Emerging Tech Startups in Pakistan
Pakistan’s influence in global IT services exports has grown substantially, increasing from 0.17% in 2017 to 0.30% in 2021. The overall volume of IT exports has surged impressively, rising from 7.2% in 2006 to a remarkable 37.7% in 2022. While Ireland leads with over 28%, Pakistan has made strides, placing ahead of China, with more than 7%, and India, with over 11%.
In 2021, Pakistani startups gained global recognition, attracting investors and securing approximately $375 million in funding. Most of these startups focus on technology-driven enterprises, contributing to the country’s increasing prevalence of such ventures.
Around 500 technology-based startups have emerged, successfully establishing their businesses, products, and services. This surge in tech startups is closely linked to the remarkable growth of the IT sector in Pakistan.
As of 2023, Pakistan boasts an impressive 71.70 million social media users and 191.8 million active cellular mobile connections, covering 80.5% of the total population. This extensive digital presence reflects the country’s growing tech landscape.
SouthXChange aligns with Google Cloud’s extended support for startups in Pakistan through the Google for Startups Cloud Program. This expansion brings added benefits to seed to Series A startups, particularly those leveraging AI as their core technology for primary products or solutions.
Now, startups in this category can use the Google for AI Startups Cloud Program, covering their cloud costs up to $350,000 over two years. This initiative aims to alleviate financial burdens on AI-focused startups and facilitate their growth.
The Program offers up to $2,000 in Google Cloud credits for self-funded startups. This financial support aids in funding the development of proof-of-concepts, enabling startups to showcase their products to potential investors and customers.
This collaboration between SouthXChange and Google Cloud highlights a commitment to fostering innovation and supporting the development of startups in Pakistan’s tech ecosystem.
Careful nurturing and mentorship are essential in the crucial phase of startup development. To meet this need, the Higher Education Commission (HEC) has established 38 business incubation centers, complemented by four National Incubation Centres (NICs) from Ignite (a project of the Ministry of Information Technology), PITB Plan 9 and other notable incubation centers like P@SHA, Enabler, and Extreme Commerce.
As entrepreneurs transition to the “startup” phase, launching businesses, products, and services, the success rates differ significantly. While general businesses face a mere 5-7% success rate during this transition, tech startups surpass this figure with success rates exceeding 10%.
This divergence is primarily attributed to the challenging business ecosystem prevailing in Pakistan, characterized by minimal ease of doing business. Technological startups, exemplified by platforms like Daraz, Bykea, and KASB Securities, experience minimal engagement with the physical market. In contrast, general startups must navigate interactions with local authorities and contend with established businesses holding monopolies, requiring numerous permits and approvals. The informal sector, supported by influential interest groups, further complicates matters.
For instance, if owners of platforms like Bykea wish to initiate physical operations, they face the challenge of amassing substantial funds for bike procurement or outsourcing. Competing against well-established business magnates becomes a hurdle, as these tycoons wield significant influence in public and administrative spheres. Consequently, young, educated graduates need help to sustain themselves in this demanding business environment.
This challenging landscape is reflected in Pakistan’s consistently low global ranking, fluctuating between the 85th and 148th positions from 2010 to 2020. Despite these hurdles, efforts by incubation centers and initiatives like NICs demonstrate a commitment to supporting the growth and success of startups in Pakistan.