Working from unpretentious offices in Lahore and home-based laptops in Peshawar, Pakistani tech entrepreneurs are quietly making a big lucrative mark in the technology sector.
From his farm outside Lahore Zafar Khan runs Sofizar, one of Pakistan’s most successful internet ventures. The company has annual revenues of twenty million dollars, mostly from Ticketnest, a Stubhub-type ticket aggregator with a global user base and a staff of ninety, split between Lahore and Silicon Valley. Khan is the face of a relatively new breed: the Pakistani tech entrepreneur.
These entrepreneurs are part of a quickly expanding technology industry that is increasingly organized. According to the Pakistan Software Houses Association, the size of the tech industry is estimated to be $3 billion and growing at twenty percent annually. Mostly self-funded, these companies range from financial services software and infrastructure to gaming, e-commerce and social networking.
The business environment these tech professionals operate in is not always easy, punctuated by what Khan refers to as ‘geopolitical constraints.’ But the allure of Silicon Valley and tech idols like Google’s Larry Page and Twitter’s Jack Dorsey is what keeps them motivated to deal with a very unique set of challenges.
Just as with their billionaire inspirations, young Pakistani entrepreneurs believe the next big technology moment could be at their fingertips. The local market is growing quickly – there are thirty million internet users in Pakistan, and internet penetration has increased by sixty-five percent since 2009. There is an abundance of talented professionals and no shortage of ideas.
Scaling Up
Big international players such as Google have begun to pay attention. Google’s Chairman Eric Schmidt paid a groundbreaking visit to Pakistan in June last year with company executives, meeting with developers and representatives of the tech industry. In a Google+ posting, he expressed optimism about Pakistan, particularly as the emerging middle class continues to leverage ‘connectivity, information and the Internet.’
As a precursor to this, a group of Googlers traveled to Lahore the year before to learn about the local tech scene and subsequently set up a fund to seed twenty-five of the top technology ideas. At $10K, the prize is small, but the prestige factor is high. It also reflects the moderate costs of setting up a scalable business.
There has also been some external acknowledgment of outstanding Pakistani techies. In 2011 MIT’s Technology Review included Umar Saif, creator of SMSall.pk and other successful startups, in its list of the top 35 Innovators Under 35 (an honour previously bestowed upon luminaries such as Facebook’s Mark Zuckerberg).
Lack of Funding
But for all but a select few players, both recognition and funding of local talent remains limited. Pakistan is starved of venture capital investment, especially as exit strategies remain difficult to quantify in a market with still questionable intellectual property laws. Funders such as Abraaj Capital have begun making inroads, and an MIT led consortium has established a Tech Angels Network, but deal flow remains limited. Most companies grow organically; e-commerce portals like Shophive.com and gaming outfit Mindstorm Studios have been able to afford this till now, but it seriously limits scaling.
And so companies raise capital in creative ways. Joint ventures with firms from Southeast Asia to the U.S. abound. Firms are often paid for services to Silicon Valley startups in equity, the value of which, for some of them, has grown considerably, adding significantly to their valuations.
The shine of startup conventions and the appeal of the technology sector is only likely to expand. A new sense of empowerment is emerging, and as Zafar Khan says, “we have smart, motivated engineers and the entire world as a potential market. We require an internet connection and enough money to keep a diesel generator going – that is all the infrastructure we need.”