9/10 Tech industry startups are bound to fail!

"Our IT vision is to put in place an accelerated digitization ecosystem to enable socio-economic development, to expand knowledge-based economy and to spur the economic growth." Syed Amin ul Haq said this in a report of 2020. But the topic of today's discussion suggests otherwise which is the concerning tech startup failure rate of Pakistan. Since then we have seen some highs and lows concerning the tech industry of Pakistan, alternatively for some there has been mostly darkness. Several college graduates and young entrepreneurs are dreaming of the next billion-dollar idea but there still seems to be a problem. Some are able to hit the right target but mostly fail to do so.

Pakistani tech industry's success till date:

In 2021, Pakistani startups collectively raised $365.87 million, showing a 450% increase from the $66.44 million raised in 2020. (good enough? right?) 

The following are a few that left their marks:

• Airlift: $85 million
• Bazaar: $36.5 million 
• TAG: $17.5 million
• Tajir: $17 million 
  
  

Startups incubated at Ignite's National Incubation Centers (NICs) have gathered some good amount of international recognition:

• KalPay: Featured in the Forbes 30 Under 30 Asia list under the "Finance & Venture Capital" category.=
• Bioniks: Featured in the Forbes 30 Under 30 Asia list under the "Social Impact" category.​
• Aero Engine Craft: Was successfully able to register a patent for supersonic jet engines that abide with the current aircraft noise standards.

No doubt that is impressive...!

Even after meeting all these milestones we are still we too far from where we actually should stand in present times. Whenever any new government takes office it promises to expand the industry making it $30, $40, $50 billion worth. But we see nothing of such sort...

India's tech industry is currently worth $250 billion as of 2024, considering that we can at least realistically talking take ours to a level of $20-$30 billion.

We will be dividing the whole dilemma of Pakistan not being able to meet its potential into a few categories:

Employment issues:

According to a report published in 2022, 25,000 students graduate from university out of which only 10% are those which are potential employees. And this means that only 2500 students can land on potentially quality jobs in the labor market. 

The rest may find themselves limited to low-skilled jobs or ultimately abandon the field of computer science and technology in search of alternative career paths. These statistics underscore a crucial reality: possessing a degree does not automatically equate to being a valuable asset in the job market. A mere verification from the HEC does not guarantee the ability to translate academic knowledge into practical expertise.

This helps us to derive out a conclusion that the problem lies in the supply constraints. No amount of subsidy or financial feed from IMF can help us find and recruit potentially skillful human resource. And the problem here is that Pakistan is doing nothing in overcoming this shortage due to its inability of identifying the actual bottleneck. 

Exorbitant taxes levied:

Direct taxes imposed in the incomes of people have observed to become burdensome for the employers. The disposable incomes for employees have fallen by a big proportion and in order to maintain the same living standard they expect their incomes to increase by the same proportion. In conclusion, they should be adjusted to inflation. 

This places a significant burden on producers, who are now compelled to hire the same labor at an increased cost. Needless to say, these rising expenses are directly impacting their competitiveness in both local and global markets. As a result, human capital—often regarded as the most vital asset in the tech industry—has been subjected to excessive taxation.

This factor is automatically leading to a vast scale brain drain in Pakistan in terms of IT experts, engineers and tech experts leaving. Connecting us to the same issue of limited supply. 

(one key point worth mentioning is the frequent comparison of our growth trajectory with that of India (Pakistan VS India tech industry). They laid the foundation of their tech industry through Business Process Outsourcing (BPO), initially focusing on fundamental, low-complexity tasks before advancing toward more technical and sophisticated roles) But now we cannot do the same thing as we woke up a little late... 

Lack of analytical thinking and social development: 

In the part, we will be discussing the critical importance of problem-solving and critical thinking skills in the context of the type of human capital we have:

Skill Gap: Many graduates from Pakistani universities lack essential problem-solving and critical thinking skills. This deficiency is for sure a significant barrier to the growth and competitiveness. There is a major gap between the skills graduates have and the ones employers want.

Industry Requirements: When hiring, companies prioritize candidates who possess strong problem-solving abilities. Conversation with the CEO of a leading software company in Pakistan, helped us conclude that the number one skill they seek in graduates is problem-solving. Unfortunately, this skill is often missing in graduates from even top universities.

Education System Flaws: The current education system in Pakistan is criticized for focusing on rote learning rather than fostering critical thinking. Students are trained to memorize information rather than to analyze, evaluate, and create solutions to complex problems.

Future of Work: Future of work will increasingly rely on problem-solving and critical thinking rather than just technical skills like coding. As automation and AI advance, many traditional technical roles may become redundant, making it essential for workers to adapt and develop higher-level cognitive skills.

Need for Reform: To address these issues, the government should call for a radical redesign of the education system. This includes creating a curriculum that emphasizes critical thinking, problem-solving, and interdisciplinary knowledge, rather than a narrow focus on technical skills.

Cross-Functional Knowledge: Future professionals will need a broad range of knowledge, including technical, legal, and design skills, to be effective in their roles. This cross-functional education is currently lacking in Pakistan.

Investment in Talent Development: The government should stress upon the importance of investing in talent development to ensure that graduates are equipped with the necessary skills to thrive in the evolving job market. This includes creating scalable and accessible educational platforms that can provide quality training to a larger audience.

There is an urgent need for educational reform in Pakistan to cultivate problem-solving and critical thinking skills among graduates, which are essential for the growth and success of the IT industry in the country.

Conclusion:

There are surely many more issues following the failure of our tech industry to grow but these , according to me, were the most significant. 

Pakistan's regulatory hurdles, unstable economic conditions, and talent retention challenges make it even harder for startups to sustain long-term growth. While the potential is immense, only those with a well-structured business model, strong leadership, and the ability to pivot when necessary stand a chance of succeeding in this highly competitive industry. Thank you for reading, and I hope you find this discussion valuable! Maew!!