Could venture capital in Pakistan be approaching a turning point?
Last month, Sarmayacar launched the nation’s largest VC fund yet, a $30-million vehicle. It’s not huge by Southeast Asian standards, but funds like these are few and far in between in Pakistan.
It is for good reason. Pakistan faces a perception battle; it is seen as too risk-prone and politically unstable. Basic infrastructure is lacking and government policies are not conducive towards investment. The very concept of VC isn’t even completely understood by wealthy Pakistani families and individuals, simply because it has barely existed until recent times.
Rabeel Warraich, CEO and founder of Sarmayacar, said: “One of the things we’ve learned through fundraising is that Pakistan families are not very comfortable with the VC concepts of investing. They’re totally fine giving you the 20, they just don’t want to give you the 2. They can’t understand why I can’t just show them all the deals that I’m sourcing, and then they decide at that point if they want to invest or not. And if they invest, they’ll pay me a small fee.”
Other rudimentary processes are also proving to be a hindrance such as accepting digital signatures.
Warraich explained: “So if someone is sitting in London or Australia, the same piece of paper needs to be sent through courier and get signed by everyone before making its way back to Pakistan. This is such a small thing, but for them (the government) this has the implication of accepting digital signatures across the board. It’s not just a VC consideration, it’s a broader consideration.”
Sarmayacar shared there are currently conversations to start a representative body for the Pakistani venture capital community. This body will weigh the challenges of structuring locally and meeting basic needs in the industry.
Warraich said: “There have been some developments in this space and we are optimistic. Once the government sees that there is potential for things to be set up, money will come in and businesses will be given the opportunity.”
Sarmayacar is led by CEO and founder Warraich and international partner Bernhard Klemen and its team is made up of GIC, Morgan Stanley and JP Morgan alums. According to Warraich, Sarmayacar plans to invest in 15-20 seed to early-stage companies, with 7-8 companies invested by the end of its first year.
The $30-million Pakistan focused fund is also backed by individuals from GIC and other investors. The fund’s current investments are PublishEx, a carrier billing company; ProCheck, a patient engagement services provider; and Patari, an online music portal.
Earlier this month, DEALSTREETASIA exclusively reported that Sarmayacar is investing in Pakistani ride-hailing startup Bykea. The Series A fundraising is expected to be in the region of $5 million and will be a combined investment involving at least three investors.