Too big to ignore: this partner at Dubai-based VC firm has a ‘long-term view’ on markets like Pakistan

DUBAI/KARACHI: The music has started to play again around Pakistan’s startups, but maybe the orchestra never stopped. Perhaps, it only slowed to pick up pace.

Much like its economy’s persistent boom-and-bust cycles, a record 2021 – that saw nearly $350 million raised – was followed by lower funding in the subsequent quarters with April-June of 2023 being a standout poor performer. For context, a mere $5.2 million was raised across eight deals in three months. The amount went marginally higher to $6.8 million in July-September, but still a far cry from levels seen in the previous year.

To fault Pakistan founders and their startups alone would be unfair. But to completely absolve them in a market that has also traditionally been tough to operate in would be biased as well.

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“What we saw was a massive hype in 2021-22 about Pakistan,” Sacha Haider, a partner at Dubai-based Global Ventures – a major VC firm – told Business Recorder during an interview recently.

“It is the 5th largest population in the world, a 100 million unique mobile subscribers and where the median age is 22 years. We also saw that over the next 10 years, there’d be continued expectation of this growth in population and this was a market you just cannot ignore.”

And the world didn’t. Flushed with liquidity, global investors poured their hearts – and chequebooks – out for Pakistani founders. It didn’t work out too well for most. A posterboy announced a spectacular shutdown. Some others scaled back and trimmed operations.

“We were 11 years into a bull run. There was excess capital with a lot of the big European and US-based funds deciding to make their first investments. But when you have international capital coming in, especially from large funds that have an incentive to deploy larger tickets, what you can end up with is distortion in valuation and distortion in pricing.”

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Haider said there were a few negative externalities from this funding landscape as well.

“The floor pricing was set too high for some companies that didn’t have the traction to justify it. When there was a global decline in funding, one of the challenges was founders couldn’t raise at a price higher than the price previously raised at.”

Haider joined Global Ventures in the early part of 2020 after a meeting with the VC firm’s managing partner Noor Sweid went from an introduction to a job offer.

At the time, Global Ventures with its lean team would operate out of coffee shops – in a manner of speaking – and handled a first fund size of $50 million. Now it has its headquarters in the emirate’s hub for innovation & technology – Dubai Internet City – with another two offices in Abu Dhabi and Cairo, and a portfolio of 60 companies.

Among them sit two with Pakistani founders – Abhi, founded by Omair Ansari and Ali Ladhubhai, and Metaschool, founded by Fatima Rizwan.

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Haider, who sees 5-10 pitchdecks a week from the different markets Global Ventures focuses on, said Pakistani founders are used to operating in a tough funding environment.

“A lot of the founders we were speaking to in 2021-2022 were already profitable, which is unheard of at the series A stage. But it’s because they’ve always operated on the understanding that capital is more nascent and therefore, it is important to have strong sustainable economic foundations.”

Haider’s point is well-taken. Operating in Pakistan is tough – and not just because businesses have to fight through inherent risks of the sector they operate in. It’s Pakistan’s stop-and-go approach to economic growth and its inability to stick to policy. Add an external risk to it – higher interest rates that have made capital more precious – and you have all the ingredients of a business slump.

However, Haider – who featured on the Forbes 30 Under 30 list in 2022 – had words of encouragement.

“For founders who are raising sustainably and have built sustainably, there is massive opportunity and that won’t disappear even with the fundraising downtrend.

“In markets like this, you have to take a long-term view. These are the centres of global growth for the next few years.”

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Haider spent her formative years in the UAE, but moved around with work experiences in Kenya, Mexico City, and Singapore as well as an undergraduate degree from the UK.

But it is Dubai where she is based now.

She has seen the emirate evolve and grow to the bustling city it is today, and remains bullish as Dubai launches a scale-up programme for 30 companies to become global unicorns in new economic sectors.

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The aim is in tandem with the UAE’s Future 100 initiative that will help identify SMEs contributing to the UAE’s future economic sectors.

“In terms of the UAE and Dubai’s startup ecosystem, the government has made a concentrated effort to create an environment that is welcoming for both international startups and fostering one where local ones can thrive.”

The B2G model works

When conveyed Pakistan government’s plan to ‘under-write’ venture capital investments in the country’s startups, Haider said the B2G model of funding works

“We are in a market that is a testament to this,” said Haider, referring to the support structure Dubai and the UAE have in place to support startups.

Copyright Business Recorder, 2023