Venture Capital in India, China and Pakistan

As the US venture capital investment activity in India and China races ahead, the VC investments in Pakistan are just beginning to show signs of life with two young Pakistani companies receiving funding in late 2006 and middle of 2007.

Venture capital investment in China was up to $719m across 39 deals during the first quarter of 2008 from $492m in the first quarter of 2007, with media and advertising companies accounting for the bulk of deal activity and investment, according to the China Quarterly Venture Capital Report released by Dow Jones VentureSource. China has seen some very high-profile IPOs and exits recently that have firmly established China's value to the US VCs as a desirable destination.

IT and IT enabled services sectors have emerged on top for VC investments in India in the first three months in 2008, attracting over two-third of the total deals worth 144 million dollar. Venture capitalists invested $928 million in 80 India-based companies last year, a significant 166% jump compared to 2006, according to Down Jones. From 2006 to 2007, the number of VC and private equity deals in India increased from 299 to 387. The value of the deals increased from $7.5b to over $14b year-over-year, according to IVCA, the Indian Venture Capital and Private Equity Association (IVCA) which has all the big-name Silicon Valley VCs represented in India. Only a quarter of the funds accounted for VC deals. In terms of exits, there were 65 M&As and 16 IPOs in 2007.

While China is flying about 5-10 years ahead of India which is gaining altitude in terms of venture capital investing with high-profile exits, Pakistan is just trying to get off the ground in this space.

Naseeb Networks, a Pakistani online recruitment, social networking, and classifieds company, has received an undisclosed amount of venture investment from two Silicon Valley VC firms, ePlanet Ventures and Draper Fisher Jurvetson. Earlier in December, 2006, PixSense received $5.4 million in equity funding, led by ATA Ventures and Innovacom.

While there is a history of US VC investments in Silicon Valley technology companies founded by Pakistani founders, none of these VCs have previously funded companies such as Naseeb and PixSense which have significant R&D centers and operations in Pakistan.

At the OPEN Forum 2008 in Silicon Valley, Mike Moritz, Senior Partner at Sequoia Capital, said that Sequoia is currently not looking to go into another geography but it may consider other geographies such as Pakistan if their portfolio companies chose to open offices there. What took Sequoia to China, India and Israel were the founders of Silicon Valley companies who made a decision to locate R&D facilities in these geographies.

Speaking in a panel discussion at OPEN Forum 2008 recently organized by the Organization of Pakistani Entrepreneurs in Silicon Valley, Faraz Hoodbhoy, the CTO of PixSense, argued that Pakistani expatriates in Silicon Valley are the harshest critics of Pakistan. They are not immediately likely to ask US VCs to invest in Pakistan. However, Hoodbhoy's company PixSense has taken this path. PixSense currently has a sizable presence in Pakistan and prides itself in what Pakistani engineers have done for it to make it successful on very low budget. Naseeb.com, the only other Pakistani company to get US VC funding from Draper Fisher Jurvetson and ePlanet Ventures, accomplished it because its founders are from Silicon Valley who set up a development center in Pakistan that has produced great results.

Faruq Ahmad, a Pakistani-American VC in Silicon Valley, wrote recently: "In my field of expertise, venture capital, Pakistan's success is particularly hard to predict. My investment experience includes India and China, and I saw how long it took these countries to get to critical mass as attractive investment destinations for US institutional investors. Pakistan is assembling a $50 million fund to help kick-start venture capital support for local companies. How the government structures and selects managers for this fund will determine whether future funds attract institutional investors and sponsorship support from top Silicon Valley firms, assuming attractive deal flow."

A public-private partnership is working with US experts to develop venture capital and private equity sectors in Pakistan. Venture capital is being promoted by the Competitiveness Support Fund (CSF), a joint initiative of the United States Agency for International Development (USAID) and Ministry of Finance, Government of Pakistan which is working closely with the Pakistan Business Council (PBC). To support the innovation economy and spur entrepreneurial economic growth in Pakistan; CSF has a special window on business incubator/ venture capital for which CSF will be working closely with relevant stakeholders in the public and private sector along with the academia and the media. This facility will lead to the creation of business incubators and provide funding for them. Support for CSF is part of the US$ 1.5 billion in aid that the US Government is providing to Pakistan over five years to improve economic growth, education, health and governance.

While the efforts of the Pakistani government and CSF are laudable, the real impetus will come from the successful outcome of VC investments in the companies such as PixSense and Naseeb. The other factor that will influence US VCs to do deals in Pakistan is the willingness of Pakistani-American entrepreneurs in the US to set up presence in Pakistan and demonstrate the value of Pakistani talent to the Americans and the rest of the world. Events such as OPEN Forum 2008 will also help bring Pakistan as a VC destination into the consciousness of the US VCs. And, of course, a measure of political stability and security will make a big difference to Pakistan's perception as investment-friendly.

Comments

Anonymous said…
nice article with information regarding OPEN and its conference but whats way to reach a VC if some one is in Pakistan and not belong to Silicon Valley like Naseeb Networks
Unknown said…
Just wanted to let you know about another success story of a Pakistani Innovative Startup that has recently raised VC Funding
More details here
http://www.bhonpoo.com/2009/09/02/seenreport-raises-series-a-vc-funding/

The official press release

http://blog.seenreport.com/report/2009-09-01-seenreport-successfully-closes-series-a-round-investment-by-al-janabi-group/
Riaz Haq said…
Here's PakObserver on US support for entrepreneurship in Pakistan:

Friday, January 11, 2013 - Islamabad—US Ambassador Richard Olson affirmed that the United States will continue to support the development of Pakistan’s entrepreneurs, including through the U.S. Ambassador’s Fund, during a visit to the National University of Sciences and Technology’s (NUST) Technology Incubation Center on Thursday.

“We all know that societies thrive when their people have ample opportunity, and this is why the United States supports young entrepreneurs in Pakistan,” said Ambassador Olson during a tour of NUST’s state-of-the-art Technology Incubation Center.

While at NUST, Ambassador Olson announced that the U.S. Ambassador’s Fund, which supports small-scale, high-impact programs for communities throughout Pakistan, will now also focus on support to Pakistan’s entrepreneurs. The U.S. Embassy also recently unveiled an entrepreneurship program called Khushhali Ka Safar (Journey to Prosperity), which provides support to innovative Pakistani entrepreneurs by connecting them with American investors and mentors, particularly from the Pakistani-American diaspora and academic institutions.

Ambassador Olson highlighted NUST’s future Center for Advanced Studies, which will focus on Pakistan’s energy needs, and is being established together by the Governments of Pakistan and the United States. Three Centers will eventually be established across the country. “These Centers, a five-year, $127 million program funded by the U.S. Agency for International Development, will promote the development of Pakistan’s water, energy, and agriculture sectors through applied research, training, university linkages, and contributions towards policy formation. We look forward to promoting entrepreneurship and innovation through the strong links each center will have with the private sector,” said the Ambassador.

In addition, the United States recently launched the multi-year Pakistan Private Investment Initiative. Drawing on public-private partnerships, this initiative will spur job growth and economic development by expanding access to capital for Pakistan’s small- to medium-sized companies.Another U.S. program, the Pakistan Firms Project, helps to increase the profitability and incomes of small and medium-sized businesses in vulnerable areas by identifying and removing constraints to private-sector job growth in key areas such as agriculture, livestock, minerals, and tourism.


http://pakobserver.net/detailnews.asp?id=191116
Riaz Haq said…
Here's a ET report on USAID helping lunch a private equity fund in Pakistan:

The United States and the government of Pakistan hosted the ‘US-Pakistan Business Opportunities Conference’ in Dubai, where USAID in association with the Abraaj Group and JS Private Equity Management (JSPE) announced the creation of the ‘Pakistan Private Investment Initiative’ which will launch two new private equity funds focused solely on Pakistan’s dynamic and fast-growing small- and medium-sized businesses.
USAID Administrator Dr Rajiv Shah announced that USAID will provide a seed investment to capitalise the funds which will be matched by Abraaj Group and JSPE with investments of their own, as well as private funds raised from other limited investors.
“We are seeding individual funds with $24 million each. The Abraaj Group and JSPE will match or exceed our commitment. We fully expect them to exceed that contribution,” said Dr Rajiv Shah. “Pooled funds will initially be $100 million which we expect will grow many fold into hundreds of millions of dollars in investment for small and medium businesses.”
The announcement came at the end of the first day of the conference. “By partnering with Abraaj and JS Private Equity Management, USAID capitalises on these companies’ expertise to make smart investment decisions that will grow the Pakistani economy, create jobs, and generate profits for investors who seize the economic opportunities that Pakistan presents,” Shah said.
Speaking at the conference US Ambassador Richard Olson said, “The United States is one of the largest investors in Pakistan, and the US government supports Pakistani business leaders by offering access to finance, facilitating business deals, and strengthening business education.”
“With 190 million potential customers, Pakistan is a huge emerging market opportunity for US companies,” Ambassador Olson observed.
The conference, sponsored by the US government, was attended by 200 American, Pakistani and Emirati businesses including Gillette, Citibank, General Electric, Procter and Gamble, Abraaj Group, Big Bird Group, Coca-Cola, Conoco Phillips, Engro, Estee Lauder, Goldman Sachs, IBM, Monsanto, Nishat Group, and the Saif Group.


http://tribune.com.pk/story/568796/access-to-finance-usaid-launches-private-equity-fund-for-pakistan/
Riaz Haq said…
#US-based 1839 Ventures partners with #PTIB to launch $20m #Pakistan-focused #VC fund. #Punjab #Lahore #Technology

https://www.dealstreetasia.com/stories/1839-ventures-partners-with-ptib-to-launch-20m-fund-84321/

Punjab Information and Technology Board (PITB) of Pakistan has partnered with US-based investment firm 1839 Ventures to launch a $20 million venture capital fund for the technology startups in Pakistan. “1839 Ventures announces its international expansion and the start of a $20-million venture capital fund that will be dedicated to investing in technology-oriented startups operated by exceptional entrepreneurs who are based across Pakistan,” the company said, in a social media post. Austin-based 1839 Ventures specialises in Series A, early stage and growth capital investments in technology oriented companies working in commerce, communication and business intelligence. It invests primarily in Texas-based companies. The announcement was made last week by the venture capital firm at the Atx+Pak Launch Entrepreneurship Program launch ceremony in Austin city. Pakistan has been trying to boost its local entrepreneurship base. Earlier in May, Pakistan’s federal government announced that it will set up a $20 million venture capital fund for local startups. The startup programme was to be open to all startups – not just in IT – since Pakistan needs innovative startups in all sectors such as agri, textiles, logistics, and manufacturing, Pakistan’s Planning Commission Member Athar Osama had said in a blog post at the time. In June, Lakson Investment was granted Pakistan’s first venture capital licence in the South Asian nation. Its application for a private equity and venture capital fund had been approved by Securities and Exchange Commission of Pakistan last year. Lakson had set up Lakson Investment Private Equity (LI PE) in the end of 2014 and is still in its pre-launch phase. It had proposed to start making investments by late 2017.

Read more at: https://www.dealstreetasia.com/stories/1839-ventures-partners-with-ptib-to-launch-20m-fund-84321/
Riaz Haq said…
Why Pakistani Startups Are The Next Big Thing
Published on December 1, 2019
Aatif Awan
Aatif Awan
Founder & Managing Partner at Indus Valley Capital

https://www.linkedin.com/pulse/why-pakistani-startups-next-big-thing-aatif-awan/

Last 18 months saw more acquisition & fundraising activity for Pakistani startups than the previous 10 years combined. That's a clear sign of the Pakistani startup market having hit an inflection point.

Firstly, the acquisition of Daraz by Alibaba for somewhere between $150M-200M highlighted the potential of ecommerce in the country. Six months later, EasyPaisa getting valued at $410M+ in the 45% buyout by ANT Financial, showed how valuable the fintech sector was. Both Daraz and EasyPaisa had only captured a fraction of these markets at the time of these deals.

At the same time, three unicorns with Pakistani founders and a significant team presence in Pakistan, all hit massive new milestones. Afiniti, a startup developing artificial intelligence for use in customer call centers, was valued at $1.6B in its series D round late last year. KeepTruckin, building trucking fleet management solutions, raised $149M in its series D round, valuing at $1.25B in Apr 2019. And the most exciting development was Careem's $3.1 Billion acquisition by Uber in March 2019. Careem's early tech and product was developed in Pakistan, the CEO Mudassir Sheikha is a Pakistani and Pakistan is one of its largest markets. One of the largest tech acquisitions of all time, slightly ahead of Apple's acquisition of Beats, this was a seminal event that has galvanized the Pakistani startup ecosystem. Ex-Careem employees are already out there starting new companies and joining high-growth startups.

Zameen/EPMG, one of the earliest and largest Pakistani startup success stories, raised a massive $100M series D round in February 2019. They have now expand to 40 cities across the UAE, Pakistan, Bangladesh, Morocco, Spain and Romania, and have over 2,000 employees.

Finally, what's most exciting is that Pakistani startups have crossed the seed to series A chasm. Three of the largest series A rounds in Pakistan have all happened in the last 8 months: Bykea's $5.7M series A in April, Cheetay's $7.8M series A in September, and Airlift securing $12M in series A funding in November. Airlift's large series A is particularly amazing because the startup only launched 8 months ago. This would be remarkable even for a Silicon Valley startup and is illustrative of how quickly startups can capture share in the completely untapped Pakistani market.

Airlift series A round is led by First Round Capital, a leading Silicon Valley VC, known for early bets on Uber and Square. First Round has not invested in Asia in more than a decade, not in China nor in India nor in Indonesia. Yet they chose to invest in a Pakistani startup given the opportunity they saw. I believe this is not a one-off event and is reflective of how primed Pakistani startup ecosystem is to take off after a long time of slow build-up.

What's Ahead: Wapistanis and VC Dollars flowing to Pakistan
To sum it up, Pakistan is the largest market untapped by startups and venture capital today. Pakistanis form one of the biggest tech talent pools in the world and have done well across the globe, founding several unicorns (at least six by my count) and having played a leading role in many others. With this talent advantage, Pakistani startups are well positioned to dominate all major industries in Pakistan and also expand to MENA, a $3.6 trillion economy that's also relatively early in the startup cycle.

What took Indonesia a decade, Pakistan will do it faster because the broadband penetration is at a much higher baseline, because capital moves faster to global opportunities today than it did a decade ago and because Pakistan has a larger talent base both at home and among the diaspora.

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