Pakistan's venture capital sector is still in its infancy and faces challenges such as inadequate funds. The government should foster more venture capital funds by offering tax breaks and other incentives, said Sheryar Hydri, Managing Partner of Deosai Ventures. He said that when successful entrepreneurs reinvest their wealth into new startups, it creates a virtuous cycle of innovation. This not only attracts talent and fosters a spirit of entrepreneurship but also establishes a strong ecosystem where knowledge and resources are shared, propelling the entire sector forward. However, in recent times, a noticeable shift has occurred in Pakistan’s investment landscape.

“Investors, whether they are venture capitalists, angel investors, or institutions, are treading more carefully. Economic uncertainties, global events, and market fluctuations have made them more risk-averse. Moreover, Investors are being more selective about projects. As a result, this limited pool of funds makes it increasingly competitive for startups to secure the financing they need to grow,” he said. He lamented that despite a historic year of VC investments exceeding USD375 million in 2021, Pakistan failed to develop a structured network of angel investor syndicates over the last decade.

“In our ecosystem, that critical angel investing stage has been missing and is still very fragmented, so a lot of great startups do not get funded in their first year, and implode without reaching the VC funding stage,” he said. “This will get worse over the next few years, leaving a huge gap for impact investors to come in and support early-stage startups until they can tap commercial funding down the road,” said the Deosai Ventures managing partner. “In nurturing the startup ecosystem, the government should play a pivotal role by providing incentives, facilitating research and development funding, and establishing a conducive regulatory environment,” he suggested.

“By providing the startups with access to funding and other resources, Pakistan can create a more conducive environment for entrepreneurship and innovation. This can help create jobs, drive economic growth, and contribute to the overall development of the country,” he opined. Sheryar said a number of startups had emerged in the recent past, catering to the needs of multiple segments of the society, including travel, trade, ride hailing, currier, e-commerce. He said startups like Tajir, Dawaai, Cheetay, SadaPay, Baazar, Daraz.pk, Zameen.com have established their name in Pakistan as well as in the world market.

“Empowering Pakistan's capital markets through venture capital is not without challenges, such as regulatory reforms and investor education. However, with right policies and incentives, these challenges can be overcome. The government, in collaboration with financial institutions and private sector, must foster an environment that attracts venture capital investment,” he added.

Credit: Independent News Pakistan (INP)