What’s Wrong With the Pakistan’s Startup Ecosystem

By Parvez Abbasi

Normally I would avoid reacting in public to the negative criticism faced by the National Incubation Center, but recent posts have encouraged me to respond in an attempt to share the “other side of the story”. As the saying goes “every coin has two sides” so please allow me to present an alternate view where I not only try to validate the great work being done, but also invite all the naysayers to share their valuable suggestions on how we can genuinely improve the Pakistani startup ecosystem to support our local entrepreneurs.

For those of you who may not have been exposed to the respective articles and posts, I will summarise for your convenience.

The posts started with statements that said the taxpayers’ money was being wasted by incompetent and inexperienced leadership for self-gain. Some naysayers went on to complain that the NICs are running without any strategy or criteria delivering only photoshoot opportunities and cosmetic results, while others complained about western incubation programs and international best practices being irrelevant in the local Pakistani context. These blogs and posts include claims of fictitious investors, dodgy mentors and an overall lack of support from the key stakeholders and custodians of the Pakistani startup ecosystem. A few naysayers highlight the lack of any achievements and ask where are the unicorns of Pakistan. Lastly, NICs have even been compared to expensive co-working spaces, with inappropriate leadership comprising of “corporate managers” by one so-called startup insider.

The Silver Lining

Before we brush all the naysayers aside, maybe there is a silver lining to the dark clouds gathering around the Pakistani startup ecosystem. If these attacks make us review and critically look at the people involved in the startup ecosystem in an attempt to improve ourselves, then maybe some good will come out of the somewhat bad press we have experienced recently.

While it could well be a personality trait or simply a negative mindset of seeing the glass as half empty or wanting to only see it as completely full of everything that’s bad. On my part, for every bad story we hear about local startups, I can share ten great stories that have also happened at the various NICs across Pakistan, but let’s take a positive approach and discuss the charges framed at the incubators of Pakistan. To help bring the point home I have taken the liberty to underline and share web links to reference material and data sources, which I would encourage the readers to view for a more detailed reading.

I would like to start by acknowledging that constructive criticism is not only be welcomed but is essential for continuous progress, development and improvements within the NIC program. I will also admit that there is truth in some of the claims (albeit extremely exaggerated) and it is our collective responsibility to find the black sheep of our community and ensure they are exposed for who they really are. This will not only help clear the majority of the good people working to support the ecosystem but more importantly to protect our young founders from any potential abuse from such predators.

I have also noticed that there are some people who have tried to create or leverage their relationships with the NIC for self-projection and potentially inappropriate equity investments. On our part, we have parted ways with such persons, as we did not agree with them and subsequently you will not see them at the NIC, as they have fully understood that they are not welcome.

History: The Early Days of Pakistani Startup Ecosystem

To understand where we are today and what all the fuss is about, we have to go back in history to the early days of the Pakistani startup ecosystem. The first incubator was started in 2005, at least twelve years prior to the launch of the first NIC in Pakistan.

Mansoor Malik and the team launched an incubation center in Islamabad at the prestigious National University of Sciences and Technology. This initiative was further developed by respected leaders who also did great work in other prestigious educational institutions such as Khurram Zafar at LUMS Lahore, Dr Shahid Qureshi at the IBA Centre for Entrepreneurial Development. Parallel to this, some independent organizations carried the banner forward such as the NEST I/O led by Jehan Ara in Karachi and Dr Faisal Khan at the Basecamp in Peshawar. We can also add to this list the pioneering work done by Invest to Innovate under the leadership of Kalsoom Lakhani.

I believe that credit should be given where credit is due and to this end, it would also be appropriate to mention other pre-NIC ecosystem facilitators such as Ather Imran at OPEN, Murtaza Zaidi at TIE Islamabad (great work done at the annual Pakistan Startup Cup) and Yusuf Hussain at the Founders Institute.

All of these people and their respective teams contributed to the startup ecosystem many years prior to the launch of any NIC in Pakistan. Personally, I believe we should give these people medals for the pioneering work they have done to lay the foundations for us and that too in exceptionally difficult circumstances and very limited resources.

But Do We Really Need Incubators?

Having said that some people are of the view that we don’t even need incubators. (BTW In case you’re wondering why I haven’t mentioned plan 9 in the above list, please stay tuned). Many naysayers are of the view that incubators do not add any value and go on to quote many famous examples of great companies such as Apple, Microsoft, Amazon, Walt Disney, Google, NIKE, Virgin, Harley Davidson, all of whom have not gone through any incubation center. All of these great companies started in a garage or in the case of Facebook and Alibaba in someone’s bedroom.

It seems like a pretty convincing argument, so why bother to invest in incubators? Apart from the fact that most Pakistanis don’t have garages, I’ve seen in my own previous startup life that starting companies from my spare room at home, scaling them into market leaders, employing thousands of people across multiple countries and serving a population of five hundred million people to generate a billion dollars in annual revenues takes years of effort. But guess what, I’m not the only one, I’m sure if you ask the founders of successful Pakistani startups such as www.rozee.pk or www.zameen.com or perhaps www.pakwheels.com they will share similar stories.

Incidentally, our NIC co-founder Zouhair Khaliq started Mobilink (Jazz) from his home. Can you imagine the learning associated with one man starting from home to building a multi-billion-dollar company, which employs thousands of people serving millions of customers? I believe that this wealth of knowledge, network and experience gained throughout this journey would be very useful to help guide and support new startup founders in achieving their own dreams.

One thing I have found to be common in all of these great founders is their mindset and how they think. The way they see the world and how they react to solving challenges is very unique, but consistent among such a select group of leaders. We call it the entrepreneurial mindset and try to help people develop such a mindset at the NIC. If you truly want to learn more about this theory, I suggest that you follow the world-renowned researcher Dr Saras Saraswati who spent over twenty-five years researching successful entrepreneurs and startup founders to co-create the effectuation theory. I am a great believer in this theory and have had great success in practicing these lessons over the past two decades.

Well, having been there and done that! I can safely say that yes it can be done without an incubator, yes startups don’t always need an incubator to survive, just as most newborn babies never go into the hospital incubator. However, what about a premature baby or ones with some weakness? For them, an incubator could be the difference between life and death. Similarly, for a new startup idea, chances are they do not have all the knowledge, resources and experiences required to develop into a successful business at this early idea stage.

The time required to develop and market the right product to the right customer through the right channel at the right price will cost a lot of money, time and resources. These resources are often scarce among young startup companies and this is where the incubators add value through a variety of interventions including mentoring by experienced entrepreneurs and domain experts. By going through the incubation curriculum such as the process of product development utilising the latest human centric design techniques taught at the NIC, many founders often pivot their ideas and products (saving potential losses in time and resources). The lessons learnt at the NiC support them to test the market through idea validation processes ultimately resulting in better go-to-market strategies also developed in collaboration with experienced industry leaders available at the NIC.

The Asia pacific design award 2018 award winning NIC not only provides a super cool working environment where you can network and learn from leading domain experts to build your company website or marketing strategy, but you can also network with industry leaders and established investors. Many new founders struggle to get companies registered while the SECP management comes to the NIC regularly to educate founders on best options to set up a new company SECP session at the NiC and help expedite the registration process within the SECP (try doing that yourself). The ability to network and learn from peers and access to the NIC alumni network of more experienced and advanced startup founders often inspires and supports the new founders especially through those difficult days.

Some references were made to the founder being compared to a mother always knowing best when the baby needs to be fed or diaper changed and this is very true, but what about beyond these basic needs, what about when the child’s tummy hurts or has fever and cries all night, why does the so-called “know-it-all” mother have to visit the doctor and ask for the doctor’s advice? In the same spirit, we can also perhaps argue that we don’t need doctors and hospitals. What if any, is the benefit of being born in a hospital (where incubators are available) as opposed to babies being born in their homes? Well, if you’re brave enough and willing to take the risk, by all means, but the mortality rate of hospital births is much less (one third). Babies born outside of hospitals are around three times more likely to die than those born in a hospital, according to new research. The same study matches the findings of larger studies conducted in the United States and confirmed that childbirth in non-hospital settings is far more dangerous than in hospitals for details please read babies born in hospitals .

This argument can be further expanded to the education system as a whole. We can also argue that the education system has failed us and therefore we should shut down all our schools and, in any case, if we can YouTube and Google everything then why have schools, colleges and universities?

To close this debate, let’s just say it’s a personal choice and egos aside (if that’s possible for you) just spend a few minutes to ponder as to why do more developed nations such as the USA, Europe, China and India (yes China and India too, so its not all about the gora mindset) have hundreds if not thousands of incubators? Why do these progressive and successful countries, through multiple government changes, support incubators? Why are incubators promoted by the world’s leading educational institutions such as Harvard, Stanford, Oxford and Cambridge?

Actually, maybe we should also ask why leading companies and businesses organisations also promote and support incubators? Perhaps the most important of all the questions to ask maybe, just maybe all of these leading governments, respected educational institutions and successful corporations are wrong? Is it possible that the united states of Naysayers have discovered something more valuable than these leading institutions and countries? And the second question is why have these nay-saying graduates not made their research findings public or shared their research for the benefit of those whom they claim to have their best interest at heart? My question to these pessimists would be please tell me what qualifies you to make such judgemental comments in the first place? Now that I’ve got that off my chest, maybe you would like to learn more on incubators and accelerators from a reputable global leader through its performance report on accelerators

What’s Wrong with Corporate’s Promoting Incubators?

Another complaint from our naysayer community is that corporate businesses do not know anything about startups and add no value to the startup ecosystem. Could this be true? Let’s take a look at the facts. Corporate companies and big businesses have played an important role in supporting the startup ecosystem across many countries. International companies such as Nike, Barclays, Ali Baba, Facebook, Google, Microsoft, Amazon and IBM to name a few. In fact, according to the GUST 2018 Report, 52% of leading global accelerators are funded by corporate sponsorship. Pakistan-specific supporters include Engro, Total, Jazz, Telenor, HBL, Careem, UBER and PTCL.

Just in the local telecom space we have seen PTCL support NIC’s in Karachi and Peshawar (for details please see PTCL news) and also the Telenor Velocity program doing great work especially among our rural farmers community as well as JazzXLR8 providing great support to the local entrepreneurs. Jazz not only launched Pakistan’s first National Incubation Center but has also actively invested in startup founders by promoting them at the prestigious annual GSMA 4YFN, which is fully sponsored by Jazz. So, if the big global market leaders are doing it, what’s the harm in big Pakistani-based corporations promoting startups in Pakistan? And that too at their own human and financial costs?

On a side note, I would like to share a personal story where during the early days of the NIC, I noticed a wheelchair-bound lady attempting to reach our session hall located on the first floor. As she struggled up step by step, I had two feelings simultaneously — one of inspiration from the visitor, as she managed to surmount the formidable stairway and the second of shame for not thinking about our differently-abled community and how we should have catered to their special needs. Realizing my mistake, I went to our partner Jazz and requested additional (non-governmental) funds to install a lift for special people. I am proud to say that the Jazz management agreed to spend an additional five million rupees from their own pocket just to meet this requirement and we now regularly host sessions where participants include over one dozen wheelchair-bound entrepreneurs at a time (thank you Jazz).

It’s OK to Fail

The startup culture promotes experiential learning through practical experiences and one of the first lessons taught is that “it’s ok to fail”. In fact, if we learn to improve from our failures, then perhaps it’s good to fail. With this ethos, we learn to try new things, make a few mistakes, improve the idea or execution and ultimately improve to the next level. Therefore, at the NiC, we advocate a culture of “fail fast, fail often and fail forward”. I am the first one to admit that we probably made mistakes along the way while building Pakistan’s first NIC, but I also believe that this was the only way, given the limited knowledge and experiences available within Pakistan at that time. In my previous corporate roles and private businesses, this was an essential part and a “cost of doing business”.

Where are the NICs getting their Funding from?

Coming back to the naysayers’ accusations about public money being squandered, for those who may not be aware, the NICs are not funded by the taxpayers of Pakistan, rather they are funded by IGNITE which is a division of the Ministry of Information Technology and Telecommunications (MOITT) whose legitimate license holders are Mobile Network Operators (MNO’s), Landline operators (such as PTCL), Internet / data Service Providers (ISP) etc. who contribute (yes you read it right contribute) a small percentage of their adjusted revenues (repeat revenues not taxes) to the IGNITE fund and the Universal Services Fund (USF). In my previous life, as commercial head of the largest MNO, I have seen first-hand how these funds have worked in providing services to remote and rural communities where our most vulnerable people are located and where telecommunication services are often not even commercially viable if it were not for the funds mentioned above, but you don’t have to take my word for it simply visit the MOITT website.

The IGNITE Board also comprises of a mixture of government officials as well as senior professional representatives of these telecommunication and data services companies that contribute to the fund. The board periodically reviews the performance of IGNITE and ultimately its projects including the NIC performances across Pakistan. One can clearly see that the senior representatives of the government, coupled with highly successful entrepreneurs, business owners and corporate professionals (including MIT, Harvard, Stanford, IMD, LUMS and Babson graduates) will more than likely ensure the proper utilisation of resources based on international best practices, as they would within their own successful companies. The government officials are looking at the wider impact on society such as women and minority empowerment, new jobs created etc. not to mention potential NAB investigations, for those interested, information is available on these board members.

The Journey of Making Pakistan’s First NIC

My own personal journey helping to set up and manage Pakistan’s first NIC meant having to jump through many hoops such as why do we need to do this, what’s in it for us, how can you work with the government etc. Nobody except our co-founder Zouhair originally believed in the vision and helped to deliver on the mission which was to create a platform to connect and empower young technology founders with industry experienced domain experts to promote a startup culture across Pakistan. Three years on and while we may be far from perfect, we have not only positively impacted the startup ecosystem by creating a world class incubation center and are acting as a benchmark for other NICs but also as a catalyst to create more high quality programmes which have been acknowledged not only by prestigious organisations like the World Bank, UNDP, TiE, OPEN and numerous embassies in Pakistan, but also by leading universities, incubation centers and market leaders from across the world including Facebook, Amazon, Microsoft, IBM and more.

The NIC is a melting pot of people with diversified backgrounds coming together from a variety of local and international experiences including government, academia, professionals, industry and domain experts from marketing and finance to HR and IT as well as fourth industrial revolution (4IR) technologies from all ages starting from eight years to eighty years old. Some of the speakers include successful serial entrepreneurs and investors such as Asher Aziz, Wahaj Siraj, Monis Rehman, Jehan Ara, Khurram Zafar, Zulfi bukhari, and my favorite James Caan to name a few (in case you don’t know any of them try Google).

The NIC also provides a much-needed safe and secure working environment for people in Pakistan including female entrepreneurs and marginalized people with special needs. These Pakistanis can work with respect and dignity with all the desired facilities. These facilities include a daycare for infants and young children, wheelchair-friendly buildings providing free co-working facilities with high speed broadband internet services, power backup facility, customised curriculum and access to proven mentors, domain experts and investors all under the same roof (and perhaps I should mention this is all offered free of cost for twelve months and often without any demand for anything in return).

The Investment Landscape

If we now consider the investment scene prior to 2016, it was practically non-existent. However, after 2017 we have seen significant interest due to the realization of new investment opportunities in Pakistani startups. New venture capital (VC) companies have sprung up within Pakistan to validate the growth in the local startup ecosystem. These companies include 47 Ventures, Sarmayacar, Lakson Investments, Planet N, Fatima Ventures, Invest to Innovate etc. There are a few more we can add to this growing list, as they are currently in the registration and establishment process. These new VC related developments are in my opinion a direct result of setting the NIC program in Pakistan, and will no doubt add to the existing multi-million-dollar investments that all of these VC companies have already completed and continue to look for more investable startups across Pakistan.

Enough of this fancy stuff. What about the numbers you may well ask? Well, as luck would have it, the numbers speak for themselves too. The first NIC was officially launched on 6th of February 2017 and is less than three years old. However, I would argue that the National incubation centers have helped to develop some of the best Pakistani startups who have not only secured millions of dollars in investments and revenues but also have a great social benefit to our society by solving local problems and creating thousands of new jobs for young Pakistanis.

This batch of formidable founders has developed an alumni network supporting each other as well as the next generation of entrepreneurs coming into the NIC each year. Since the actual numbers are significantly large, I would encourage anyone wanting to get more details to visit the Ignite website.

The Birth of the Unicorn

What about the Pakistani unicorns? Why has the NIC failed to produce a single unicorn? For those of you who are wondering why we are discussing the mythical flying horse, I suggest that you quickly look at what a unicorn is.

So, now that we are familiar with the unicorn as a startup or company with a billion-dollar valuation, we can explore this question further. To begin with, let us examine where a unicorn is typically found and what type of environment is necessary for them to be born in and survive. When we start to study unicorns, we can’t help but notice that in large the majority of unicorns are born in the USA and Europe, and more recently in China and India. I believe that a lot of reasons for unicorn success is due to the early start pre-1920’s (for those who failed at maths, that’s 100 years ago) coupled with corporate, business and academia support and favorable government policies including early investment in incubators.

The best-known ecosystem is Silicon Valley and you can learn more about the valley from here — the valley came into existence well over a hundred years ago. The second ingredient for a unicorn is highly skilled human resources working on research and development usually on cutting edge technologies. These resources come from then the world’s best-recognized universities such as Stanford, MIT or Harvard and in the case of Europe Oxford or Cambridge, which are readily available, and close at hand to each other.

The last ingredient is investment or venture capital (VC) funding. The USA has over 550 billionaires, while China and India have 476 and 131 respectively (guess how many Pakistan has?). These billionaires not only make a lot of money but also have very large powerful networks of similar people who jointly invest in startups to help create more new unicorns.

Another example of good support would be from the UK government who not only has all of the above but also provide tax benefits for investors and startups. Using these startup-friendly tax schemes, all investors in the UK (where they have at least 54 billionaires) can save up to 80% of their investment against future tax payment liabilities. Do you think that is too good to be true? Well, check out this site on UK startup tax incentives.

So, in summary, we can possibly conclude that to create a unicorn we need decades of experience; access to the brightest brains from the world’s best universities, coupled with a bunch of billionaires and a lot of government and tax incentives. I know what you’re thinking — now it’s easy for me to say that we don’t have the best universities or the fact that we only have two billionaires (yes Mian sahib and company) and that government in Pakistan is not very supportive so let’s wait for that to happen first then we can talk about unicorns.

No, in fact I believe we will have our unicorns despite all of the above and the NICs will play a pivotal role in helping us get there. What I really did want to share was that on average, it takes anywhere from 6 to 12 years to become a unicorn and perhaps that is the reason why NIC predecessors such as plan 9, Plan X, TIC etc despite starting many years before the NIC are yet to announce their unicorns (not counting the ones resting in Adiala). As for the first NIC unicorn, keep watching this space.

The Final Message

A final message to the naysayers would be reflecting on a quote from the great author “Sun Tzu” and his book the “Art of War” where he states, “if you know your enemy and you know yourself, you need not fear the result of a hundred battles.”

I know each of the complainers, having interacted with them personally over the past three years and while I do not wish to embarrass them, I would like them to think about the impact of their ill-founded comments on the ecosystem. I suggest that the so-called startup insiders pay their outstanding respects to the ecosystem prior to attempting to jump-start their outdated and disillusioned ideologies. I would also like to suggest that the most notable Doctor Shahib has the courtesy to visit at least one NIC in his life before reaching any conclusion based on his predetermined biases.

To close, I would like to remind myself (first) and others that we are not perfect and prone to making mistakes. No one person has a monopoly on all the good ideas and everyone has some value to add. We need to put our differences aside to team up and share the diversified experiences that will help us all to develop an all-inclusive ecosystem for maximum impact and growth for startups in Pakistan. On our part, we are determined to get there, with you or without you!

So next time you decide to belittle the real startup heroes of Pakistan, may I humbly request do your research!

About the Author

The author serves as the founding Project Director of Pakistan’s first National Incubation Center and was previously founder of Mobilezone (MZ), a billion-dollar revenue company stretching across Afghanistan, Bangladesh, Pakistan and the UAE. Prior to MZ he was a founding member of Mobilink, where he was instrumental in developing the Jazz brand and highly successful Jazz franchise network across Pakistan. Parvez is a living example of a successful and active diaspora returning to Pakistan to promote awareness about Pakistani investment and business opportunities to local and foreign brands and also provides free coaching and mentorship to deserving youth across Pakistan. He is available via parvez@teamup.pk.

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