This is a guest post by Anthony Mitchell from InternationalStaff.net, who is a frequent contributor and commenter here on Green & White.
The question of how to encourage startups is complex until we break it down into readily solvable components. Here three barriers are addressed.
The first barrier startups face relates to the mindset that what is Western oriented is automatically better.
During the colonial period, economic activities were focused on exporting to Western markets.
Today when someone thinks of starting a technology-enabled business, too often it is directed at immediately serving customers overseas. This creates risks because not only does a business have to go though the effort to set up, but also to understand and penetrate an unfamiliar, remote market where there are strong established competitors and where marketing can be expensive.
Customer service can be difficult and expensive to provide internationally. There can also be legal barriers to market entry that entrepreneurs are not aware of when they begin operations.
Press coverage of startups, expectations of peers, and established cultural patterns perpetuate the popularity of startup strategies in Pakistan that are high risk and often impractical.
Government support is weighed in favour of export-oriented businesses. This can be counterproductive because if a startup can first gain traction and experience locally, then it will be in a better position to expand internationally when the time is right.
PTAâ€™s announcement of a contest in Pakistan to nurture local technologies is a brilliant step in the right direction and one that needs to be followed by other public and private sector organizations.
A second barrier to startups is the lack of access to capital. One of the best places in the world to invest in early stage startups right now is in Pakistan.
A young company in Pakistan can hone its product and services lines domestically, and then expand globally, creating tremendous revenue opportunities. Revenue opportunities at home are strong because of pent up demand for technology-enabled services (such as mobile banking), demand for more efficient retail distribution systems, and the high penetration of mobile devices. Risks of starting up in Pakistan are lowered by the presence of a highly skilled labour force at extremely low costs.
Every other country in the world would like to have the advantages available in Pakistan for IT/ITeS companies.
But without access to capital, opportunities will be wasted.
The cost of launching an IT/ITeS startup have dropped dramatically in just the last two years, thanks to cloud computing, free online services and other spinoffs from the global technology revolution.
A startup venture fund of from $25-50 million dollars per year in Pakistan would, if properly managed, contribute vastly greater amounts back into the local economy. The venture fund can and should be government supported, perhaps with foreign aid funds earmarked towards capacity building in the private sector.
The venture fund could be accompanied by an incubation system to provide marketing and legal advice to small companies. Technology inputs could also be made available at no or low cost. Cohort training by specialists can help IT/ITeS companies build capacity for marketing and technical tasks.
The third barrier to startups is the lack of access to transparent role models. I recently sanitized my NDAs and contracts and sent them to an IT industry association in Pakistan, to distribute to their members. Young companies need to see how established businesses operate and be able to access those business practices on-demand.
Startup opportunities are better in Pakistan than anywhere else in the world. These opportunities can and should be realized with the help of a pro-Pakistan orientation, access to capital and startup role-models