The journey from boom to busts can be rather quick, as we Pakistanis know all too well. However, in the last couple of years, the tech industry has also come to this realisation after a long period of what seemed like reality-defying invincibility at one point. From $648.6 billion of venture capital in 2021, global fundraising went to $248.4bn in 2023, marking a strong correction in the market. And that entirely changed how companies operated, or more aptly, went back to how they have always operated: to make profits.

Far too many times, I have heard founders talk about how their maverick accounting — with all those adjusted earnings or margins calculated on the gross merchandise value instead of revenue — wasn’t intellectual dishonesty but rather indicative of a new age which the boring old school indicators just couldn’t capture. Once, an engineer of a well-funded startup argued that in tech, profitability is a thing of a bygone era and just doesn’t matter anymore.

Of course, this was the time when engineers like himself were getting offers left, right and centre at eye-popping pay bumps as a poaching war ensued. Companies were struggling to retain the talent and the employee turnover rate had spiked by 12 percentage points to 30 per cent in 2021, as per Pakistan Software House Association’s Salary Survey.

But the past is another country, as many have to realise the hard way. Especially those associated with the technology sector, be it the founders, customers or employees. The latter, in particular, has had a rough period with a wave of layoffs and shutdowns across the country and no amount of venture capital seems to provide much immunity. Beginning mid-2022, we have seen the who’s who and what’s what of startups either fall or fumble.

The GDP of the information and communication sector fell year-on-year in three of the four quarters of FY23, as per the State Bank

While the data for shutdowns is a little grey, due to a lack of proper liquidation events and so-called pivots, some of the most-funded companies in each sector have closed shop. Airlift, Jugnu and Jomo in e-commerce, Medznmore in health, Finja and TAG from fintech are just some of the obvious names who have one way or the other packed up bags — either from Pakistan, the business or altogether.

Similarly, there are media reports of Bazaar letting go 600 people in a non-core vertical, Dastgyr firing some 80 per cent of the workforce, and trouble at Cheetay and Swyft. Add to it Foodpanda and Daraz, arguably the largest platform-based companies in the country, who both have conducted multiple rounds of layoffs since the beginning of 2022.

Needless to say, Pakistan is not alone in this. According to Levels.fyi, 168 tech companies have laid off 42,324 employees so far in 2024, on track to touch the 2023 figures of 1,190 and 262,915. Understandably, this creates a very unnerving environment for employees who have suddenly found themselves out of many options.

After all, the salaries offered by the funded startups were typically much higher than the rest of the industry. With foreign entities also cutting back hirings, the options have been restricted even more.

What could possibly make matters worse is the worldwide cut in discretionary corporate spending on technology, possibly spilling over into the export-oriented IT services industry, which is by far the biggest employer of technical talent.

Fortunately, that hasn’t really happened so far, primarily because we are too small a fish and are fighting for projects that don’t really make too much of a difference to the bottom line. For now, that advantage of backwardness is essentially our opportunity, but it doesn’t look like we are grabbing it by the horns.

The fact that the gross domestic product of the information and communication sector fell year-on-year in three of the four quarters of FY23, as per the State Bank, certainly should ring alarm bells. Perhaps one could argue, rightfully so, that the reason behind the sequential decline was that companies were keeping their money out of the country amid all the political and economic uncertainty.

Regardless, it still means that local corporates are not reinvesting their earnings back into the country, which adversely affects the sector’s growth. The fact that our IT sector doesn’t really attract meaningful foreign direct investment adds to the woes.

Not to make things any more gloomy than they already were, tech was one area where the “Pakistani dream” was still possible and common, in fact. If this hope crumbles too, then there may not be many reasons left for our brightest to stick around.

The writer is the co-founder of Data Darbar

Published in Dawn, The Business and Finance Weekly, February 26th, 2024