How Lahore can be the new Bengaluru

Pakistan has a plethora of new-age technology entrepreneurs. They just need investors and mentoring to create the perfect ecosystem in the country for startups to flourish

Published: Jan 7, 2016 06:06:57 AM IST
Updated: Jan 7, 2016 08:53:15 AM IST
How Lahore can be the new Bengaluru
Image: Getty Images
Students at Lahore watch the live broadcast of a cricket match between India and Pakistan. Pakistan has a better demographic dividend than India

Something fascinating is afoot in our neighbour’s home.

Pakistan, better known for its other triumphs—food, religion, unrest and cricket— is emerging as a hotbed of 21st century entrepreneurship.

Historically, 99 percent of economic establishments in Pakistan have been enterprises set up by individuals or groups of entrepreneurs. However, these 99 percent collectively account for not more than 40 percent of the country’s gross domestic product (GDP).They are old-school, small-shop, traditional enterprises often lacking gusto and the drive for innovation.

In recent times, however, a sexier set of enterprises is emerging: One that is better-connected, inspired and influenced by its tech cousins across the Pacific. The Ewing Marion Kauffman Foundation calls them the sexier step-brothers and step-sisters of the small and medium enterprises (SMEs).

It’s not surprising that many of these startups are focussed on technology: Building mobile apps, creating online marketplaces and disrupting social behaviour in a country with close to 200 million people—the world’s sixth largest population—half of them under the age of 25.

The most promising of these is Groopic, an increasingly popular app that allows the photographer to be in the photograph, taking the selfie revolution head-on. Another one called EatOye! is an online food delivery service with 700-plus restaurants operating across eight cities with clear aspirations to become the Zomato of Pakistan. Finally, Convo, which also emerged from Pakistan not too long ago, has now become a sought-after social networking app for global enterprises and is used by 6,000 companies across 150 countries, and has a usage footprint of as much as 10 percent of the Fortune 500.

And it makes perfect sense that these types of businesses are emerging from Pakistan.

First, Pakistan enjoys the same demographic dividend as India; perhaps better, with a median age of 21 years compared to India’s 26. This means two things: One, a lot of young, passionate entrepreneurs will emerge, much like the next generation that has created a wave of startups here in India; and two, there will be a lot of young consumers of technology and innovative products.

Second, Pakistan has a social DNA geared towards engineering, leading to a heavy supply of high-quality engineers, coders, developers and tech enthusiasts. The same DNA that has helped create many exciting multi-billion-dollar businesses in India: Flipkart, Ola and Mu Sigma to name a few.

Third, these businesses are devoid of any regional barriers. You can do your work sitting in Multan or Peshawar and people will download your app or your game from the Apple Store without knowing or caring about where and how it was made.

Finally, the physical risks are a lot more alleviated for these businesses. Given the wave of war, terrorism and political unrest this region has seen in recent times, it feels a lot more assuring to build and run a business that requires only some servers and storage infrastructure (with an easy backup in Tokyo and Shanghai) as opposed to putting up large plants, factories, distribution centres and retail outlets.

For all these reasons and more, the popularity of new-age entrepreneurship is booming in Pakistan.

And there is conclusive evidence: Plan9, a tech incubation project of the government of Punjab, for example, receives 7,500 new business pitches every six months, up from zero a few years ago. Similarly, 35 percent of all business plans submitted to the Global Innovation through Science and Technology (GIST) programme (an Obama administration initiative to promote entrepreneurship in Muslim countries) are from Pakistan. Even within the country, top universities such as IBA, LUMS and NUST are incubating 25-30 new businesses at any given point: A clear sign of the times.

While these are reasons enough to cheer, Pakistan’s entrepreneurial revolution has a long way to go.

For starters, any startup mecca—including ones in Pakistan—requires the creation of an ecosystem that not only encourages and nurtures the growth of new, innovative businesses, but also helps them steer around common causes of entrepreneurial failure. Such an ecosystem should provide sustained funding for growth and also offer the mentorship required to create Pakistan’s first billion-dollar startup.

The centrepiece of such an ecosystem is a large number of angel-, venture- and growth investors with the right risk-taking ability, large chequebooks and a vast acumen for identifying trends from their global investing experiences.  

Sadly, they do not yet exist in Pakistan. Due to the country’s legacy of political unrest and discord, external funding is rare. Founders often rely on benefactors in the family or personal loans from friends. Naturally, mentorship too is scarce.

Closer home, the experience of successful startups in India has also demonstrated that a mature ecosystem is vital.

For instance, there was no Flipkart seven years ago. It is now valued at $15 billion. An astonishing array of no less than 12 investors nurtured it from early stages till it became an online retail giant selling over $4 billion in merchandise, ahead of Reliance Retail or Future Group. They supported the business through its growth pangs, offering not just capital, but also strategic direction, portfolio synergies and access to great global advisors. This is the sort of money and mentoring Pakistani entrepreneurs are desperate for.

So the real question is: Can Pakistan successfully replicate this ecosystem, and if so, how?

So far, there is only one formal angel investor network in Pakistan: The Plan9 Angel Investment Club, which consists of local industrialists and successful businesspeople. More formal associations of investors will hopefully emerge in Pakistan within the next few years. It will require people who want to make money, but also have a strong passion to transform the entrepreneurial potential of Pakistan. Perhaps Pakistani expats who have made their fortunes elsewhere will seize the opportunity to reconnect with local industry by funding new ventures?

Of course, this will need to be facilitated by the right legal and regulatory frameworks and incentives by the Securities and Exchange Commission of Pakistan, the equivalent of India’s market regulator Sebi.

A concerted effort to build a strong investor community in the country, backed by the right political will, should enable Pakistan to build its own ecosystem.

And yet, we must ask ourselves a question in India. If we have so successfully developed a well-running ecosystem around entrepreneurship, why must Pakistan reinvent the wheel?  

Successful Indian companies and their financial sponsors can offer guidance and mentorship to young businesses in Pakistan. Given the right playbook, it would be fascinating to see what happens.

In fact, the World Economic Forum’s South Asia Bridge Initiative (SABI) is already in action, facilitating exchange programmes for entrepreneurs between India and Pakistan as a first baby step.

Of course, how successful this is will depend heavily on the political environment and the ability to sustain steady relations between the two nations.

Maybe we got it wrong trying to fix the politics first. Maybe common business interests will pave the road where politics failed.

Regardless, Pakistan owes its young people more than an inheritance of strife, the opportunity to shape their country and articulate the elusive Pakistani dream. So although it may not be clear on the outside, it was made crystal clear to us in Lahore that Pakistan is ready to forge its own Bengaluru.

The authors are former McKinsey consultants and Stanford Business School alumni. Views are strictly personal.

(This story appears in the 08 January, 2016 issue of Forbes India. To visit our Archives, click here.)

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  • Girish D

    This article is amateurish to say the least. They go to Lahore for couple of days and then declare Pakistan is ripe for start up revolution? Is it that easy folks? The ecosystem develops over years and you need conducive social environment. Couple of scientists in Pakistani research lab have written research paper on how Jins can be used to solve perennial energy shortage in Pakistan! The authors have brushed aside violence and terrorism like something that will not impact technology start up if you dare to start one. Really? Can start ups thrive in such a intolerant country?

    on Feb 11, 2016
  • Joe Blogs

    What a worthless article, with a cheap stunt headline to get reader clicks. "Demographic Dividend", really? Which poor developing country doesn't have a theoretical demographic dividend. Even Mogadishu, Somalia has a massive "demographic dividend". I believe Europe today is reaping Syria, Afghanistan and North Africa's "demographic dividend" every day by the thousands. When almost half of Pakistan's population is illiterate and even the urban educated are almost completely ignorant of modern science in a society that increasingly learns towards conservatism and outright fundamentalism, what kind of dividend is that?

    on Jan 29, 2016
  • John Smith

    This is certainly one of more sophomoric articles that I have read on the Forbes website ... totally devoid of anything significant with a misleading title. It is similar to a reasonable high school research article. I am hoping that this is due to a restriction on space rather than a lack of effort. First, there is no mention of how Lahore may evolve in a B'lore. Then, it is not clear why Groopic is better than Convo which apparently has 6000 corporate clients. No financials - actual or estimated. It appears to be very contrived effort. Finally, social DNA? demographic dividend? These terms are totally used of context. Perhaps it is a creative use of the terms and one should encourage it. My main issue is that this is a rather weak article that does not deliver anything of substance. I can only conjecture about why this article was created.

    on Jan 14, 2016