Startups fail in Pakistan all the time, however, failure in this region is not covered in popular research. That said, anyone who has attempted business in Pakistan can very well attest to the following overlooked reasons why startups fail in Pakistan.
1. Truck ki batti
You may or may not have heard this colloquial idiom, but it has become a definitive part of doing business in Pakistan.
This phrase literally means “to chase after a truck’s light”. Borne out of a tradition in rural pathfinding where, in the absence of a road map, you follow a truck in the hopes that it will guide you safely to your destination despite knowing full-well that the truck has no idea, intention or obligation to do so.
This applies to people who, instead of offering a square deal, offer something abstract or intangible instead. Such people will make you hold on, for dear life, to the faintest of hope that both success and money are just around the corner if you stick with them long enough (hint: get out of there yesterday). Success in this scenario is one-sided and the chaser is never on that side.
This also applies to young entrepreneurs who, instead of planning and strategizing a roadmap for success, just copy someone else’s verbatim and hope to replicate their success.
Entrepreneurs who trade intangible commodities such as promises of success, network or tutelage for tangible assets, such as time and money have chosen to trust someone else to do the right thing. Sustainable startups are not built on this form of trust and failure is just around the corner.
Trading in empty promises leads to imminent failure, disappointment, and very hard lessons learned. People are looking out for their own interests and the only reason anyone trusts someone else with their time and money is if they expect to make a profit, or not spend any to begin with.
2. The market hates innovation
Every market is chasing one buzzword after another. AI, IoT, Cyber Security, Big Data, et al. are the market’s “go-to” solutions these days. That’s where the big money is. If you solve an old problem that, though great, isn’t a buzzword, half your struggle will be to convince people to give your idea a chance.
What seems like disruptive technology globally, might just become a niche product by the time it reaches the Pakistani market. That is because the infrastructure here is not responsive to disruptive technologies, only incremental changes. Riding the coat-tails of a highly successful venture that is.
Despite Ignite and NIC‘s sincerest efforts, the Pakistani investor continues to focus on retail shopping, real-estate, food, tourism, to name the big money items. You will notice most local technological innovations orbit that sphere as well. Such as FoodPanda (formerly EatOye), Zameen.com, Daraz.pk, et al. but the kind of risk required to innovate something else will be met with just the fiercest resistance possible.
3. No skin in the game
The phrase, invented by Nassim Taleb, stems from the idea that unless you are exposed to just as much risk as all your other stakeholders, you will not be as connected to the project as everyone else.
This does not mean that everyone should share the same equity, it just means that whatever investment is made from one stakeholder (e.g. time, money, resources, etc.) should be matched by others in some form. So if one is putting in a lot of money, the other should be putting in a lot of time.
This also enforces an unofficial regulation within the system. Nassim proposes that with this model enforced, we might not even require regulatory bodies for businesses.
A business operator isn’t going to be as invested in a business if they have less, or nothing to lose. The idea of a “safety net” comes into play here. If a stakeholder has other means of income, or external funding, vs. one with nothing else, then the one with passive income could decide to try something else, leaving the other stranded. Distributing the risk unevenly.
This is all too common in Pakistan. One founder pours their heart and soul into a project and the other might change their mind at the last second and everything can fall apart. You might be thinking, “we’ll do the paperwork, well…”
4. Irresponsible spending habits
Some businesses have a tendency to accumulate a lot of wealth very quickly. Sometimes, more wealth than people know what to do with. If investments/profits/revenue are seen as extra wealth instead of ROI, people end up spending the entire company’s net worth on improving their quality of life. This is both irresponsible and even borderline criminal (depending on what stage the funding was usurped).
The challenge here is that lack of financial responsibility is a bad habit and a faltering mindset. As long as the mindset exists, the company’s money is not going to be in safe hands. Even with the most noble intents, such a person ends up overspending on equipment and facilities for the office space.
If all of the company’s profits are basically bonus for the CEO, then the company is never going to grow.
Another telltale sign of such a business is ludicrous pricing. Either so low that it becomes unsustainable, or so high that you can’t find viable clients. This usually happens to first-timers, but it does happen a whole lot.
5. Entrepreneur is only in it for the title
There are people everywhere who go about romanticizing the idea of running a startup without having to go through any of the struggles. This is a short-lived experience, because such people are willing to start operations with even a half-baked idea, leaving behind the crumbling husk of a would-be successful venture.
This could be because the founder is already rich. Or, perhaps they were opposed to the 9-5 suit and tie routine. Or any number of reasons that end up with a person taking on a title by setting out to accomplishing something, but not actually doing it.
Businesses built as shrines to individuals aren’t built to last. Their purpose is limited to labels and temporary accolades. Which, when achieved, renders interest in the rest of the process obsolete.
The biggest indicator of such a person is that any discussions with them about the future of their business will sound more like a wishlist than a plan.
6. Building only for an international market
There exists a mindset, especially in online businesses, that encourage entrepreneurs to keep businesses global. That’s where the money is, after all.
The desire to launch a product with global appeal is inescapable. However, global markets are extremely competitive and the opportunity to profit from those markets is exponentially harder than operating in a localized market.
While some businesses profit off of being available internationally, e.g. Tech Blogs, tourism and raw materials. Some entrepreneurs don’t realize that they can reap benefits by remaining local, e.g Slantys, Shezan (FMCGs), Gourmet, Nayatel, etc.
Imagine, a producer comes to you with the idea to make a movie in Pakistan that will succeed in India. Not realizing that if you make a movie for Pakistani audiences, it won’t sell well in India. If we make a movie for Indian audiences, they have plenty of their own and have no reason to watch ours. Lose-lose
That wasn’t a hypothetical scenario, by the way. We are talking about the flop movie “Dekh Magar Pyar Se”, which, this writer was involved in the early-stage development of.
7. I have the idea, the rest is just details
Ideas, however, are dime a dozen, anyone can come up with an idea, or so they proverbially say.
It was rampant innovation that brought us platforms like Uber, Air BnB and OpenTable. The thought, “I can do that better” brought us Lyft, OneFineStay and Foodpanda/Foodora. Misplaced confidence makes many an entrepreneur go “I can do that too”. Business graveyards are full of the latter; these half-baked, poorly executed ideas.
Alternatively, there will be people who will be non-stop good idea machines. However, that will be the sum total of their contribution. These people have an overlap with the kind mentioned in point Y and Z in that they expect someone else to do the dirty work for them.
Nobody can execute your vision better than you can. While you can outsource small parts of your vision to stay focused, you cannot do it to the whole thing.
People who put the entire operation in someone else’s hands are going to watch their business die a slow, painful, yet easily avoidable death.
8. Had time for everything else but the startup
My son is graduating this week, I have to go attend to that. The parents are elderly, they need my attention. Daughter needs pick and drop from school. I have a family thing in a different city, I have to go meet someone for this thing I’m buying/selling, I need to go check on a family/property dispute.
All these words still echo through the skeletal remains of thousands of startups. Admittedly those are all legitimate reasons for people to be preoccupied, but someone who is serious about running a business will have to come to terms with the fact that this is part of life and businesses need to function despite all of those things.
There are people who tend to their affairs and get right back to work. If someone is happy to leave the office at the drop of a hat, then that someone is not really interested in the work.
9. Chasing only after whales
A whale in this business is anyone who is spending more money than you know what to do with in a whole year. This usually happens when a huge contract gets announced, like a government, military or some high-end NGO. This trickles down into the economy through a series of smaller outsourced tasks.
Those with the right connections pick up such contracts and use them to expand their operations and businesses.
The fact that someone would take a huge risk and try to make it as an entrepreneur is, on paper, incredibly irresponsible. All the motivation, hardwork and energy can’t guarantee you any form of success. In Pakistan, there are so many factors at play that make things difficult for the average person as-is, that entrepreneurship takes on so much additional risk. There are layers upon layers of social, political, and personal conflicts that Pakistanis are brought up with that just breaking through them should be grounds for some form of reward. However, the world does not reward struggle. So if you are hustling out there and have succumbed to any of the above, know that this is part of all of our journeys and we hope to write about you some day when you are a runaway success.
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