Taraec Hussein, VP, Gobi Partners
With the funding winter set in, growth-stage startups worldwide find it hard to raise capital. Many high-profile unicorns in fast-growing markets like India have started feeling the pinch and are laying off people in hundreds, if not thousands.
In volatile times like this, Pakistan could offer a golden opportunity for VCs to tap into its largely untapped startup sector. The Islamic republic has recently witnessed a steady inflow of VC.
Malaysia-based Gobi Partners is one of the most active VCs in Pakistan. The VC firm has partnered with Fatima Group to form Fatima Gobi Ventures which has invested in two dozen startups, such as Rider, Tazah, Colabs, and Fasset.
In this article, Taraec Hussein, Vice President of Gobi Partners discusses Pakistan’s emerging startup ecosystem.
Improved internet infrastructure
Pakistan is at an inflexion point of mobile connectivity. Pakistan was one of the countries lagging in 3G and 4G connectivity. If you look at some other economies like India and Indonesia, there was always a love period after the introduction of 3G and 4G infrastructure before the market caught on. Right.
For Pakistan, it happened in 2019-2021. There is now a lot of mobile connectivity, and many directly engage on smartphones. The country has over 100 million 3G and 4g mobile connections.
Abundance of talents
Pakistan has many highly skilled professional nationals working in the US, Europe, the Middle East, Singapore, and other Southeast Asian markets. These talented people, trained in some of the world’s best companies, are now returning and starting digital businesses for the country.
As we know, venture capital always seeks talent, so there is a huge talent pool at the co-founder or CEO level, software engineers, and product engineers.
Also Read: Pakistan startups, the last massive untapped opportunity in the world
Pakistan is also a market where IT export is one of the biggest GDP contributors. It has a lot of software houses. As a result, there’s a lot of trained IT talent.
COVID-19-induced digitalisation
The COVID-19 pandemic has accelerated the push or need for digitalisation. There is now a digitalised way of doing everyday tasks. It even exceeded our expectations in terms of how fast can companies grow in Pakistan.
Given that it’s a very nascent ecosystem, how long would it take for Pakistan to catch up to other markets, such as Indonesia? And I think that the timing was right. In terms of COVID-19, the silver lining is that now Pakistanis, who cannot go to a grocery shop or walk into a bank, are looking for online ways to do basic everyday tasks.
High-profile Pakistanis in VC firms in the US
Another crucial thing about Pakistan is a lot of Pakistanis are sitting in high position partner positions in VC firms across the US. So the hurdles to understanding what the Pakistani market is or the opportunities. A lot of these challenges are being curbed by the local Pakistani partners.
Exciting opportunities in crypto, social commerce and agri
The cryptocurrency space in Pakistan presents tremendous opportunities. The Pakistani per capita is one of the world’s highest owners of crypto assets. There are no crypto platforms in Pakistan, but Gen-Z buys digital assets through money changers. This generation’s first investment assets will be either crypto or NFTs. So they are leapfrogging the local exchanges and going straight into digital assets. There is a great opportunity now, depending on how the regulators react to a crypto platform.
The other exciting space is social commerce. If you look at other markets, social commerce has surpassed the market size of e-commerce.
Social commerce is a big part of consumer behaviour in countries like Thailand, Vietnam, and the Philippines. This is a big space in Pakistan because it is a very social market. Whether it is group buying, whether it is a reseller, a live streaming model or the D2C model, many models within social commerce are still not explored in the early days.
Pakistan is a massive agriculture market, and there are many hurdles within the supply chain. There are some companies like Tazah that have raised decent rounds. We will see a lot more opportunities within the agri space.
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