ishaq Khan (GIK) Institute of Engineering Sciences and Technology and is now working in various tech companies’ in various roles related to engineering, strategy, product management and operations.

The year 2022 was eventful for Pakistani startups. “Pakistani startups were still able to raise over $350 million in 2022, which is an order of magnitude higher than what Pakistani startups used to raise just a couple of years ago,” he noted.

According to him, several major global investors like Kleiner Perkins, Tiger Global and Sequoia invested in Pakistani startups.

“Overall, Pakistan’s tech ecosystem is getting more mature by the day and 2022 will be remembered as a good year for the Pakistani startups.” However, he also admits that all is not well.

“There were also challenges such as overall shifting of global macros and political uncertainty that might have contributed to Airlift, one of the highest funded startups from Pakistan ever, to shut down,” he said.

“We have also started to see a few exits by the Pakistani tech startups such as Cloudways for $350 million, Tez Financial by a Swiss company Zoodpay and FindMyAdventure by GoZayaan.”

However, Fahd believes slow investment is more than a Pakistani phenomenon. He asserts that investments have slowed down in the second half of 2022 but that is the general trend across the globe due to the current macros and recession.

“Due to higher interest rates, the investors have become more careful with their investment decisions and political uncertainty in Pakistan does not help the case either. However, good startups have still been able to raise funds from strong investors,” he said.

“It might become harder to raise funds for the startups but good startups will still be able to attract funding. Marquee global venture firms like Sequoia and Kleiner Perkins have invested in Pakistani startups in 2022, while more new global funds are considering Pakistan as their investment destination,” he added.

According to Fahd, a greater part of investment in Pakistan is coming from the United States.

“The US has been a hub of tech startups for years with thousands of success stories, so that might explain why the US investors are more comfortable with the high-risk venture investments,” he said, adding that Pakistani investors have generally focused on real estate, as it has generated good returns at much lower risks.

Fahd also expressed optimism and said things will change eventually for good.

“This is an organic process, so I am not overly worried. The Pakistani tech ecosystem is maturing and the news of funding is starting to emerge more often,” he noted.

The local investors have started to notice and more and more family offices are beginning ventures focusing on tech startups.

Though entrepreneurship is the best answer to rising unemployment in the country, it is not easy to start your work.

“Entrepreneurship is not meant for everyone. It often takes years of hard work, long hours and no recognition for being successful. Statistically, most ventures fail,” he said, adding that one should only jump into entrepreneurship if one is extremely passionate about resolving a problem.

Paklaunch is organising an investment meet-up and conference in Dubai next month, where the top 50 Pakistani startups will participate and meet with the leading global tech investors. However, Fahd believes funding will become challenging, especially in the first half of 2023.

“It will not be easy to acquire funding for the startups without strong business fundamentals and, unfortunately, there will be some consolidation,” he remarked.

Regarding the future, he believed that it would help make the tech startups that can withstand the downturn more resilient and focus on profitability and/or creativity to grow.

“The investors will reward good startups with great teams resolving big problems,” he added.

When asked why the US investors are more interested in tech-based startups, he said: “The investors are only interested in returns and even though most tech startups fail, they provide an investment vehicle for potentially large returns, as well.”