Startup culture is kicking off in Pakistan but it is in infancy. Umar Saif was one of the few mentors who attended the TechJuice Circle in Islamabad — an event focused on startups networking with tech and business leaders in the country. In his fireside chat, he discussed several problems surrounding the startup community in Pakistan. The former PITB chairman who is now working on his own startup and is launching Khudi Ventures discussed 6 things the government must do to improve the startup ecosystem.
1. Divert pension funds to fund funds of funds
The first thing he wanted the government to do was to empower funds that support startups. He said that it wasn’t the government’s task to take up equity in startups but if they invested in such funds, startups would benefit. He suggested that the government should divert part of the EOBI pension money to such funds. This would support startups and encourage other VCs to join the race.
2. State Bank’s regulations on VCs need to be revised
He said that it is particularly difficult for a Pakistani to own something outside of Pakistan. This discourages VCs to set up funds in Pakistan, so they are forced to set up their infrastructure outside of Pakistan. “Regulate or deregulate the wealth coming in or wealth going out.”
3. SECP needs to ensure that sweat equity is real
SECP needs to devise a way to avoid the wrong valuation of assets and stock allocation. He suggested that Pakistan engineering council should evaluate the idea. He said that investors can manipulate the startup saying that they don’t have the real stock and SECP would have to side with them. So there is a need to revamp their company law.
4. Pakistan stock exchange needs to do a small cap IPO regime
VCs need a way to exit out after investing. The first way could be to have the startup get acquired. The second would be listed in stock exchange. He said that you don’t find big IT companies on the stock exchange. So is there a way to have a small cap IP? He pointed out that Uber and Twitter are not in profit, yet they raise money from the market.
5. Pakistan needs to improve its copyrights enforcement policy
A problem that many are aware of is Pakistan’s poor enforcement of copyrights policy. Whenever you are making something there is always the danger of it getting copied. He said that WIPO had been set up quite recently in Pakistan, but it still takes years to get a patent.
While policies for the patent violation have seen better implementation, Pakistan is still far away from a violation free zone. The courts are weak at settling disputes and many laws have not been updated to reflect recent developments.
6. Improve taxation policies for startup
He said that current taxation policies are quite harmful to startups. The startup founder faces the risk of having accounts closed in the name of taxation and then has to wait for months before the startup gets a hearing. Startups need to be given rebates and relaxation so that more people can embrace them. There can be economic zones to promote trade and make it easier for startups to prosper.
