Why the investment raised by Pakistani startups doesn’t make it to Pakistan

Common sense is not so common.
Common sense is not so common.

Systemic red-tape and blanket incompetence.

Pakistani tech startups raised a record $36 million in funding in 2019.

But the question is, did the $36 million make it to Pakistan?

The short answer is NO.

Here’s the long answer.

When a startup announces that it has raised funding of $1 million, what it is saying is that they have someone who is going to invest up to $1 million over the next few months given certain milestones and agreed-upon terms.

In the meantime, the money is stashed in a bank account to show that the investor is serious. This bank account is usually in Singapore or Dubai and almost never in Pakistan.

This is unfortunate and unnecessary. However, it’s the only way for the investor to mitigate the risk of not having access or control over the capital after it is committed.

Then I saw this Tweet from Uzair Younus:

Uzair Younus is a non-resident fellow at the Atlantic Council and the host of Pakistonomy Podcast. I discovered him almost a year ago as a result of his thoughtful and byte-sized analysis in layman terms about the Pakistani economy.

I saw an opportunity and asked him the following question:

Later he responded:

As soon as the episode dropped, I streamed it. His guest is Bilal Moon, who covers local and international equity markets and currently manages investments in Pakistan.

Around the 17:40 minute mark, they discuss my question and here’s his response, paraphrased:

  • Lack of institutional development.
  • Incompetent State bank leaders.
  • Smart people are snubbed.

Apart from the answer to my question, Uzair and Bilal take a deep dive into the intricacies of the Pakistani stock market and other related topics.

Give it a listen. Apple | SoundCloud

To sum it up, the Pakistani government is missing out on $36 million in USD that would otherwise sit in its coffers due to systemic red-tape and blanket incompetence.

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