Information Technology industry is one of the tools which is developed by entrepreneurs with a vision of the latest market trends and knowledge of upcoming technologies. In recent years, hi-tech entrepreneurship has become primary a major concern for developed countries. The main factors behind the success are the hi-tech talent combined with hi-risk investors.
Established conventional industries lose competitive advantage with time, and soon get to maturity stage where profits shrink day-by-day and enormous capital is required to run the business with less return. In case of hi-tech start-ups, in short span of time, the company will be giving high returns. Such high return rates could never be imagined even in big well-established multinationals.
In developed countries, governmental policies in the shape of financing, subsidies, etc., support these hi-tech companies. Governments consider these firms as the revenue rewarding. .
Assuming that there is hi-tech talent in Pakistan, then following will be the main issues related to hi-tech entrepreneurship:
The policies of trade and industry are not favourable to start-ups. From registering a hi-tech company, to running its day-to-day business, coping with tax regulations and dealing with different governmental agencies is extremely difficult and complex. From government side, there are lot of formalities, unnecessary delays in procedures, regulatory confusions, lack of institutional operational policies and corruption.
The unavoidable hurdles in the business timeline eat up resources — time and money. Hi-tech start-up usually comprises highly time sensitive scenarios.
For a hi-tech start-up, there should a market which is ready to pay the price of the hi-tech product. Usually, such market exists in western countries. Access to those markets for companies is difficult due to the lack of governmental agreements and preferences. With government busy in signing trade agreements with under-developed countries for basic raw commodities, the availability of markets for Pakistani hi-tech entrepreneurial companies remains a dream.
Following could be an unusual comparison of traditional trade versus hi-tech entrepreneurial trade with developed countries: Selling mangoes to Tajikistan versus selling branded canned fruits to Scandinavia; selling rice to Zimbabwe versus selling automotive software to France; selling kinnos to Bangladesh versus selling BPO services to telecom firms in Germany.
Innovation and technology protection is also one of the issues being faced by hi-tech entrepreneurs. They have two options to protect their complimentary assets. Either they could opt to disclose publicly their technology or innovation and protect through trademarks, copyright or patents; or they could protect their technology by secrecy. In both cases it is difficult in Pakistan.
There are no proper IPR laws for Pakistani entrepreneurs. The established IPO body by the government will initially be offering services to foreign companies and multinationals. It will take decades for IPO to protect local intellectual rights. They would have huge operational constrains in this matter.
Startups require capital. For money, usually a high-tech entrepreneur turns to several options for money. Among them are venture capitalists, investment funds and banks. These entities invest money keeping in view the proposed business plan and amount of risk with the business. Hi-tech start-ups are associated with high risks. That’s the reason that the return is also high.
Unfortunately, Pakistani banks and other financial institutions fear risks and prefer to invest or disinvest in liquid markets where they find easy returns, no matter how much. With this averseness to risk of the financing institutions, high-tech entrepreneurs find no money option, both from debt and equity financing sources.
Other option available to hi-tech entrepreneurs is asking for financing through friends and family. In this, there could be financing options for the entrepreneur but such huge money is usually in the informal sector. The last option is own money which is usually not sufficient to start a hi-tech company.
Under these circumstances, it is very difficult for a hi-tech enterprise to start and thrive. That is the reason, that the country lacks the hi-tech entrepreneurial companies unlike its neighbours.