As the founding father of a Pakistani startup investment fund Zayn Venture Capital, Faisal Aftab He’s spent a lot of time grilling entrepreneurs. But he’s never done it before in front of an audience of hundreds of thousands.
Aftab, who spoke to Crunchbase News via his hotel’s often unstable Wi-Fi connection, arrived in Karachi to start filming the first episodes of “Shark Tank Pakistan.” There, he’ll join a jury that can evaluate proposals from founders who are ready to look in photos.
The lineup won’t be typical for Aftab, who was educated in the U.S. and U.K., and whose company has focused on fintech, logistics and e-commerce. While those may very well be attractive sectors for investment returns, consumer products — reminiscent of food and cosmetics — are more likely to fare higher in TV and YouTube audience.
Oddly enough, the Shark Tank filming was a coincidence, as we had originally covered the interview months ago. The goal was to get some insight into the region’s funding, with an eye toward why Pakistan — a country of 235 million people with widespread smartphone adoption and abundant entrepreneurial and tech talent — has attracted reasonably modest amounts of startup investment up to now.
It is true that there are some Pakistani startups that have raised large rounds of funding, reminiscent of courier services PostExonline grocery shopping service Mart Cowand student loan provider EduFi (founded and managed by a colleague from Shark Aleena Nadeem). But the total investment is still measured in the lots of of hundreds of thousands — lower than a single mega-round for an AI-generation unicorn today.
Perhaps the tide is turning. Pakistan was a latecomer in wireless infrastructure, delaying the adoption of popular apps, Aftab said. Now, Pakistanis are making up for lost time with increased adoption of digital payments and other app-enabled tools.
Here are some of the topics we covered in our discussion:
Motivation to launch a Pakistan-focused enterprise capital fund
Aftab said one motive was to explore the opportunities offered by the growing access to smartphones and reliable web connections. Pakistan was a late bloomer in this space, with 3G and 4G only coming in 2014 and 2015. Since most of the population cannot afford desktops and laptops, smartphones are their primary device for accessing the web.
According to Aftab, Pakistan is still in the “first wave” of app startups. Zayn file this reflects the incontrovertible fact that the corporations operate in sectors reminiscent of online grocery delivery, quick loans, digital transportation management and fashion e-commerce.
Fintech is a particularly big opportunity, Aftab noted, provided that historically banks haven’t made much consumer loans in Pakistan, and processes like credit scoring haven’t been common. Adoption of digital payments is also on a roll.
Slowing pace of investment in Pakistan
Investment in Pakistan began to choose up in 2019 and then “grew like crazy” in 2021, Aftab said. But funding to the region has since fallen, as has overall global enterprise investment.
“What we’re lacking right now is growth capital,” he said. That leaves many existing, funded startups and their backers in a tough spot as they seek funding to scale further. But he said he’s optimistic the current slowdown will prove temporary.
How Deal Flow Shapes on Shark Tank
Aftab said the sharks are not allowed to see any deal flow, but he expects a mixture of tech and non-tech, and “all the judges are investing personal capital.” In particular, on the non-tech side, there are many corporations that have not had any previous funding.
Many of those can be consumer goods. In Pakistan, Aftab said he sees a growing industry of many consumer products, reminiscent of organic shampoos, oils, local food products and furniture.
The show is expected to launch to the public late this yr or early next yr, so we’ll likely have to attend for a fuller picture of who’s competing for the sharks’ attention and capital.
Pakistan’s Growing Dependence on Domestic Products
Aftab noted that the growth in the domestic consumer goods market is relatively recent.
Essentially, when the United States raised rates of interest in 2022, the dollar rose, which caused energy costs to skyrocket for energy-importing countries like Pakistan, he said. In the past, it didn’t make sense to provide certain products domestically because it was cheaper to import them. But now the real effective exchange rate increases the need to provide domestically.
“This has created a huge opportunity,” Aftab said, adding that he is surprised at how many domestic products he now buys – especially in categories like soap and shampoo – whereas previously he would buy imported ones.
Cleantech as a growth market
I have noticed that so far there has not been much recent investment in clean technologies in Pakistan, which is a bit surprising given the severe air pollution in Lahore and other cities, extreme heat, water shortages and other problems.
However, this is clearly an area where economic growth might be expected to speed up.
“It’s actually happening now,” Aftab said. If you look at thematic investors, a few years ago they were more interested in platforms and fintech opportunities for their funds. But now there are investors focusing on climate and cleantech startups.
For example, Zayn recently looked at a company that focused on HVAC efficiency for large buildings. And today he said, “the funds that are being raised, they all have an allocation to clean technology or an allocation to climate.”