Private Equity and Venture Capital in Pakistan
US is providing $80 million to create multiple VC and PE funds in Pakistan. These funds will be run by professional fund managers who will be required to manage and raise additional money from other sources to start multiple funds. US Embassy in Islamabad told Express Tribune that they expect that "there will be substantial interest from local, regional and international investors”.
Polish Model:
The initiative is based on the Polish American Enterprise Fund model which was started with $140 million from US government and has now grown to several billion dollars of investable funds, according to Express Tribune.
US AID's Theodore Heisler said that co-investment was essential in bringing the size of each fund to a level where it can cover operating expenses. The funds will focus on investing in small and medium entrepreneurial companies which, the US Silicon Valley experience has demonstrated, are major drivers of innovation, economic growth and job creation.
History of VC and PE Funds:
In 2010, the Overseas Private Investment Corporation (OPIC) provided JSPE Private Equity Fund II $50 million with a target capitalization of $150 million.
Venture capital investing is not entirely new in Pakistan, according to Venture Beat. Silicon Valley insiders like Reid Hoffman, Mark Pincus and Joe Kraus, along with Draper Fisher Jurvetson (DFJ) and EPlanet Ventures have already started. In 2003, Hoffman, Pincus and Kraus invested in Monis Rahman, a Pakistani-American who left Intel for entrepreneurship. Rahman had successfully launched and sold a start-up in the Bay Area, eDaycare.com.
There are several investment firms in Pakistan, such as BMA Capital, Indus Basin Holdings and JS Private Equity, that offer examples of professionally managed funds. In addition, there are Social Entrepreneurial Funds like Acumen Fund, Dawood Foundation and Kashf Foundation which are very active in the SME sector in Pakistan.
Opportunity in Pakistan:
Pakistan has the world’s sixth largest population, seventh largest diaspora and the ninth largest labor force. With rapidly declining fertility and aging populations in the industrialized world, Pakistan's growing talent pool is likely to play a much bigger role to satisfy global demand for workers in the 21st century and contribute to the well-being of Pakistan as well as other parts of the world.
With half the population below 20 years and 60 per cent below 30 years, Pakistan is well-positioned to reap what is often described as "demographic dividend", with its workforce growing at a faster rate than total population. This trend is estimated to accelerate over several decades. Contrary to the oft-repeated talk of doom and gloom, average Pakistanis are now taking education more seriously than ever. Youth literacy is about 70% and growing, and young people are spending more time in schools and colleges to graduate at higher rates than their Indian counterparts in 15+ age group, according to a report on educational achievement by Harvard University researchers Robert Barro and Jong-Wha Lee. Vocational training is also getting increased focus since 2006 under National Vocational Training Commission (NAVTEC) with help from Germany, Japan, South Korea and the Netherlands.
A 2012 World Bank report titled "More and Better Jobs in South Asia" shows that 63% of Pakistan's workforce is self-employed, including 13% high-end self-employed. Salaried and daily wage earners make up only 37% of the workforce. Even if one chooses to consider just the 13% who are high-end self-employed as entrepreneurs, it's still a significant population willing to take risks who can do better with greater availability of venture and private equity money.
A recent Pew Survey of 21 countries reported that 81% of Pakistanis believe in hard work to achieve material success. Americans are the second most optimistic with 77% sharing this belief followed by Tunisians (73%), Brazilians (69%), Indians (67%) and Mexicans (65%).
Conclusion:
Promoting venture capital and private equity investments in Pakistan is a welcome initiative. It has the potential to unleash funding of new profitable ideas in small and medium size entrepreneurial businesses for significant returns to investors while also helping Pakistan achieve much needed economic stimulus with new jobs to lift more people out of poverty.
Related Links:
Haq's Musings
Pakistanis Lead the World in Faith in Hard Work
Entrepreneurial Pakistanis
Financial Services Sector in Pakistan
Venture Capital Investing in Pakistan
Minorities are Majority in Silicon Valley
String Food and Beverage Demand Draws Investments to Pak Agribusiness
Strong Earnings Propel Pak Shares to New Highs
Pakistan's Underground Economy
Tax Evasion Fosters Aid Dependence
Poll Finds Pakistanis Happier Than Neighbors
Pakistan's Rural Economy Booming
Pakistan Car Sales Up 61%
Resilient Pakistan Defies Doomsayers
Polish Model:
US AID's Theodore Heisler said that co-investment was essential in bringing the size of each fund to a level where it can cover operating expenses. The funds will focus on investing in small and medium entrepreneurial companies which, the US Silicon Valley experience has demonstrated, are major drivers of innovation, economic growth and job creation.
History of VC and PE Funds:
In 2010, the Overseas Private Investment Corporation (OPIC) provided JSPE Private Equity Fund II $50 million with a target capitalization of $150 million.
Venture capital investing is not entirely new in Pakistan, according to Venture Beat. Silicon Valley insiders like Reid Hoffman, Mark Pincus and Joe Kraus, along with Draper Fisher Jurvetson (DFJ) and EPlanet Ventures have already started. In 2003, Hoffman, Pincus and Kraus invested in Monis Rahman, a Pakistani-American who left Intel for entrepreneurship. Rahman had successfully launched and sold a start-up in the Bay Area, eDaycare.com.
There are several investment firms in Pakistan, such as BMA Capital, Indus Basin Holdings and JS Private Equity, that offer examples of professionally managed funds. In addition, there are Social Entrepreneurial Funds like Acumen Fund, Dawood Foundation and Kashf Foundation which are very active in the SME sector in Pakistan.
Opportunity in Pakistan:
Pakistan has the world’s sixth largest population, seventh largest diaspora and the ninth largest labor force. With rapidly declining fertility and aging populations in the industrialized world, Pakistan's growing talent pool is likely to play a much bigger role to satisfy global demand for workers in the 21st century and contribute to the well-being of Pakistan as well as other parts of the world.
With half the population below 20 years and 60 per cent below 30 years, Pakistan is well-positioned to reap what is often described as "demographic dividend", with its workforce growing at a faster rate than total population. This trend is estimated to accelerate over several decades. Contrary to the oft-repeated talk of doom and gloom, average Pakistanis are now taking education more seriously than ever. Youth literacy is about 70% and growing, and young people are spending more time in schools and colleges to graduate at higher rates than their Indian counterparts in 15+ age group, according to a report on educational achievement by Harvard University researchers Robert Barro and Jong-Wha Lee. Vocational training is also getting increased focus since 2006 under National Vocational Training Commission (NAVTEC) with help from Germany, Japan, South Korea and the Netherlands.
A 2012 World Bank report titled "More and Better Jobs in South Asia" shows that 63% of Pakistan's workforce is self-employed, including 13% high-end self-employed. Salaried and daily wage earners make up only 37% of the workforce. Even if one chooses to consider just the 13% who are high-end self-employed as entrepreneurs, it's still a significant population willing to take risks who can do better with greater availability of venture and private equity money.
A recent Pew Survey of 21 countries reported that 81% of Pakistanis believe in hard work to achieve material success. Americans are the second most optimistic with 77% sharing this belief followed by Tunisians (73%), Brazilians (69%), Indians (67%) and Mexicans (65%).
Conclusion:
Promoting venture capital and private equity investments in Pakistan is a welcome initiative. It has the potential to unleash funding of new profitable ideas in small and medium size entrepreneurial businesses for significant returns to investors while also helping Pakistan achieve much needed economic stimulus with new jobs to lift more people out of poverty.
Related Links:
Haq's Musings
Pakistanis Lead the World in Faith in Hard Work
Entrepreneurial Pakistanis
Financial Services Sector in Pakistan
Venture Capital Investing in Pakistan
Minorities are Majority in Silicon Valley
String Food and Beverage Demand Draws Investments to Pak Agribusiness
Strong Earnings Propel Pak Shares to New Highs
Pakistan's Underground Economy
Tax Evasion Fosters Aid Dependence
Poll Finds Pakistanis Happier Than Neighbors
Pakistan's Rural Economy Booming
Pakistan Car Sales Up 61%
Resilient Pakistan Defies Doomsayers
Comments
There’s no shortage of bad news about Pakistan. Lots of trend lines are worrisome. That said, allow me to fuzz up your mental image of Pakistan with these thoughts, while they are still fresh from a trip in mid-September.
Pakistan has lots of bright, able, independent-minded, young talent.
Pakistan has a middle class. This cohort can grow and prosper if a nation of traders is free to trade freely and directly to the subcontinent, as well as to Central Asia.
Pakistan has vigorous political parties. It has an election coming up whose outcome cannot be confidently predicted. Religious parties are minority parties. How many Islamic states fit this description?
Pakistan’s armed forces are beset by many problems. These problems will only be compounded by seizing power. Pakistan’s politicians have running room to succeed – or to make the same old mistakes.
Everyone in the country understands that the economy has to improve. Without economic growth, national security is a mirage.
The Line of Control dividing Kashmir has been mostly quiet for almost a decade now.
On August 14th, Chief of Army Staff, Gen. Ashfaq Pervez Kayani, gave a speech at the Pakistan Military Academy on the occasion of Pakistan’s 65th Independence Day. What he said has gotten little play outside of Pakistan.
Here’s a sampler:
It becomes blatant extremism when one not only insists upon finality of personal opinion, but tries imposing it on others. More so, if one tries to enforce his opinion through use of gun, it becomes terrorism. That is why Islam does not allow anyone to claim to be a know all, and flirt with divinity.
If this is the correct definition of extremism and terrorism, then the war against it is our own war, and a just war, too. Any misgivings in this regards can divide us internally, leading to a civil war situation. It is therefore, vital that our minds must be clear of cobwebs on this crucial issue.
The war against extremism and terrorism is not only the Army’s war, but that of the whole nation. We as a nation must stand united against this threat. Army’s success is dependent on the will and support of the people… It is also crucial that appropriate laws are passed to deal with terrorism. Since 2001, many countries in the world have formulated special anti-terrorism laws. Unfortunately, our progress towards such legislation remained very slow…
We are fully aware that it is the most difficult task for any Army to fight its own people. This is always done as a last resort. Our ultimate aim is to bring peace to these areas so that the people can live a normal life. But for that to happen, it is critical that people abide by the constitution and law of the land. No state can afford a parallel system of governance and militias.
Please compare these remarks with those Gen. Kayani gave at the same venue shortly before the Osama bin Laden raid. It is standard practice to blame Pakistan’s ills on unwise choices by its military leaders. I’ve been there and done that, and will probably do so again. And yet, no other Pakistani politician has come close to framing the issues that Pakistan faces in this way.
Is this hokum, or is there a shift underway? Is the trade initiative a tactical maneuver or a possible strategic opening? We’ll see. There are too many complicating factors to enumerate, but here’s one: India, like Pakistan, has a national election coming up.
http://krepon.armscontrolwonk.com/archive/3558/visiting-pakistan
US assures Pak of early release of $600 million CSF arrears
* US officials call on Finance Minister Hafeez Shaikh * Reaffirm US commitment for provision of $200 million for Diamer-Basha Dam
Staff Report
ISLAMABAD: The United States on Thursday assured Pakistan of an early release of $600 million Coalition Support Fund (CSF) arrears, increasing OPIC support for projects in Pakistan from $100 million to $1 billion, launch $80 million Pakistan Investment Fund for SMEs in January 2013 and also reaffirmed US commitment for provision of $ 200 million for Diamer-Basha dam.
US Ambassador to Pakistan Richard G Olson and Robin Raphel, senior adviser to special representative for Afghanistan and Pakistan, called on Finance Minister Hafeez Shaikh in his office. Issues of mutual interest, particularly economic ties between the two countries, were discussed in the meeting. Both the sides expressed their satisfaction over the pace of development in Pak-US economic ties.
Olson and Raphel congratulated the finance minister over his recent successful visit to United States of America and declared that the visit would prove a milestone in strengthening economic bonds between the two countries.
Shaikh informed the US delegation that the overall economic conditions in the country are moving in the right direction. The visiting delegation was informed by the finance minister that despite energy scarcity and security situation, Pakistan’s economy has started showing positive trends. The minister informed the US side that due to the policies of the government, Pakistan is witnessing lowest inflation rate in the region and trade balance deficit is on declining trend. The US delegation was informed that Karachi Stock Exchange is the best performing stock exchange in the world during the last one year.
The US officials assured the finance minister that the Coalition Support Fund (CSF) amounting to $600 million would be released without any delay. The visiting delegation also informed the Finance Minister that the United States is going to launch 80 million dollar Pakistan Investment Fund for SMEs in January 2013.
During the meeting the US delegation informed the Finance Minister that active participation of Overseas Private Investment Corporation (OPIC) in development of Pakistan would be ensured. The active participation of OPIC will increase the support for projects in Pakistan from $ 100 million to $1 billion.
The visiting US delegation also reaffirmed US commitment for provision of $200 million for Diamer-Basha Dam.
Both the sides discussed Pak-US bilateral trade also. The US delegation said that USA is trying to facilitate Pakistan’s exports to the United States to a maximum degree. It was further informed by the visiting delegation that US investment in Pakistan is witnessing ever increasing trend.
Olson and Raphel committed that the US would extend its cooperation to optimum level for timely completion of development projects in Pakistan.
The visiting delegation informed that the US would assist Pakistan in every possible way to overcome energy crisis. The delegation further told that assistance to Pakistan for development of social sector and infrastructure will also be accelerated.
http://www.dailytimes.com.pk/default.asp?page=2012\12\14\story_14-12-2012_pg7_13
The Pentagon quietly notified Congress this month that it would reimburse Pakistan nearly $700 million for the cost of stationing 140,000 troops on the border with Afghanistan, an effort to normalize support for the Pakistani military after nearly two years of crises and mutual retaliation.
The biggest proponent of putting foreign aid and military reimbursements to Pakistan on a steady footing is the man President Barack Obama is leaning toward naming as secretary of state: Senator John Kerry, Democrat of Massachusetts. Mr. Kerry, the chairman of the Senate Foreign Relations Committee, has frequently served as an envoy to Pakistan, including after the killing of Osama bin Laden, and was a co-author of a law that authorized five years and about $7.5 billion of nonmilitary assistance to Pakistan.
The United States also provides about $2 billion in annual security assistance, roughly half of which goes to reimburse Pakistan for conducting military operations to fight terrorism.
Until now, many of these reimbursements, called coalition support funds, have been held up, in part because of disputes with Pakistan over the Bin Laden raid, the operations of the C.I.A., and its decision to block supply lines into Afghanistan last year.
The $688 million payment — the first since this summer, covering food, ammunition and other expenses from June through November 2011 — has caused barely a ripple of protest since it was sent to Capitol Hill on Dec. 7.
The absence of a reaction, American and Pakistani officials say, underscores how relations between the two countries have been gradually thawing since Pakistan reopened the NATO supply routes in July after an apology from the Obama administration for an errant American airstrike that killed 24 Pakistani soldiers in November 2011.
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Despite the easing of tensions in recent months, there are still plenty of sore spots in the relationship.
Lt. Gen. Michael D. Barbero, who heads the Pentagon agency responsible for combating roadside bombs, known as improvised explosive devices, or I.E.D.’s, told a Senate hearing last week that Pakistan’s efforts to stem the flow of a common agricultural fertilizer, calcium ammonium nitrate, that Taliban insurgents use to make roadside bombs had fallen woefully short.
“Our Pakistani partners can and must do more,” General Barbero told a Senate Foreign Relations subcommittee hearing.
American officials have also all but given up on Pakistan’s carrying out a clearing operation in North Waziristan, a major militant safe haven.
“Pakistan’s continued acceptance of sanctuaries for Afghan-focused insurgents and failure to interdict I.E.D. materials and components continue to undermine the security of Afghanistan and pose an enduring threat to U.S., coalition and Afghan forces,” a Pentagon report, mandated by Congress, concluded last week.
http://www.nytimes.com/2012/12/18/world/asia/pentagon-to-reimburse-pakistan-688-million.html?pagewanted=2&_r=0
Pakistan received the second tranche of $688 million Coalition Support Fund (CSF) from the US on Friday. This second CSF tranche is expected to provide relief to the ailing economy, supporting the country’s macroeconomic indicators positively in short-term.
Analysts said that Pakistan’ depleting foreign exchange reserves have been enhanced with inflows of much-awaited funds dedicated mainly for the expense of military operations in the war against terrorism. This was the second instalment received by the country after it got $1.12 billion in July.
The foreign reserves will be improved along with balance of payment and rupee position against dollar on temporary basis.
The current account balance failed to sustain its surplus position as it turned into a deficit of $365 million in November due to trade imbalance of trade and services that stood at $6.3 billion and $8.2 billion, respectively in the first five months of the current financial year. The rupee, which neared the Rs 100 mark against the dollar, will likely get some respite. The macroeconomic situation will be improved for a quarter with inflows of millions of dollars into the country’s reserves, analysts said.
In the short-term, the country will benefit from the millions of dollars inflows but its impact will not be sustainable for the long-term, they added.
The overall CSF pledged by US government is $2.5 billion in which remaining amount will be expected in future to be received by the country depending on diplomatic relationship with the US government. The persistent inflows are important for the country mainly for the payment of $7.9 billion it borrowed from the International Monetary Fund (IMF), otherwise, the economic situation will get severe and the country will again go to the IMF.
http://www.dailytimes.com.pk/default.asp?page=2012\12\29\story_29-12-2012_pg5_13
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
KARACHI: Pakistan’s economy has the ability to navigate through choppy waters and the economic potential this country holds encourage all to become a part of the country’s future.
The Governor State Bank of Pakistan (SBP) Yaseen Anwar at Pakistan Navy War College Lahore said while our current economic situation was less than optimal and it was also very far from what might be described as an economic calamity.
Anwar said in 65 years, Pakistan has never gone through an episode of hyperinflation, Pakistan has never defaulted on its international and domestic debts, in fact our economy has grown consistently, but not spectacularly, over the past six decades.
This has been despite periods of international alienation and sanctions, three expensive wars, two hostile fronts, regular political upheaval, social unrest, sharp increases in the price of oil, and much, much more, he added.
State Bank has always ensured that the financial system of the country remains safe and stable. The robustness of our financial system is a direct consequence of the reforms process and the State Bank’s constant vigilance, he said.
There is a lot that can be improved in our financial system. He called for the development of efficient debt markets, even better regulatory and reporting practices and the broadening of the financial sector’s scope to include largely unbanked sectors of the economy, such as agriculture, small and medium enterprises and housing.
‘Despite this wish-list, the fact remains that our financial system is, by design, secure and does not pose any threat to the economy as a whole,’ he added.
The size of Pakistan’s undocumented economy is by some estimates, as large as the formal economy. The informal economy does not file taxes and while it does absorb a significant chunk of the labour force, it also evades corporate and labour laws, he said.
Although close informal relationships do make the economy more resilient, they do so at a cost to the overall economy, by eroding the ambit of the regulators.
He stressed the need for the greater integration of country’s domestic market with global markets but observed it does not mean that we should not have proper controls and mechanisms in place to safeguard our own interests. ‘Greater integration with financial markets will mean that capital will flow more quickly through our borders. It’s definitely something that will boost the national economy, but, as most East Asian countries learned in the 90s, it can be a double-edged sword.
Therefore having some capital controls in place, which reduce the volatility of capital flows, is a necessary regulation in this day and age, Anwar added.
More effective regulation is the need of the hour for our own economy, he said, adding it is an essential part of what is needed today to get the economy on a track for steady and sustainable growth.
He said the government’s footprint in some sectors of the economy was very large and quite negligible in other sectors.
Such divergence is unhealthy. Effective regulation is sorely lacking in other sectors. The tax machinery can be tightened considerably. One of the country’s most challenging problems today is the size of the fiscal deficit-and a large part of the solution lies in increasing our tax base by enacting regulation that encourages tax compliance, and punishes tax evasion, he added.
The government will need to borrow less money from the central bank. Borrowing from the central bank is popularly known as printing money, he said, adding if government borrowing from the central bank falls, inflation will follow suit.
Therefore, better tax collection is a necessary condition for faster economic growth. And for that we need to have more effective tax regulation, he added.
....
http://www.dailytimes.com.pk/default.asp?page=2013\03\06\story_6-3-2013_pg5_1
Originally founded in California, Startup Grind is an international community with a global presence in more than 40 cities and 20 countries.
Its mission is dedicated to celebrate the success stories of founders and innovators of business startups and encourage entrepreneurship.
The monthly interviews and startup mixers provide a great opportunity to entrepreneurs-in-making to network with ambitious people and benefit from the ‘pearls of wisdom’.
The official launch in Pakistan took place on Friday, the 3rd of May at T2F (The Second Floor).
It was hosted by Mr. Fawaad Saleem, the Chapter Director for Startup Grind and chaired Mr. Farzal Ali Dojki as the guest of honour. Mr. Farzal is the CEO of Next Generation Innovations, a consulting company that specializes in customized IT solutions and often partners with startup businesses to support their launch and operations.
The event started off with tea and networking as professionals across different spectrums of the industry engaged in meaningful networking. Before the interview began, Mr. Farzal gathered the prime issues that plagued the audience’s minds regarding startups.
The concerns focused on lack of funding opportunities, successful team-building, and making the choice between entrepreneurship and employment in the early stages of one’s career.
He concluded his talk with three lessons.
Firstly, as a startup you need to work hard and with dedication.
Secondly, it is important to hire carefully and ‘fall in love’ with the people you are hiring.
Thirdly, in order to launch a startup, it is important to work in a startup first. The learning curve of working in a successful small team is extremely high. One gets the opportunity to engage directly with the customers, take decisions, and explore areas of growth.
http://dawn.com/2013/05/06/startup-grind-launches-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/
Private equity is poised to take off in Pakistan, with contrarian investors betting that the country is endowed with far greater potential than news reports chronicling Taliban bombings, the war in neighbouring Afghanistan or an evolving democracy’s frequent bouts of political drama might imply.
While Pakistan is undoubtedly a high risk play, investor sentiment has improved following a smooth transition at general elections in May and pledges by the new government of Prime Minister Nawaz Sharif to tackle a stubborn power crisis that has stifled manufacturing.
“I feel like being a kid in a candy store,” said Shaharyar Ahmed, 32, who started his career as an equity researcher at Goldman Sachs in New York, but who returned to his native Pakistan last year. “So many companies, amazing returns, growing in leaps and bounds – it’s a buyers’ market.”
Ahmed and his collaborator Isfandiyar Shaheen, 30, are at the vanguard. As co-managers of Cyan Capital, a $50 million private equity fund set up by the Dawood Hercules Group, one of Pakistan’s biggest conglomerates, they must prove that they can find finance-starved companies ready for rapid expansion.
But the risk-hungry duo have now forsaken budding careers in the United States financial industry in the belief that somewhere in Pakistan’s ranks of unglamorous, overlooked family businesses lie hidden the seeds of future corporate giants.
“There’s a new wave of interest in private equity,” said Chairman of JS Private Equity Ali Jehangir Siddiqui while talking to Reuters. “There are certainly some funds that are stepping up to the plate, we hope that there will be more.”
Wild west
The new funds all aim to introduce the private equity model that is now familiar in rich and poor countries alike: groups of investors buy stakes in privately owned companies in return for a say in how they are run.
The theory is that an injection of capital and management savvy will turbo-charge the best of Pakistan’s family-run enterprises, creating jobs for a restive, youthful population and lucrative returns for the funds when they sell their stakes.
“It doesn’t take a rocket scientist to figure out how much you can do in this country, it’s absolutely green,” said Cyan’s Shaheen, a Pakistani who began his career in US investment banking but now lives in Karachi. “It’s like the Wild West.”
Cyan’s confidence in Pakistan’s prospects stems in part from the sheer size of the market in a country of 180 million people, where many conservatively run companies have shied away from scaling up their businesses into nationwide operations.
Companies listed on the Karachi Stock Exchange have grown their profits by at least 13-15% annually since 2009, according to one market analyst. With 49% returns in 2012, the market was among the world’s top performers....
http://tribune.com.pk/story/585766/new-private-equity-fund-exposes-lucrative-prospects-in-pakistan/
With his new financing scheme for the youth, Prime Minister Nawaz Sharif on Saturday unveiled a plan to enable budding entrepreneurs to run their business ventures.
The Youth Business Loans initiative is the government’s delivery of a promise made during the election campaign. “During the election campaign, I witnessed the vigour and enthusiasm that the youth showed, and promised that if voted to power, the PML-N would empower the youth of Pakistan so they can contribute effectively towards the development of the country,” he said at the launch of the scheme.
The chairperson of the prime minister’s Youth Business Loans scheme, Maryam Nawaz, said the aim was to convert young ‘dependents’ into ‘providers’.
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The scheme is designed to provide subsidised financing at eight percent mark-up per annum for 100,000 beneficiaries through National Bank of Pakistan and First Women Bank.
The total mark up rate would be 15 per cent but the government would pay the remaining seven percent on behalf of the applicants.
Those falling in the age group of 21 and 45 years are eligible to apply for loans from Rs100,000 to Rs2,000,000.
Small business loans with a tenure of up to seven years plus one-year grace period and a debt-equity ratio of 90:10 will be disbursed across the country including Gilgit-Baltistan‚ Azad Jammu and Kashmir and the Federally Administered Tribal Areas.
Youth will have an eight-year payback period with the first year as a grace period for repayment.
http://tribune.com.pk/story/642764/pm-business-loans-scheme-govt-launches-initiative-to-empower-youth/
To promote and assist the local entrepreneurships across the country, the 2015 Pakistan Start-Up Cup, an intensive, nationwide business competition launched here on Saturday.
The Start-Up Cup is locally driven business model competition open to any idea. This innovative community-based approach is designed to increase the quality and quality of entrepreneurs in the community.
The US Embassy in Islamabad and the Islamabad Indus Entrepreneurs (TiE) Chapter, in collaboration with the US Pakistan Women’s Council, launched the 2015 Pakistan Start-Up Cup, an intensive, nationwide business competition. Entrepreneurs selected to participate in Start-Up Cup will receive coaching through multi-day “Build-a-Business” workshops and regular mentoring to help turn their ideas into a commercial reality. Prize money of $10,000, $7,500, and $5,000 will be awarded to the winner and two runners-ups with the best Start Up concept.
At the opening ceremony, Deputy Chief of Mission of the US Embassy in Islamabad Thomas E Williams, said, “Programs like Start Up Cup foster greater inclusiveness in Pakistan’s economy, particularly for women. The entrepreneurial solutions that arise from competitions such as Start-Up Cup foster inclusiveness, grow economies, promote stability, expand the international supply chain, and spread the exchange of ideas.”
Over the course of the seven-month programe, aspiring Pakistani entrepreneurs will learn to design viable business models, develop customers, and launch their start-up business concepts in the marketplace.
This year’s programme will build on the success of last year’s Start-Up Cup, which saw over 400 entrepreneurs compete for one of the top three prizes. Last year’s winning team went on to defeat 170 other entrepreneurs to win the first-ever World Start-Up Cup competition in Yerevan, Armenia.
The 2015 Start-Up Cup in Pakistan will introduce new partnerships with entrepreneurship centres across Pakistan, including the world’s first Women’s Entrepreneurial Centre of resources, education, access, and training for Economic Empowerment (WECREATE) in Islamabad sponsored by the US Department of State in collaboration with the US Pakistan Women’s Council; the Lahore University for Management Science (LUMS) Centre for Entrepreneurship; and Karachi-based technology incubator “The Nest I/O.”
The partnerships between Start-Up Cup and these centres will ensure that newly established businesses receive sustained support and mentoring, essential tools for long-term success. Numerous US Embassy programmes assist Pakistan’s entrepreneurs by increasing their access to financial resources, supporting opportunities for entrepreneurship education, and nurturing an entrepreneurial culture.
There are four base stations for this program, Islamabad, Lahore, Peshawar and Karachi with overall prize money of Rs22.5 million.
During the opening ceremony esteemed businessman and Islamabad TiE Board member Imtiaz Rastgar said, “StartUp Cup has only came to Pakistan two years ago and already tremendous feats have been achieved as new voices and ingenious minds have been brought to the fore. One can only imagine how much advantage this competition will bring as the years progress”.
http://www.dailytimes.com.pk/islamabad/22-Feb-2015/pakistan-s-2nd-annual-start-up-cup-competition-launched
Finance is an important enabler of economic growth anywhere in the world. For Pakistan, which needs annual economic growth of at least 7 percent just to keep up with the number of youth expected to enter the labor market each year, this financing is important not only for the economy but for stability. Yet the private sector credit to gross domestic product (GDP) and financial depth ratios in Pakistan trail behind leading emerging economies.
In the SME segment, the volume of lending and types of financing tailored to SME needs have been very limited. A World Bank study found that only 16 percent of total credit in Pakistan went to SMEs. Moreover, about 70 percent of SME borrowing was used for working capital while only about 12 percent went toward long-term investment. Another survey shows only 11 percent of micro, small, and medium enterprises (MSMEs) in Pakistan report having access to finance, below the 15 percent international average and well below percentages reported in higher performing middle-income countries like Brazil and Turkey (30 and 48 percent respectively).
Despite these limitations, SMEs make an out-sized contribution to Pakistan's economy. The same World Bank study found that SMEs in Pakistan employ nearly 70 percent of workers in the manufacturing, services, and trade sectors and generate an estimated 35 percent of manufacturing's value addition. They also contribute over 30 percent of GDP and more than 25 percent of export earnings. Thus, alleviating a key constraint to their growth could lead to substantial increases in the number of jobs for Pakistan's large number of youth and greater income generation.
The new Partnership reflects a shared commitment to promote broad-based economic growth in Pakistan. Private sector investment was identified as an essential ingredient for growth in the Government of Pakistan's Vision 2025 strategy. The Partnership is part of a larger umbrella of U.S. support to SMEs in Pakistan to help them grow and expand into new markets. It will provide partner banks- Bank Alfalah, JS Bank, Khushhali Bank and First Microfinance Bank- with a loan portfolio guarantee through USAID's Development Credit Authority (DCA). The guarantee will lower the risk to the banks for lending in sectors they would otherwise perceive as being too risky. It will also encourage partner banks to extend longer-term loans and introduce credit products that address the needs of SMEs.
With more access to finance, small and medium businesses are poised to make even larger contributions to the Pakistan economy than they do now. The new U.S.-Pakistan Partnership for Access to Credit will make it possible for dynamic SMEs to be more than small and beautiful. After all, beauty is in the eye of the beholder and for businesses eyeing scale-up, there are few things more attractive than being able to grow.
http://www.huffingtonpost.com/borany-penh/eyeing-business-growth-in_b_6865186.html
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In summer 2012 Abraaj acquired London-based Aureos Capital, which gave it a global network of offices. Now the combined company does deals in the range of $20 million to $100 million. It has majority stakes in nearly half its portfolio companies, such as the Colombia-based D1 supermarket chain, which grew from 18 stores in 2010 to more than 280 today; Ghana-based ice cream maker Fan Milk International, a coinvestment with Paris’ Danone; and Pakistan’s Karachi Electric Supply, into which Abraaj invested $360 million in 2008.
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Arif Naqvi, chief executive of Dubai’s Abraaj Group, hates the way Westerners speak about his part of the world. His private equity firm, he says, does not operate in emerging markets or, worse, frontier markets.
“We have taken the risk out of investing in what the West mistakenly calls ‘emerging markets,’ ” he says in elegant, Pakistani-accented English from a Madison Avenue outpost. “ They’re growth markets,” he insists.
While his remarks contain a healthy dose of marketing, Naqvi has a point. His $9 billion private equity firm–currently the largest investor in emerging markets outside of Brazil, Russia, India and China–has a track record many developed-world money managers would kill for. Despite operating in places where the rule of law often comes into question, limited partners report an impressive 17% annual return since inception in 2002.
Naqvi, 55, considers the notion of risky emerging markets a myth–part of what he calls “universally practiced hypocrisies.” He reminds a visitor that in 2008 the biggest risk on the planet came not from the developing world but from the financial capital of the modern era, New York City. Why, he asks pointedly, “have you not attached a risk premium to doing business with Wall Street banks?”
In a clubby world of global dealmakers, Blackstone, KKR and Carlyle get most of the headlines, but Abraaj is the undisputed private equity king of investing in the seemingly dangerous markets of Asia, Africa and Latin America. There is no shortage of big investors wanting to get into its newest funds. So far in 2015 the firm has sucked in $1.4 billion in fresh capital, giving Abraaj the largest pool of institutional money now pointed at sub-Saharan Africa in the world.
The firm currently has 300 limited partners, including the Gates and Skoll foundations, the World Bank’s International Finance Corporation (IFC) and the European Investment Bank.
“I view them as having more depth and breadth [in emerging markets] than the bigger players,” says Jin-Yong Cai, CEO of the IFC, which has invested $200 million in Abraaj funds and $70 million directly with Abraaj in deals, including an electric company in Karachi and a home loans company in Ghana.
http://www.forbes.com/sites/elizabethmacbride/2015/11/04/the-story-behind-abraajs-stunning-rise/#69bcdb005be3
http://www.dawn.com/news/1289957/saudi-arabia-softbank-plan-100-billion-tech-fund-one-of-the-worlds-biggest
Saudi Arabia and Japan's SoftBank Group (9984.T) said they will create a technology investment fund that could grow as large as $100 billion, aiming to create one of the world's largest private equity funds.
The plan is part of a series of dramatic business initiatives launched by Riyadh this year as Saudi Arabia, its economy hurt by low oil prices, deploys huge financial reserves in an effort to move into non-oil industries.
SoftBank's founder and chairman Masayoshi Son, who has built his company into a $68bn telecommunications and tech investment behemoth from a $50,000 start-up, has been seeking to expand in new areas.
The Public Investment Fund (PIF), Saudi Arabia's top sovereign wealth fund, is set to be the lead investment partner and may invest up to $45bn over the next five years while SoftBank expects to invest at least $25bn, the Japanese company said in a statement.
Several other large investors are in talks on their possible participation and could bring the total size of the new fund up to $100bn. The investors were not identified.
"With the establishment of the SoftBank Vision Fund, we will be able to step up investments in technology companies globally. Over the next decade, the SoftBank Vision Fund will be the biggest investor in the technology sector," SoftBank Chairman Masayoshi Son said.
The fund would be managed in Britain by a subsidiary of SoftBank.
Investment power
Saudi Arabia's Deputy Crown Prince Mohammed bin Salman, leading an economic reform drive in the kingdom, has revealed a string of high-profile investment plans this year.
He has said he aims to expand the PIF, founded in 1971 to finance development projects in the kingdom and until this year little known abroad, from $160bn to about $2 trillion, making it the world's largest sovereign fund.
In June, the PIF departed from Saudi Arabia's traditional strategy of low-risk investments and took a step into the tech world by announcing the $3.5bn purchase of a stake in United States ride-hailing firm Uber.
The deal illustrated how Riyadh now hopes to use its investments to develop the economy: Uber is a popular form of transport for Saudi women, who are banned from driving, and is creating badly needed non-oil jobs for Saudi citizens.
SoftBank's tech and telecommunications portfolio ranges from U.S. carrier Sprint (S.N) to a stake in Chinese e-commerce giant Alibaba (BABA.N).
Its $32bn purchase of British company ARM in July established its first major presence in chip making, driven by expectations for a shift to the so-called "internet of things" – networks of connected devices, vehicles and sensors.
Son said earlier this year that he wanted to "cement SoftBank 2.0" by working on unconventional ideas.
Ijara Capital Partners Limited has been granted a license to a private venture capital fund and equity under the newly promoted Private Funds Regulations 2015 by the Securities and Exchange Commission of Pakistan (SECP), reports Dawn Media.
Ijara Capital Partners Limited is the second firm to receive this license. Lakson Investments Ltd. was also granted a similar license a few days ago. The license issued will be valid for a period of three years and the firm will be required to launch the fund within six months of license approval.
CEO of Ijara group Farurukh Ansari told Dawn that the fund will be worth $100 million dollars and is expected to launch in December. The fund will focus on verticals including energy, healthcare, education, infrastructure, fashion and lifestyle.
The fund will be raised by encouraging local and international VCs to invest by sharing insights and information about the business industry and opportunities in Pakistan.
Venture Capital fund shops have started to crop up in the country and deal flow has started too. Just yesterday, while presiding a meeting of information technology leaders in Lahore, Chairman PITB Dr. Umar Saif mentioned that the government is inching close to launching a government-backed venture capital fund in the country. The fund is also expected to be north of $3 million dollars and will be dubbed as ‘Innovation Fund’ because government doesn’t want equity in startups but it wants to accelerate entrepreneurship and encourage local and international investors to put their money in the business industry of Pakistan.
https://www.techinasia.com/slide-series-a-funding
Pakistan-based Slide, an Android lockscreen app that rewards users for clicking on ads or reading content, today announced that it’s closed a series A funding round worth US$3.6 million. Terms of the deal were not disclosed.
The round was led by Songhyun Investment, a South Korean VC firm. Slide has raised a total of US$4.6 million to date.
Slide launched roughly a year ago and claims to have 5 million downloads already. CEO Junaid Malik says the funds will be used to further strengthen the company’s presence in Pakistan and develop more products.
He adds that they’re now live in India and in the midst of closing deals to expand to the Middle Eastern market.
Slide is similar to apps like Candy and Popslide. It incentivizes users to read content that pops up every time they unlock their phones. Readers accumulate points for each click which they can then exchange for mobile phone top-ups.
The team’s blown past an internal target of 1 million downloads in the first year, so it’s clear that the concept is catching on.
“A year ago when I was quitting my job, most people said I shouldn’t do it and even today, I’m not sure where this journey will end but to me what matters the most is that I started from scratch,” beams Junaid.
Published on June 6, 2017
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Babar Lakhani
Babar Lakhani
FollowBabar Lakhani
CEO @ Lakson Investments
I am excited to announce that Lakson Investments (“LI”) has been awarded the first VC license in Pakistan.
LI is one of the largest private sector asset managers in Pakistan with over US$300mn under management with a rating of AM2+.
In Q4 2016, LI launched Lakson Investment Private Equity (“LI PE”) , which is led by a senior team of partners who were previously Directors at Goldman Sachs and Abraaj. This PE Fund is currently in pre-launch and expects to be investing by the fall of 2017.
LI is actively seeking to build another high-calibre investment team for Lakson Investments VC (”LI VC”) combining local knowledge with international experience. The Fund will invest alongside entrepreneurs and local businesses to build new enterprises and through investing seed capital, take ideas to the next stage. LI VC will work with LI’s team of over 50 experienced professionals while at the same time, leverage the operational experience of the Lakson Group. Over 14,000 people are employed by Lakson in Pakistan in businesses across sectors such as: Technology (CyberNet & Sybrid), Broadcast and Print Media (Express Media Group), FMCG (Colgate-Palmolive Pakistan), Insurance, and QSR (McDonald’s Pakistan).
Pakistan today has incredible opportunities in the IT space and LI VC is excited to announce that Sybrid will be their key technology partner to review both the IT capabilities of the firms that the Funds invest in and as well, evaluate how IT will create scalable opportunities. Teams and offices will be based around Pakistan in Karachi, Lahore and Islamabad.
https://www.linkedin.com/pulse/pakistans-first-vc-firm-babar-lakhani
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/
business incubators and accelerators – it has quickly evolved
since then.
By 2019, the country had 24 incubators and
accelerators and around 20 key investors
with many funds
catering to early stage start-ups.
https://twitter.com/bilalgilani/status/1385738041575227396?s=20