Pakistan's entrepreneurial ecosystem: challenges and opportunities

The startup culture in Pakistan is perhaps in its startup phase. I have been a curious observer, student, and participant in this emerging phenomenon for the last 7 years. I have worked, facilitated, mentored, advised, and pushed numerous young entrepreneurs in this period, not just because it was my job requirement at two major private universities, but also my passion, rather than an inner calling to do so. I am also a part of a modest social startup as a founding member, co-founded a virtual incubator and consulting firm for startups, and am also a member of the executive committee of the local chapter of a non-profit platform dedicated to promoting entrepreneurial spirit in the country. These little achievements were followed by two venture failures, so I feel that I pass the bare minimum criteria to have a say in the growing entrepreneurial phenomenon. I also have been involved in a formal research project to study local entrepreneurship for the last two years. Over the years, and particularly during the last 3 years, I have seen the entrepreneurship culture being peculiarly pushed by various stakeholders. I feel that it’s the right time to make some comments on the challenges young entrepreneurs are facing today and their possible solutions. The following are some of my observations and suggestions.

1. Social Constraints: Pakistani society is family-oriented, traditional at its core, yet standing at the shores of modernism. Many of us want to follow modern trends but are not bold enough to completely thrash the family and religious values we have inherited from previous generations. Specifically in job-oriented families, there is a significant influence of parents on the career choices of their children, more so because they finance most of the education. Furthermore, once the boy gets a job his mother starts looking for Rishta, for which a stable job is a prerequisite. In the case of females, the process starts much earlier. In such a context, it is quite unlikely for the parents to support any adventurism in between. Compare this with a millennial in the USA or Europe, who is very much independent by the time s/he crosses 18; they decide their careers and their partners on their own. So when the likes of Elon Musk or Jeff Bezos, at 20-something, decide to spend 16 hours on their first venture a day and sleep on a couch in his/her office at night, they probably don't have any worries about how their mom or dad would feel about it. Feel the difference. To be more specific, when you tell a 19-year-old pampered teenager, mostly fed by his/her parents, coming from a job and family-oriented background, having aforementioned expectations from parents, with no market exposure, looking at western entrepreneurs as an example, and come up with some fancy (aka innovative) business ideas and 40-page business plans, without much knowing how to execute it or sufficiently being aware of local ground realities, then things don’t quite add up for most. Very few parents allow and comprehend any adventurism along with ongoing education of their child. An alternative socially compatible approach is therefore needed. Solution: It’s not advisable to bypass the family. Young entrepreneurs need to find ways to build the confidence of their family members. Going against their will or not taking them into confidence would create negative word of mouth for the entire entrepreneurial movement. It would be easier to get permission for smaller startup experiments than the big ones. I, for example, tell students to tell their parents that it’s a university project to execute a business idea that they are working on, and they can ask their parents to call me for confirmation, even if I haven’t given them the assignment (lying for a greater purpose). The media also needs to play its part, for example, morning shows can invite successful young entrepreneurs to share their experiences to convince mothers. Educational institutions also have to play their part by creating a conducive environment for students in this context.

2. Key Drivers: The social constraints, norms, culture, economic conditions, and history of this part of the world are unique. How many times our country has faced what Greece is facing these days, what the USA faced in 2007, or what Indonesia and other Asia countries faced during the 1990s? Comparing our socio-economic order with other parts of the world it doesn't surprise me that I see only 23% of our youth want to start something on their own as compared to 64% of working adults in Africa (GEM 2017 report), and 66% millennials in the USA. I can bet this percentage is even lower among MBA students I have interacted with, more so because they are programmed to get a job in some fancy company when they graduate. So there is lesser internal drive and more an external push generated by various seminars, workshops, conferences, talks, and business plan competition (an already obsolete concept), pushing the entrepreneurship culture in Pakistan. Furthermore American American-inspired VC culture is sweeping in, and the few start-ups that are promising, are acquired by bigger companies. The acquisition is also celebrated in the media sometimes. The young ones only get the message that you build a company to sell it. The ‘Idea croron ka’ TV show gives a clear message to the Pakistani millennial ‘It's all about money, getting an investment is what success means’. Lukas Mikelionis makes the same observation about the startup culture in the UK: “Nowadays, by contrast, selling your company for a life-changing sum of money is the mark of success;... Start-up culture shifted the focus away from company ownership to either getting rich by selling or participating in a never-ending game of start-up creation … There’s no question whether this culture is damaging to young people … the prevailing mantra of to earn you must spend dictates the direction of most start-ups, which then leads to the absurd belief that the absence of consumption is a fault of lack of marketing. In reality, however, a high burn rate of cash by start-ups and lack of market need are the most popular reasons why start-ups eventually fail.” If an entrepreneur is at the ideation stage and manages to get investment from a big shot, s/he may become an employee of the investor; a kind of an employee who would rather work hard, day and night to pay his own and his team’s salary. There are few retired corporate executives, with lots of savings in their pockets, with little knowledge about the challenges faced by a young team of entrepreneurs. They are roaming around in the hunt for promising startups, and often immature souls fall for their prey. In my humble opinion, the drive is more artificial and less natural, tables need to be turned. Solution: Instead of making money the primary motivator, they need to be inspired from the very beginning to feel pride in creating solutions to local problems. Examples of local and international social entrepreneurs need to be discussed with them frequently. Trainers, mentors, instructors, and professors, all would have to play their part in encouraging students to become problem solvers. Students should be made to read Jim Collins’s Built to Last and Ricardo Semler’s Maverick before they graduate. The more students realize the severity of the local problems the more self-confidence and desire to become the solution to create sustainable solutions to those problems. It's needless to emphasize the role of educational intuitions and media here.

3. Business Plan Competitions (BPCs): It wouldn’t be wrong to call such competitions torch-bearing events driving the local startup culture from the front. The problem is it’s not an impossibility to win such competition exclusively based on one’s presentation skills. Of course, the idea, its market potential, and scalability are also important; however, a person with poor execution skills and better presentation skills might ace the business plan competition. I have seen more people becoming disappointed by the bias of judges, a non-tech venture may be ignored by a tech-loving judge. BPCs also promote the culture of ‘looking successful, instead of becoming one’; you can win prizes with little execution and more pompousness. A business plan format has its own biases. It presumes that markets behave rationally and can be predicted using scientific analysis; therefore it’s possible to forecast the market size, potential demands, gaps, and customer future orientation and plan accordingly. We know for a fact that markets don’t behave rationally, often unpredictably (see Nassim Nicholas Talib and Sara Sarasvathy for details). On the other hand business plans are good for large companies launching new products in stable markets with little information asymmetry, however, they don’t fit in the chaos inside a growing startup particularly those who intend to create new markets. Business plans rather create an atmosphere of hubris and inflexibility within the startup team. For the same reasons, Steve Blank argues that such competitions are good for the organizers and institutions (for funding purposes) but bad for startups (see Steve Blank for details); Solution: Business plans should be replaced with business exhibitions where the customer would be the judge. An example of the Chatkhara Festival for food entrepreneurs organized at IoBM in Nov 2016)

4. Which Venture Qualifies as a Startup? The aforementioned trends give a loud and clear message to the youth ‘You are an entrepreneur when you have been selected by some glamorous incubator, have a highly innovative idea (sic), have a fancy name (ABC enterprise won’t jive in), use technology even if isn’t needed, claims to grow around 300% per year, have a valuation in millions of dollars (who cares how it's calculated), have received or is about to receive funding from a VC preferably a foreign one, have a team of 3 – 6 young university grads who can speak fluent English in an American accent, won a couple of business plan competitions, have been covered in blogs and newspapers’ etc. I know lots of startups that don’t fit this profile … some of them aren’t even innovative. Almost every day, traditional businesses are started by Memon, Delhi saudagaran, Chinioti, Gujrati, Bohri, etc. entrepreneurs. People open general stores, travel agencies, restaurants, schools, etc. now and then. If one of my students intends to start a poultry or a travel agency or an office supplies business or a not-so-fancy restaurant (for example), he won’t fit in the aforesaid profile, won’t win any business plan competitions, and probably won’t be accepted as an entrepreneur despite creating a sustainable venture and generating employment opportunities.

Solution: The business idea/plan competition and incubation culture are largely responsible for creating such a divide. Universities need to organize exhibitions. It should be acknowledged that not all entrepreneurs require a fancy co-working space, let alone a business plan competition to prove their capabilities. Even if some judges are invited to some event then it should be made sure that they belong to all walks of life, have humility, and are mature enough to bypass their biases to appreciate the true aptitude of the entrepreneur.

5. Educational Bureaucracy: The universities in Pakistan are regulated by HEC and its subsidiaries. The university professors are prized for their publications. The final year projects of students provide material for these publications and students as free labor, who would experiment and collect data for them. The primary rubric on which the project is evaluated is the student’s comprehension and application of theory not that if the project is commercially viable. The professors don’t have the authority to even change the respective evaluation criteria. The professors in most cases also don’t have any reasonable understanding of how a project is commercialized, as that’s not what they are hired for. Some of these professors even have a defeatist mindset which is transferred to the students in many cases. I have come across many students with amazing commercializable ideas, but who lack self-belief and entrepreneurial vision. To my utter disappointment, despite the students sitting on a gold mine (a workable prototype), they fail to see how it can be converted into a sellable product for a global audience. Sometimes, hours of mentoring render fruitless against the damage done by these armchair professors with inflated egos and little practical competence. The atmosphere inside the educational institutions, coupled with parent’s expectations, keeps the students running meaninglessly after their grades, leaving little time for extracurricular. ‘Every other teacher sells the vision of an industry/corporate job’ complains every student when I try to convince them about the entrepreneurial alternative. The teaching objectives for each course are vetted by the HoDs, academic councils, and other authorities inside the universities (more so in public institutes). Most teachers therefore find it feasible to cover a course content exclusively designed to address a potential employee, not an entrepreneur; only a few try to explore unchartered territories, while taking the students along with them. Little surprise that most engineering students I have encountered particularly lack the vision, acumen, and necessary mindset to even think on entrepreneurial lines. Those with interest, lack the basic understanding. On top of that, some of them feel extreme pride in their technologically advanced and practically useless product proposition (I as an engineer would admit doing so myself, a long time back). On the other hand, most business students are conditioned to get a job in an MNC, as that’s exactly what their program aims for. I have even come across examples of IT grads who would fake themselves as entrepreneurs to spend some time inside an incubator till they get a job in Pakistan or abroad. The problem is systemic, and deeply rooted in the culture of the academic institutions, and can’t be fixed just by organizing a few talks, seminars; workshops, and business plan competitions, even if HEC keeps prizing universities with higher ratings for doing so

Solution (probable): HEC needs to adapt to the requirements of entrepreneurs. Perhaps some scientific research on local entrepreneurs may convince HEC. However, the entire institution from the regulators to education providers is too slow to respond to the local needs. Opening up ORIC and incubation centers won’t fix the problems either.

6. Local Relevance: Ernesto Sirolli in his TED talk shared an interesting story from his experience in Africa about the failure of the efforts of his team, and other European NGOs to develop agricultural opportunities and other social initiatives in Zambia and other parts of Africa. He said that whatever we touched, we destroyed, because they didn’t first understand the local conditions, culture, values, norms, etc., and thought European ways of doing things were better and would naturally produce results. But they didn’t. There are numerous historians and scholars I can cite here for the implausibility of the idea of importing solutions or methods from one society and expecting results in another culturally/ideologically different society. The presumption that every society evolves in the same linear fashion, from primitive to modern like the Western world, is utterly false. This is a word of caution for those (with foreign qualifications and experience) who look to emulate Western solutions to fix local problems. Having said this, the number of business ideas that are copied from Kickstarter (etc.), have little significance to local realities or are not practically executable or scalable, is significantly high in the evolving entrepreneurial sphere. Pakistan isn’t a developed country (sic), we rather have gazillions of very basic problems. From lack of clean water, healthy food, to clean environment, waste management, to affordable clean energy, affordable healthcare, etc., etc. … I searched ‘water’, ‘recycle’, ‘waste’, ‘energy’, ‘solar’ on https://www.startuplist.pk/ and I got nothing. Searching for ‘food’ and ‘health care’ got me some names that were more about helping you get to a food outlet a doctor, or e-commerce stores for medicine, etc. In health care I know of a startup like doctHERs which connects lady doctors to patients at remote locations to provide affordable health care, but how many are there really like this one? On another website, I found EcoEnergyFinance (promoting solar energy in rural areas) and TransparentHands (donation collection and disbursement platform) which were addressing local problems. Grit 3D developing 3D printed prosthetics for the patients is another example, I know of. There would be more, however, the percentage of such startups that focus on local problems is negligible as compared to the rest. The number of those who would have done this in a local sociocultural context would be even lesser. Simply speaking, fixing local problems with locally compatible solutions is not what you expect from a typical startup. To become attractive to an international investor is perhaps more important. Where exactly the talent and intellectual acumen being directed toward? Are we like a big farm for international investors to test and develop business ideas and take away at a fraction of the cost? I hope the answer is no.

Solution: see the solution of point # 2 above.