Why Startups cannot succeed in Pakistan, yet.

Published July 8, 2014
An employee works on his computer at the office. — Reuters Photo
An employee works on his computer at the office. — Reuters Photo

First things first; every new business is not a ‘startup’, it is just a small business.

For a business to be qualified as a startup, it has to be in the process of finding an enduring and scalable business model. For it to be categorized as a lean startup, in addition to the aforementioned, it also has to be hypothesis-driven, focus on customer-centric, iterative, agile product development and expect failure with a predisposition to fail and tweak, or pivot.

It’s become fashionable everywhere to publicly say you have a startup. The problem arises when the ramifications of that snowball into an undesirable precedent or a negative connotation. For a startup environment to thrive, it’s host (city) needs to have, or develop, a couple of key characteristics:

  • For starters, it needs to have an urban culture designed to enhance collisions between disparate groups of people. It’s all the rage to have a ‘co-working’ space and attend ‘meetups’, but unless teams can consistently collide, and the environment and interpersonal culture for people to gravitate and collaborate exists, those contrived meet-ups aren’t going to result in enduring partnerships. The cities need a city-within-a-city to act as an agglomeration of startups, educational institutions and corporate entities of every order.

  • Secondly, startups are high-risk, high-reward organisms. Entrepreneurs are hard-wired to take unreasonable risks, but you’re unlikely to find an entrepreneur who wants to continue living as a pauper, albeit a successful one. Startups thrive where ‘exit markets’ exist, or can be grown / attracted easily. In Pakistan, there are seldom any large corporate acquisitions, hardly any large scale venture capital firms operating, and the chances of many Pakistani startups filing for an Initial Public Offering (IPO) on the Nasdaq (or other exchanges) are slim, at least in the near future.

  • Thirdly, standards. While people expect a startup to take a while to find its footing, they expect it to be a superlative product or service. This is why most of them are disruptive to their respective industries. A radical idea still has to be well executed, consistently. Our culture penalizes the pursuit of excellence. Why, should there be standards to exceed, when mediocrity is more than enough to be profitable? This triune, a combination of lacking government regulation, competent competition and adequate customer backlash, has allowed this situation to persist for decades. When was the last time any business or institution absolutely blew past your expectations? How often has it happened?

  • Fourthly, the populace needs to get past the ‘import everything’ culture. The government needs to impose higher taxes on imports to bolster, rather kickstart, the local manufacturing industry. You cannot expect employment to increase, and for urban population to experience class and income mobility, if the demand for imported commodities and brands stays at a high level or continues to grow. The class with the highest disposable income should spearhead the shift by voting with their wallets and demanding higher standards from local manufacturers, instead of lining the pockets of franchise holders and the masters they are beholden to. This is spurious progress.

Ayn Rand stated that the upper class of a society is its past, the middle class it’s future; an aphorism which is equally applicable today globally, just as it was a hundred years ago. The Pakistani middle class, from a distance, appears to be torn between yearning for it’s dismembered Indian identity and its conscripted religious one. Momentum is hard to gain and the need for economic momentum with velocity - having speed and direction - is undeniable. Startups can be a catalyst only if allowed to, but for anything to be unreasonably successful, it has to be dominant, and in order to be dominant, it must be pervasive, which it can only be if it’s host is receptive; something which regrettably, Pakistani’s are not.

The writer is a technology advisor and strategist.
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