‘Only 10 to 20% of all startups actually make it’ says Hafsa Sohrish Director at Plan X, one of the country’s largest startup accelerators. The statistic may not be surprising, but the number of startups that are entering the local IT industry has surpassed expectations of growth within the industry. Plan X reports that about 600 startups applied to showcase their products at the Demoday exhibition last year, and the number is only expected to increase this year. What is driving an increasing number of would-be entrepreneurs to go out and start their own venture?
The launch of 3G/4G services in early 2014 has had a visible impact on the number of entrepreneurial ventures being undertaken in the IT sector, with many of them benefitting from the multiple incubators and accelerators that have mushroomed across the country.
These startups however, are facing the heat in the wake of growing competition, unreliable market dynamics, and a saturation of similar services. The financial viability of startups in the backdrop of aforementioned challenges poses several hurdles. After all, incubation is the lifeline of many of them, but it provides limited sustenance. And the need to break free from the clutches of seed funding is often seen as the initial stage of a startup coming of age.
WonderTree is a unique startup developing interactive games for children with special needs. It uses augmented reality features fused with Microsoft Kinect to help children improve their attention span. It was incubated at PASHA’s tech incubator program Nest I/O, and recently won the third prize at GIST TECH-I startup competition held at the University of Stanford, California.
Speaking exclusively to MIT Tech, Ayesha Aslam, WonderTree’s communications head said that ‘Every start up transits through hard times… The viabilities of such ventures is linked to their research and functionality, we have extracted the proof of our concept through international researches. Our system is in the testing phase, the revenues have started pouring in and will gain momentum in coming couple of months.’
All this sounds great but ultimately businesses thrive on their ability to innovate and grow with the passage of time. Numerous questions remain unanswered: how many educational institutions would be interested in procuring this solution, will it be affordable and are its expansion possibilities as realistic as they make it sound.
Similarly, Patari; the application that aims to give the likes of Spotify, and Apple Music a run for their money, has had its own share of initial success in the form of a win at a startup competition organized by the US embassy. Catering exclusively to connoisseurs of Pakistani music, Patari aims to have an online library of every Pakistani song ever produced. The ambitious project has thus far paid 1.25 million rupees in royalties to Pakistani artists, claims Ahmer Naqvi, Director of Content at Patari, who also said that the artists are paid 40% of the revenue earned from their respective content. With the intent of “revitalizing the entire ecosystem of the music industry” the startup’s plans stretch beyond that of a localized music streaming service.
Although Patari claims a ‘solid subscriber base’, it answered the question of financial viability by citing its sponsorship deals, and associations with corporate clients. The startup also plans on monetizing its subscriber base by introducing paid subscriptions. How this will work, in a market where piracy is the norm, and with international free streaming services like Soundcloud also operating is still unknown.
Not all startups have had to look up to incubators to perpetuate their service, Careem being one example of such a success story. The app based taxi service commenced operations in Lahore, Pakistan in October 2015, and has since then expanded successfully into Karachi, and Islamabad. Junaid Iqbal, Managing Director of Careem in Pakistan attributes the success of the service to the unexpectedly high demand for such a service. Careem, alongside having measurably more revenue for growth, and marketing purposes at its disposal, varies from other startups that it has exponentially been absorbent of local market structures in the field of transport by including local car providers into their service. Junaid Iqbal says that “Our greatest achievement thus far would have been the creation of about 500 entrepreneurs, who have invested in cars, employed captains and have become businesspersons for the first time in their lives.’
This successful model of amalgamation with local business entities has been one of the underlying aspects of Careem’s success. The startup unlike the very ambitious Patari, and WonderTree, does not have a niche reliant user base, it offers a much more basic service to a scalable greater market. While discussing the growth of Careem, Iqbal mentioned plans of expanding into other cities, hopeful from the fact that new cars are entering the Careem fleet on a daily basis. The service despite its incredibly high demand, is not the sole provider for app based transportation, the likes of Uber provide for a fair competitive market. Addressing the issue of competitor Uber being launched in Pakistan earlier in 2016, Iqbal said ‘The pie is large enough for two players, and in fact, when a global player comes to Pakistan, it puts positive spotlight on our economy and spreads awareness. Them being here is a positive event and no, there isn’t a price war yet.’Careem’s foray into the local transport scene has been greeted with nearly all the markers of financial viability, and success.
Finance is not the only reason why startups may fail.Plan X’s Director Hafsah Shorish believes that most startups fail due to a lack of vision beyond a certain point in their lifecycle. ‘We’ve seen amazing ideas, which can be game changers, have amazing potential but are bogged down by the fact that the people in charge of executing the idea don’t have the right team for the job’. Still, she feels that ‘there has been a paradigm shift in the attitudes towards tech startups, and that has helped the industry in general.’
Still, there is no ultimate foolproof plan for startups to succeed. And more often than not, the issue of long term financial viability remains unclear. Incubators and accelerators can only take them so far.