A new list of the world’s “top startup ecosystems” has been released, and Pakistan does not fare well. Many other countries, such as India, South Africa, Azerbaijan, Kenya, and Nigeria, have made significant progress.
A report published by Start-up Blink provides a global perspective on the startup ecosystem and the success of various countries. It is the third report on the global start-up ecosystem. The performance of 1000 cities and 100 nations in the start-up ecosystem was ranked in this research. Crunchbase, SEMrush, Meetup, UNAIDS, HIEx, Coworker.com, and Findexable are among the market domain leaders supporting this study. Three key parameters were used to rank cities and nations in this report:
- The quantity of startups & other supporting organizations
- Quality of startups & other supporting organizations
- Business environment and critical mass (Ecosystem)
Quality, quantity, and the business environment all contribute to a city’s or country’s overall score. As a result of this analysis, the United States is ranked first, India is ranked 23rd, and Pakistan is ranked 82nd, with 138 start-ups founded in a year. In Pakistan, Lahore was the most successful city, ranking 271 out of 1000 cities, while Bangalore was placed 14th. To catch up with the neighbours, there is still a long way to go.
According to the Ministry of Information Technology and Telecommunication (MOITT) in 2015, there are two key reasons for Pakistan’s low ranking in the report: a low percentage of GDP allocated to science and development, and low scientific and educational standards. Even after investing billions in National Incubation Centres, Online programmes, Loans, and other initiatives over the last five years, we are still looking up at a war-torn Egypt.
Startup Ecosystem Report
We now have a population of 220 million people, with 60% of the population under the age of 30. According to studies cited by The Business Recorder, 87 million people are still living in poverty. What are we doing incorrectly? Is it Covid-19 or our policies that are to blame? How did China and India turn their economies around to become the world’s fastest-growing economies? Will Pakistan be able to do so in the future? These are the kinds of questions we need to ask ourselves as we define our place in the mobile-first world.
Startups may be little enterprises, but they may have a big impact on the economy. They create new jobs, which means more employment, which means a stronger economy and greater prosperity.
Faculty members are in charge of more than 90% of university business incubators since they were given the added responsibility. As a result, we’ve seen a lot of startup companies fail to perform consistently in the market and eventually shut down.
Over the previous 15 years, Pakistan’s startup business has grown tremendously. When the first incubation centre opened at the National University of Science and Technology (NUST) in 2005, it seemed like a pipe dream, but now we have many private and government-funded incubation centres operating throughout Pakistan’s major cities. However, the quality of these incubation centres’ operations, as well as the development of new firms through these entities, remains a major question mark in the ecosystem so far. The goal of achieving self-sufficiency through entrepreneurial ventures is still in its early stages. According to Mackenzie, Pakistan will have a blooming star by 2026.
Entrepreneurship appears to be the answer. Indeed, it is, and incubation centres were born from this precise idea. We saw the birth of the TIC (Technology Incubation Centre), also known as NIC, as well as the NUST Incubation Centre and IBA’s incubation centre. In 2014, the Higher Education Commission (HEC) issued a directive to every authorised university to establish Business Incubation Centres (BICs) for students and other young entrepreneurs. Every university began their own incubation centres at that time, with little infrastructure, resources, and experience. Private incubation centres addressed the apparent void in the ethos of business for business. They started offering their services – now that they had a little more experience.
“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. How-ever, 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 aspi-ring innovators to 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, PM of Pakistan directed another initiative named as “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 instalments of loan repayment. Its 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 of Pakistan’s Planning Commission, where he established a policy framework on Creative Governance centred on entrepreneurship. He argues that the system should have more freedom and less constraints, with limited monitoring. However, by creating these National incubation centres with gorgeous offices and mentors with no prior business expertise, we are enforcing rather than fostering a start-up environment. Their whole concentration is on adorning the centres and publicising them on social media. Since a few years, we haven’t seen a national success storey from this type of ecology.
He also criticised SMEDA’s (Small and Medium Enterprises Development Authority) performance throughout the years, claiming that no one from the government is assisting the ecosystem. Students are encouraged to participate in incubation centres, however they are unable to open a bank account. How can they investigate and innovate if they are constantly chasing down the system’s processes and policies? According to him, there should be no comparisons with the West at this time since we are so far behind. Although there is no fundamental research in the market, the government ignores it. One of the most essential strategies for innovating is academic research. Research is an issue that need a lot more attention.
He concluded the discussion with the fact that there is no ecosystem in the Pakistan’s economy other than 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 a separate interview with Muhammad Ahsen Mirza, the director of the International Islamic University’s business incubation centre in Islamabad, he stated that 15 businesses had graduated and 16 are still incubated. He believes that entrepreneurship is the key to success, and that in order to achieve this, we must overcome the ecosystem’s barriers and work together.
Currently, the success rate of his incubation centre is 50%. Muhammad Ahsen believes that the time is beginning to fit in to 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 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 give and take in businesses. This establishment of trust not only solidifies 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.
According to Ayub Ghauri, CEO – Founder of HospitALL (Pvt) Limited, university incubation centres and their mentors lack experience in creating new firms. Incubation centres attract PhDs and researchers, which is fine in a classroom context, but incubation centres are meant for hands-on execution of business development. And it is because of this goal of BICs and the function of facilitators that the current IC structures are inefficient. Similarly, students who have been incubated in the system have limited experience and should not be urged to launch a firm before gaining some. As a result, such incubation centres have little advantage in terms of development.
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 an 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 business can provide platforms for these startups to provide solutions and services or products for a payment rat-her than a simply 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 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 place along with the right chemicals and seeds for best produce. Finally, he stressed that it is the trained farmers who ensure that the produce 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 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 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 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 the-se destinations and encouraging the culture of entrepreneurship is one of them. Financial experts see 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 employment rate. Every one of the present enterprising economies on the planet are fruitful as they permit people to set up their endeavours 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 quantity 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 be material in most work environment circumstances. While on the full macro level, there is a requirement for government to address the administrative issues and regulatory framework.
Business Incubators have 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 of 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 ad-ministrations 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 ecosystem right from the start.
Business incubation centres should be headed by the 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.