A new ranking of the world’s “best startup ecosystems” is out — and the results don’t look good for Pakistan. We are falling behind many other countries, such as India, South Africa, Azerbaijan, Kenya, and Nigeria, which have greatly improved.
A Global Perspective on the Start-up ecosystem and performance of various countries is being measured by a report presented by Start-up Blink. It is the 3rd global start-up ecosystem report. In this report, 1000 cities and 100 countries were ranked based on their performance in the start-up ecosystem. This report is supported by various market domain leaders, predominantly, Crunchbase, SEMrush, Meetup, UNAIDS, HIEx, Coworker.com, and Findexable. This report identifies 3 main factors on which cities and countries were ranked:
- The quantity of startups & other supporting organizations
- Quality of startups & other supporting organizations
- Business environment and critical mass (Ecosystem)
The total score of any city or country is based on quality, quantity, and business environment. So, as per this report, US stands first in the ranking, India got 23rd position and Pakistan ranks 82nd with 138 start-ups created in one year. In Pakistan, Lahore is the most successful city came 271 out of 1000 cities in comparison to Bangalore ranked at 14th position. It is still a long way to catch up with the neighbors.
There are 2 main reasons for Pakistan to be ranked so low in the report and these are as per Ministry of Information Technology & Telecommunication (MOITT) in 2015, low percentage of GDP for science and development and low standards of science and education. Even after 5 years, after investing billions in National Incubation Centres, Online programs, Loans and what not, we are still standing with war-stricken Egypt above us.
Startup Ecosystem Report
Today, we are a nation of 220 million people with 60% of the population well below the age of 30. Yet, 87 million still fall far below the poverty line as per research quoted by The Business Recorder. What are we doing wrong? Is it Covid-19 or our policies? How did China and India turn their economies around and are rapidly becoming fastest growing economies of the world? Will Pakistan, ever be able to do that? These are the questions we must ask ourselves while defining our position to compete in the mobile-driven world.
Startups may be small businesses but they can play a consequential role in economic growth. They create new jobs which means more employment, and more employment means an improved economy and prosperity.
More than 90% of the business incubation centers in universities are headed by the faculty members as they were given the additional charge. As a result, we saw many startup companies failing to consistently perform in the market and later just quit.
Ecosystem Report
The startup industry in Pakistan has evolved immensely over the span of last 15 years. In 2005, when first incubation centre was established in National University of Science and Technology (NUST), it felt like a dream but today, here we are with several private and government-funded incubation centres working in various cities of Pakistan. However, the quality of the processes of these incubation centres and the establishment of new businesses through these entities is still a big question mark on the ecosystem available so far. The agenda of becoming a self-sufficient economy through entrepreneurial venture is still in infancy. As per the Mackenzie, by 2026, Pakistan will have a flowering startup scene with significant venture capital investments worth more than $1 billion.
Entrepreneurship seems to be a solution. Indeed it is, and with this very thought, incubation centres came into being. We saw the dawn of TIC (Technology Incubation Centre) more commonly known as NIC, NUST Incubation Centre along with IBA’s incubation centre. In 2014, HEC directed every accredited university to build Business Incubation Centres (BICs) for the students and other young entrepreneurs. That was the time when every university started their own incubation centres with limited infrastructure, facilities and experience. In the spirit of business for businesses, the apparent gap was filled by private incubation centres. They began offering their services – with a bit more experience and infrastructure and had to lead to a boom in the growth of new startups in the market. As per HEC definition,
“A business incubator’s primary goal is to produce successful firms that will leave the program financially viable and freestanding.”
Higher Education Commission (HEC)
The pitfall was however the absence of any provision for a structured program that would enable young companies to be successful. However, this question was not asked. More than 90% of the business incubation centers in universities are headed by the faculty members as they were given the additional charge and we saw many companies failing to consistently perform in the market and later just quit. After HEC, the ministry of IT took a flagship initiative and launched various programs in order to establish the fact that entrepreneurial activity is required to change the poorest situations prevalent in a country. In 2016, the first National Incubation Centre was launched in Islamabad, and today, we have 5 NICs operating in Pakistan’s five major cities. They receive applications twice a year and it is a 6- month program in which they provide workspace, acceleration, and other incubation facilities to help aspiring innovators grow and establish their ideas into realities. Another initiative was “Digiskills”, in which the focus is on developing the skills of the exceptional students to build their own freelancing careers digitally. Both were great initiatives, but the outcome was still not very favorable. In 2019, the PM of Pakistan directed another initiative named “Kamayab Jawan Program” in which small loans will be given to the aspirants who want to start their own product or service-based businesses with convenient installments of loan repayment. It is been more than 18 months and the program is still not fully operational. Time will tell how these programs will pan out and what economic benefit will be drawn.
In a series of interviews, Usman Ahmed (the founder of Startup Insider) with various think tanks of the ecosystem and try to identify the gaps in the system to suggest some remedies to improve it.
Dr. Nadeem-ul-Haque is a former Deputy Chairman, Planning Commission of Pakistan who introduced a policy framework on Creative Governance that was primarily based on entrepreneurship. He believes that there should be freedom in the system and fewer controls with limited monitoring. However, we are not building a start-up ecosystem rather enforcing it by creating these National incubation centres with beautiful offices and mentors with no prior business experiences. Their entire focus is on decorating the centers and promoting them on social media. We have not seen any national success story from this type of ecosystem since previous several years.
He further critiqued the SMEDA (Small & Medium Enterprises Development Authority) performance for the last many years that no one from the government body is helping the ecosystem. Students are encouraged to be part of incubation centres; however, they are unable to open an account in the bank. How can they research and innovate if they keep chasing up the processes and policies of the system? In his opinion, there should be no comparison with the west now because we are far behind. There is no fundamental research in the market, but Govt. is overlooking it. Academic research is one of the most fundamental methods for innovating. Research is an area that needs to get a lot more glamorous focus; something it has not received from academic circles in the past.
He concluded the discussion with the fact that there is no ecosystem in Pakistan\’s economy other than a bureaucratic ecosystem. We have the talent, but we are unable to nurture this talent. These incubation centers have not developed even a single national-level business.
In another interview with Muhammad Ahsen Mirza who is heading the business incubation center in International Islamic University, Islamabad mentioned that there are 15 startups that have been graduated till now and 16 are still incubated. He believes that entrepreneurship can be the key to success and for that, we should overcome the barriers in the ecosystem and help each other.
Currently, the success rate of his incubation centre is 50%. Muhammad Ahsen believes that the time is beginning to fit into the adage that the right person is on the right bus at the right seat – this very infrastructure of experts doing the right job will channel the building up of the ecosystem. There are now people who are working towards filling out gaps in the skills of people providing this ecosystem. His take on entrepreneurship and Islam is geared towards establishing the business of Islamic laws of business. The key is that Islam propagates trust in the dealership of giving and taking in businesses. This establishment of trust not only solidifies the consumer base but gives the businesses a unique bargaining power where they can charge more for being honest and true in the product or service they are fulfilling. This very ideology needs to be instilled among the budding entrepreneurs of Pakistan while they are being coached on the framework of entrepreneurship.
Ayub Ghauri CEO – Founder at HospitALL (Pvt) Limited deems that in universities’ incubation centers and the associated mentors do not have much experience in starting new businesses. We find PhDs and scholars in incubation centers which in classroom settings are great but incubation centers are designed for hands-on execution of business commercialization. And this purpose of BICs and the facilitators’ role presents a caveat that causes the current IC structures to be ineffective. Similarly, students incubated in the system do not have much exposure and should not be encouraged to start a business before getting some experience. So, such incubation centres do not have many advantages in developing businesses. He has a dynamic opinion where he believes that BICs are not taken very seriously – because perhaps because it is not paid!
He believes that students of Pakistan are not raised like the west and their exposure and experiences at the age of 20 are very limited. With such limited experience, it is only prudent that they gain experience of 5-7 years before embarking on setting up a business. He also states that experience and youth have to knit fingers to ensure new startups can thrive. Aligned with the support from the government agencies such businesses can provide platforms for these startups to provide solutions and services or products for payment rather than a simple grant. He concluded the discussion with the fact that government-based incubation centers come with controls and strict monitoring naturally. This will decrease the efficiency of the system and the survival rate of the businesses. So, there should be a coordinated effort from private and govt. bodies in order to build a much stronger and well-equipped system.
Shahid Qureshi is heading the Centre of Entrepreneurial Development in IBA, Karachi. He stated that the basic ideology of business studies needs to be changed. He exemplified the eco-system requirements of entrepreneurship with that of agriculture – it is essential that a watering system is placed along with the right chemicals and seeds for the best produce. Finally, he stressed that it is the trained farmers who ensure that the product is multiplied and sustained within the ecosystem. He further believes, as an expert on the subject, that we need to appreciate the person who is setting up a small ‘Thaila’ (cart shop) in the market as his entrepreneurial venture. In his opinion, conventional ‘Babu-culture’ (a term coined in the Colonial times referring to smartly dressed incompetent officers) is gone and we will see the end of these 9 to 5 jobs in the near future as it has already begun. The very essence of nurture and the culture needs to undergo an ideological change – appreciation of the entrepreneurial spirit needs to surface from parents, education institutions, and span across even the media.
In discussing the development of the National Incubation Centre in 5 cities of Pakistan, he stated that each NIC received 500 million rupees in funding to incubate new start-ups. However, this ecosystem is partially developed, and it will move slowly because it is an organic process and needs not to be expedited like this.
Finally, Roshaan Sheikh who is a young entrepreneur thinks that there is no right time, and you can start from anywhere. Before starting her own venture, she used to work in a design house. Later, she went to National Incubation Centre Islamabad with a business idea. However, it was not well received by the mentors and eventually she left the incubation center and currently doing a full- time job. She has a strong opinion that these NIC’s are making very less impact on the ecosystem because there is no proper mentorship program, and the overall regulatory framework is much of a hassle. In Pakistan, the concept if BICs is very generalized and forced according to a curriculum where the people taking part in BICs are experienced or fresh. Treating every enrolling member as a fresh student without any experience may not be suited to budding entrepreneurs who are looking for the very ecosystem that has been spoken of time and again.
If someone is just looking for a shared working space then it is a great idea. However, the mentors and trainers do not have much experience nor are they able to tailor the facilities according to the need of the businesses that are incubated. Furthermore, in our culture the persistence of power distance is huge and the concept of gaining business advantage through networking in the industry is next to invisible.
Roshaan Sheikh (Former NIC Islamabad Incubatee)
It is very apparent that monetary advancement as a cognizant component is a new post-pilgrim marvel in nations like Pakistan. This is, indeed, an energizing period throughout the entire existence of this country where public and global offices are cooperating to accomplish a straightforward goal; accomplishing economic development and eradicating poverty. Pakistan is taking a few measures to accomplish these destinations and encouraging the culture of entrepreneurship is one of them. Financial experts see the business venture as a blend of advancement and risk-taking. At whatever point such action flourishes, it accomplishes a high development rate and offers freedoms to the entirety of society, including poor people. Advantages are offered as far as development and increase in the employment rate. Every one of the present enterprising economies on the planet is fruitful as they permit people to set up their endeavors and establish a solid rivalry where everybody attempts to think of creative thoughts, ideas, and new ways of doing business. This works like a chain response and the culture branch out quickly.
It has been very promising to notice the measure of this expanded movement since 2015 despite the fact that the discussed gaps and challenges keep on increasing in the startup ecosystem of Pakistan. As the difficulties persevere in the country, the specialists whose perspectives are amalgamated in this report appeared to be positive for the startup environment of Pakistan. The urgency of the matter is that business incubation centres should work purely on the entrepreneurship development in the system.
The research results showed that in over a time of 5 years an average of 50% local entrepreneurs graduated from each incubation centres. However, a portion of the significant difficulties of business incubators included; the absence of cutting edge and legitimate ICT offices, the deficiency of sponsorship activities for business entrepreneurs, inadequate production space for encouraging BI projects as well as the research and development due to lack of experience and not because of money.
Understanding the distinction between the micro and large-scale climate of the Ecosystem is very significant to see the rise of examples of overcoming adversity in Pakistan. In the miniature climate the number of players will keep on expanding, however, every member of the ecosystem should cooperate to provide opportunities and reinforce the pipeline for new companies. The idea of business venture incubation expects to create and support an enterprising society in Pakistan by utilizing the organized approach of the conventional schooling framework. The educational plan should be intended to show abilities and skills that are similarly advantageous to going into business just as being material in most work environment circumstances. While on the full macro level, there is a requirement for the government to address the administrative issues and regulatory framework.
Business Incubators have a more noteworthy task to carry out for the accomplishment of a better ecosystem in all aspects. The purpose of this report was to uncover the challenges faced by young entrepreneurs in the system and put a strong focus on the significant role played by business incubation centers. Nonetheless, the results of the current study and discussion with the various experts are showing blended discoveries. Notwithstanding the significance of these BICs, they are not playing the required part for the business community as well as for the economy of Pakistan.
They are acceptable at giving the systems administration too as consultancy administrations for organizations while the arrangement of framework offices, preparing and showcasing needs are not agreeably given by them. Further, it is likewise conceivable that the BICs may assume a positive part in different viewpoints too, for example, training, marketing, and infrastructure facilities. However, incubated entrepreneurs do not look very satisfied currently due to higher expectations of services, intense competition, and challenges in the market.
The Way Forward
As per the above discussion, it has been derived that a national level entrepreneurship program should be established by the Government that should focus on the convenience of the entrepreneurs. District-level programs should be established with a massive awareness campaign in exhibiting the ideas of local startups and business ventures. All Public libraries should be given a status of Business Incubation Centres all across Pakistan following a task force to build local startups for employment creation. To produce hundreds of unicorns, we need a pipeline of millions of ideas. Entrepreneurship should also be taught at schools to make kids part of the ecosystem right from the start.
Business incubation centres should be headed by seasoned entrepreneurs rather than employees from academia or bureaucratic organisations. Currently, the incubation period for most of the centres is 4-6 months. This should be more than a year and less than 2 in order to build strong business ventures in the market. There is a 2% success rate of these incubation centres and 90% of them are tech based offering services and not products. A more diverse appro ach is needed to get young entrepreneurs from other industries as well.
Role of networking service should be provided in order to learn from the experts of the industry. They should provide latest technology updates along with tools to enrich their period with the centre. A massive budget should be allocated for the ventures of the aspiring entrepreneurs rather than developing the offices in terms of furniture’s and buildings.
Local entrepreneur should be given more appreciation in the society through meetup sessions, seminars and talks. This will be very beneficial for the young entrepreneurs to understand the strategies they use to cope up with the personal and professional challenges faced in their journey.
It is widely believed and we witnessed in the Startup blink report that USA stand first in the startup race. Yet, USA has the highest failure rate of startups as well. This will lead us to the conclusion that Failures should be celebrated. There is a misconception in the society about entrepreneurs. People are not ready for the failures. And when they occur they quit. Almost all the entrepreneurs in the entire world faced failures before success. Failure should be considered as a part of the journey not the end of it.
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