Amir Saeed

The launch of the Pakistan Startup Fund (PSF) is a major step taken by the government to strengthen the country’s startup environment, showing its commitment to supporting innovation and entrepreneurship. Nazir Ali, Assistant Director at the Trade Development Authority of Pakistan (TDAP), said this while talking to WealthPK. The PSF encourages investment of top-tier global and local venture capital (VC) funds in the country to boost startup growth. VC firms frequently face considerable risks in the emerging startup ecosystem. The fund will offer 10-30 percent of the total investment made by the venture capital in a particular funding round as equity-free capital or a grant as the last cheque. The government’s commitment of Rs2 billion is expected to catalyze Rs50 billion in the country’s startup ecosystem. With Rs2 billion fund, the government aims to mitigate venture capital risks and support innovative startups, providing them with the necessary resources to grow and succeed, said Nazir. “The initiative demonstrates the country’s commitment to fostering entrepreneurship and driving economic growth, recognizing the essential role that startups play in job creation and innovation,” he said.

He pointed out that the startups in Pakistan were facing a significant challenge in securing venture capital – a crucial component of their growth and success. Despite the country’s potential for innovation and entrepreneurship, the venture capital ecosystem remains underdeveloped, leaving many startups struggling to access the funding they need to grow. The TDAP assistant director was optimistic that the Fund will provide a safety net for the venture capital firms, encouraging them to invest in startups, which have historically struggled to access funding. The fund would help bridge the funding gap that many startups experience, allowing them to scale and thrive while also contributing to the country’s economic progress. Talking to WealthPK, Tahir Abbas, Head of Research at Arif Habib Limited, said the startup ecosystem had already shown promising signs, with many successful startups emerging in recent years, despite the challenges they face. However, access to funding has been a major hurdle for many entrepreneurs, limiting their ability to realize their full potential.

Abbas also mentioned the high-risk aversion of local investors, another challenge the startups faced. Many investors hesitate to invest in startups, preferring more traditional and established businesses. This risk aversion makes it difficult for startups to secure funding, even if they have a promising business model and significant growth potential. He highlighted that a data-driven approach was crucial to ensure strategic investments. The fund must leverage global best practices, industry research, and market analysis to identify high-growth potential startups. This will enable informed decision-making, minimizing risks and maximizing returns. Abbas suggested that encouraging diversity and inclusion was also important. Women-led startups and entrepreneurs from underserved areas must receive adequate support to ensure equal opportunities. By fostering a culture of inclusivity, the country would tap into the vast potential of its diverse talent pool.

Credit: INP-WealthPk