The start-up culture is very different from that of traditional businesses
“Technology helps in reaching a large audience with an ease ... and in scaling the business quickly,” explains Jadoon. Islam agrees: “Start-ups may adapt technology to solve problems but not every start-up is tech-oriented.”
Thus many up-and-coming tech start-ups have mainly used technology to change an existing business model. For example, Careem, a ride-hailing app, connects passengers with Careem drivers (traditionally the domain of cab and rickshaw drivers), Rozee.com connects employers with employees and lists job adverts (a field previously dominated by the newspaper job advertisement section) and so on. Some are websites that have taken on well-established industries: Daraz.com is an online retailer and Netflix is an online TV and film-streaming subscription service.
And there are countless other tech start-ups that have made money from simply delivering what we want, when we want it and made many of us mere couch potatoes. Whether its cinema tickets or fish, these services will deliver it to your doorstop. Other e-services or apps connect buyers with sellers, owners with renters, help you find the doctor, domestic help or tailor you’re looking for — all with the click of a button.
Will the explosion of tech start-ups mean the end of retail space, travel agents and other traditional businesses? Only time will tell. However, as any investor will tell you — whether any business thrives or not depends on how much money it makes.
When technology meets a good cause
Not all start-ups are industry disruptors out to grab a slice of a shrinking profit pie. Some are non-profit and have philanthropic leanings. For instance initiatives such as Wonder Tree (http://wondertree.co) use augmented reality to develop educational and therapeutic games for special children.
Another, Modulus Tech, provides sustainable housing for 250,000 rupees. The founders began this initiative last year to address the needs of internally displaced persons and those affected by natural disasters. Using Building Information Modeling and solar energy simulations, they have created a cost-effective model that can be built in just three hours. What started off as a social venture is now fast attracting the interest of businesses who want to set up labour colonies.
Other such non-profit start-ups include Transparent Hands in Lahore that funds surgeries of poor patients using a global crowd-funding platform and Karachi-based Ges-Drive which makes video games for physically-challenged people.
Such initiatives are working on a good cause and have great potential to scale-up globally given their universal applications. But even such start-ups often run into a problem every business does: a lack of revenue.
Karachi-based DoctHERS, for instance, connects women doctors who are not practising due to social or family obligations, to millions of underserved patients via telemedicine. Islam, for instance, feels DoctHERS may struggle to be financially sustainable. “The purpose has to be bigger. In this case it is to provide healthcare, but in the bargain they have to make money to be able to sustain the [company],” he says.
Not for every Tom, Dick and Harry
While having passion and drive for their project is what allows start-up founders to get through the rough times, it can also be what runs them down. The world of tech start-ups is certainly not for the faint-hearted. After finding out that his blood pressure was higher than normal, Chaudhri of Mandi Express reduced smoking, started exercising and eating healthier. “I have always been an optimist and whenever there are down moments, someone or the other will crack a joke to lighten things up at work,” he adds.
Those who make it, or who scale up, cease to be a start-up and become a company. Some laughingly tell you that a good way of gauging that a start-up has graduated is if the founders begin to wear suits and fly business class.
According to Jadoon, there is no hard-and-fast rule as to when a start-up ceases to be one but ideally after about three years in business, most start-ups cease being one. Some factors to measure when a start-up mantle has been shrugged off are: multiple office locations, acquisition by a big company, employees over a certain number, revenue growth exceeding the set target and so on.
Uber and Careem started as start-ups, but given their current global scale, aren’t anymore. But there is no fixed time-period when a start-up should reach the next level. However, for the founder, the sooner the better.
There is no documented number available to know the exact number of start-ups or incubators in Pakistan currently. However, Islam puts the conservative estimates for the latter to be “in the range of 30 across the country.” Many such incubators are located at universities such as NED, Karachi University, LUMS, IBA and so on while others are in the private sector.
“Primarily these incubation centres are working as co-working space providing space, internet, on-site coaching and mentoring to the start-ups,” says Islam. In some cases, such as JBS as well as Plan 9 (started by the Punjab Information Technology Board), the start-up founders are given advice to make business cases and establish connections with potential investors. Many also arrange for industry veterans to come and talk to them.
He says each incubation centre has, at any given time, four to five start-ups. “I would assume that if they churn out two batches each year, then currently around 250 plus start-ups are in operation.”
“With the current batch we will have graduated about 100 start-ups from The Nest i/o,” say Jehan Ara. “Assuming that some of the other leading incubators have done the same, we would have at least 500.”
She also explains that there are many start-ups that are not part of incubators or accelerators but have been started by young people across the country. “Some will be successful and some will fail,” she says but insists failure is something start-up founder have to accept and shouldn’t view negatively.
If you fail, try and try again
However, success is not always guaranteed and many start-ups just die before they make it.
While hundreds of start-ups come up every year, according to Forbes nine out of 10 start-ups fail. Since it opened over two years ago, about 100 start-ups have passed through the four-month cycle of The Nest i/o and about 85 percent of those continue to survive and create employment.
“It depends on how you define success,” says Jehan Ara. While success rate varies, she believes some fail and start a second or third venture, while others pivot — when a start-up ditches its original idea for another concept or changes direction.
According to Planet N, another investor company, 67 percent of the more than 700 start-ups established since 2010 are still active and 68 have managed to increase funding by about 20 million dollars. At least 24 incubators, accelerators and co-working spaces supporting start-ups have popped up across the country in the past seven years. Planet N invests in start-ups providing them a platform for growth through collaboration and shared services.
Jadoon says the start-up culture in Pakistan is quite new but rapidly growing. What he has observed is that the “start-up scene” in the country is without structure and an incubator is nothing but a “glorified Internet café.”
“We need to provide proper governance and structure to start-ups so they can be nurtured properly. We should focus on quality rather than quantity. It is better to have five quality start-ups than 12 mediocre ones,” he believes.
Islam concurs saying of those that fail, 22 percent do so due to a lack of funding but over 77 percent is because of a bad business plan. Many of them are “not tuned to systems and policies, completely unaware of corporate governance or knowledge of tax structures,” he says.
And that is why JBS’s Islam prefers to acquire start-ups to hand-hold the young entrepreneurs and walk them through the process. “We want to minimise the failure rate, provide them with access to the market since we are well-ensconced, allow them to use our brand to be taken seriously, provide them with a structure, discipline and accountability,” he explains.
But what is in it for JBS? “We want to future-proof our business by investing in innovation through these start-ups,” says Islam. “We believe trends will undergo major changes and if the company does not prepare itself to invest in the future, its existence will be at stake.”
Based on studies and available research, there are going to be five key areas which will remain the dominant force in the IT industry of the future including cloud computing, internet of things (IOT), mobility, big data and networks and network security. Out of the above five, JBS picked big data and IOT for investing in future. “Hence the company we were looking for has to be in one of the two areas and Blutech is formed as a big data company,” explains Islam.
Explaining the working relationship in more detail, Islam says:
“While we would like entrepreneurial culture to evolve solidly and scale ... we give the “management right” to the start-up founder/CEO. He runs the show as an entrepreneur, but needs to become part of our business unit, corporate culture and governance so [the start-up] has the right infrastructure, support, governance and accountability to become successful. This requires serious engagement and commitment on our part and also on the part of the start-up.” This is a win-win for both.
The success of the start-up industry, however, in the end rests on the shoulders of the millenials who are willing to jump through hoops to achieve their dreams. Even if that means, as Umair of Sukoon.com put it, "you have to work 25/8" to make it happen.
Published in Dawn, EOS, May 28th, 2017
A previous version of this article incorrectly stated that Mandi Express had been incubated by the US companies VentureHive and Microsoft. Mandi Express was actually incubated by The Nest i/o. The article has been updated to reflect this change.