Prominent Pakistani startups and their venture capital sponsors gathered in London at the recent Paklaunch Unconference 23.2 to discuss the unique challenges faced by them in the current economic landscape, reports WealthPK. The changing global economic cycle has significantly affected Pakistan, and the landscape for startups there has become increasingly challenging due to a significant reduction in the global venture capital funding. This decline is attributed to global interest rate changes, primarily influenced by the rising interest rates in the United States and Western markets. The key message for the Pakistani startups at the conference was “to focus on survival and profitability during the current economic downturn.” However, there are encouraging signs “as venture capital firms remain committed to investing in Pakistan’s long-term potential.”

In this changing landscape, venture capital firms demand that startups prioritize profitability over the traditional focus on revenue and scale. The venture capitalists are particularly interested in startups with a long-term strategy and the potential to dominate their markets. They tend to shy away from the capital-intensive businesses with narrow profit margins, given the high-risk nature of startups. Pakistan’s GDP growth rate has consistently been 5% per annum for the past few decades, outperforming many other countries. This, coupled with the country’s large and growing population, presents significant opportunities for startups. The ventures that can tap into the informal economy are particularly well-positioned to succeed. The conference highlighted the presence of ambitious and capable founders from a variety of sectors, including retail B2B, fintech, electric vehicle manufacturing, and software development. These founders possess innovative ideas and are equipped to manage risks and lead their businesses.

However, Pakistani startups face substantial challenges, including currency depreciation and political instability, which make it difficult to achieve business goals in terms of USD returns. Expanding internationally is an option for some startups, but stability in their home market remains a significant concern. In the early stages of their business lifecycle, most Pakistani startups require time and capital to achieve sustainable profitability. Their viability and ability to scale will largely depend on securing the necessary funding. The venture capital firms hope for a swift correction in global markets, but the uncertain economic landscape raises concerns about this possibility. Despite these challenges, the Pakistani start-up ecosystem is thriving, thanks to the dedication and commitment of organizations such as Paklaunch led by Aly Fahad. Paklaunch has played a pivotal role in creating a supportive community for Pakistani startups, enabling the convergence of individuals from diverse backgrounds and geographical locations.

Credit: Independent News Pakistan (INP)