Venture Capital

What is Venture Capital?

Venture capital:
 Raise pools of capital from institutional and
singular investors.
 Fund new and rapidly creating organizations;
 Buy favored value securities and take board
positions;
 Increase the estimation of the organization
through powerful investment;
 Go vulnerable with the want of higher prizes;
 Have a long-term introduction
History of Venture Capital in Pakistan
 The lawful structure for the foundation of venture capital
organizations was set up out of the blue by July 2000 .
 The Pakistani venture capital market saw slower-than-expected
development during the 1990s.
 The government investigators property this slower expansion of
venture capital to the general slower financial development
amid the 1990s
 The absence of qualified professional venture capitalist
educated about the operation of venture capital in rising
economies
 The key obstacle to extending Pakistan's venture capital
business has been business people's attitude, which is
additionally expected to a challenge in the future. .
 entrepreneurs are less motivated to raise venture capital on
account of their family-claimed.
 social esteems that dishearten a business person to share the
piece of possession and control with pariah (e.g., venture
capitalist) as an return of cash.
History of Venture Capital in Pakistan

 The business culture of Pakistan isn't

energetic about the more dangerous
endeavors of a business person.
 On the off chance that an entrepreneurial
exertion fails, it is extremely likely that the
business person will lose his name and
notoriety alongside his cash.
 venture capital organizations are principally
engaged in the media and telecom part
and furthermore want to put resources into
business process outsourcing (BPO).
The Pakistan Economic Survey (2005)
 The Pakistan Economic Survey (2005) noticed that "venture capital and
other Financial Institutions (FIs) satisfy just 18 to 21% of fund
necessities of the local programming houses.
 Venture capital organizations to focus on this area, particularly in
helping the nearby organizations in item improvement and advertising
the IT-empowered administrations of neighborhood organizations
abroad to get any sizeable offer in the worldwide BPO."
 , In Pakistan, the stringent collateral prerequisites of banks and
different FIs restrict new businesses' and also existing SMEs' entrance
to financing
 FIs require guarantee of up to 120%– 130% of the advance esteem
(Khan, 1997).
 ). This is the reason SMEs for the most part depend on self-financing or
held profit (Pakistani Economic Survey, 2005).
 , as a major aspect of its program me to advance the funding business,
conceded an expense exception for funding speculation for a time of
seven years from 1 July 2000 to 30 June 2007.
 The aggregate resources of funding organizations saw the most
astounding one-time Pakistani venture capitalist investment criteria
yearly development of 218% from Pakistan Rupees (PRs) 1005 million
in FY 2004 to PRs3, 200 million in FY 2005.
The Pakistan Economic Survey (2005)
The Pakistan Economic Survey (2005)
Investment Criteria of Pakistan Venture Capitalist

The criteria are classified into seven major categories:

 The entrepreneur's personality
 The entrepreneur's experience
 Product/service characteristics
 Market characteristics
 Financial characteristics
 Environment conditions
 Venture team composition
Developments in Venture Capital in Pakistan
 The VC interests in Pakistan are quite recently starting to hint at existence with
two youthful Pakistani organizations accepting financing in late 2006 and center
of 2007.
 At the OPEN Forum 2008 in Silicon Valley, Pakistan if their portfolio
organizations opened workplaces there.
 Talking in a board dialog at OPEN Forum 2008, Faraz Hoodbhoy, the CTO of
PixSense, contended that Pakistani exiles in Silicon Valley are the harshest
pundits of Pakistan.
 PixSense at present has a sizable nearness in Pakistan and values what
Pakistani specialists have improved the situation it to make it effective on a low
spending plan
 .Naseeb.com, the main other Pakistani organization to get US VC subsidizing
from Draper Fisher Jurvetson and ePlanet Ventures, achieved it since its
originators are from Silicon Valley who set up an improvement focus in Pakistan
that has delivered awesome outcomes.
 Investment is being advanced by the Competitiveness Support Fund (CSF), a
joint activity of the United States Agency for International Development (USAID)
 and Ministry of Finance, Government of Pakistan which is working intimately
with the Pakistan Business Council (PBC).
 Naseeb.com was unquestionably the case that drove DFJ and EPlanet to back
Rahman's next venture, the Lahore-based online employment gateway,
rozee.pk, in 2007
 challenge Pakistani banks and financial investors to make a Pakistan venture
funds that they would then match
 Now a few speculation firms in Pakistan, for example, the Abraaj Capital Group-
supported BMA Capital, that could control the store.
Startup Incubators & Venture Capital Firms in Pakistan

 Start-up Incubators and Venture Capital

Firms expect a crucial part in an
entrepreneurial organic framework.
 Seed financing" to plans of action that they
see functional and have strong gatherings
to pass on the VENTURE independently.
 Requested an once-over of such open
entryways for Pakistani Startups and we
will consolidate more to the summary.
 Attempting entrepreneurs must check the
individual locales and discuss with the
specialists of these associations.
Issues & Challenges for Venture Capital Industry in
Pakistan
SWOT Analysis

 Better economic growth in last 6 years

 Growth and consolidation of banking sector

 Better spending on higher education


Weaknesses:

 Lack of entrepreneurship

 Shortage of skilled human resource

 Lack of innovation and R&D among enterprises

 Limited knowledge based sectors

 Risky investment and few exit opportunities
Issues & Challenges for Venture Capital Industry in
Pakistan

Opportunities:

 Increase in foreign direct investment

 Young entrepreneurs willing to share the success
 Growth potential in many sectors of economy

Threats:
 Law and order situation
 Political Instability
 Country Image Perception
Issues & Challenges for Venture Capital Industry in Pakistan
Challenges and Opportunities for Venture Capital
in Pakistan

 In Pakistan, venture capital is in the condition of earliest stages

 Faces testing issues as business visionary dispositions, restricted help from the state, SMEs
constrained controls and in addition family possessed organizations.
 If government and the private segment assume their parts and endeavor coordinated
endeavors, funding can develop.
 With GPD growth of more than 6 percent in last five years, Pakistan has been able to attract
domestic as well as foreign investment.
 Banking sector has grown more than 30-40 percent in last 5 years and this has also attracted
foreign banks to acquire local banks or start their operations in Pakistan.
 Government of Pakistan has been successful in improving physical infrastructure, many
projects are already completed
 Mutual funds, asset management companies and private equity companies have also
witnessed growth in last few years.
 For venture capital industry to grow when we have many positives like business friendly
government policies, government funding for sector development programs, high growth in
financial sector, better standing of IT sector in local market, creation of business and
technology incubators and overall economic development.
 The key sectors that the venture capital firms are focusing and can focus more for attractive
opportunities are telecom, IT, IT related products and services, pharmaceutical manufacturing
and drug discovery/ research, bio technology, textile, retailing, renewable energy (solar and
wind), entertainment (water parks, theme parks, Cineplex, hotels, restaurants, resorts), LPG,
real estate/construction, Business Process Outsourcing (BPO), transportation, auto and auto
parts; and light engineering products.
Conclusion
 Venture capital can play a more Innovation and improvement part in a
creating nation like Pakistan.
 It could help the restoration of a wiped out unit through people with
ideas and turnaround administration ability.
 Venture Capitalist could likewise be in accordance with the
advancements occurring in their parent company.
 Yet another area where can assume a critical part in developing nations
is the service area including tourism, distributing, social insurance
 Venture capital companies should also make efforts to understand the
cultural attitude of Pakistani entrepreneurs and SMEs;
 According to SMEDA survey, only 25% SMEs have ever approached
banks for lending and venture capital is totally new phenomenon for
them.
 Converting dreams into reality will also require political stability; better
law and order situation along with direct and indirect support from
government.
 Active involvement of private sector to timely identify right kind of
opportunities.