The 21st century saw a significant surge in the rise of start-ups. While many start-ups presented new and innovative ideas – such as Uber, Airbnb, a vast majority of these businesses failed even before reaching the seed round — the investment round. This is because start-ups generally do not have a strong backing. Many investors and finance institutions do not treat this industry as the one that might give good return. This is why the growth and success rate of start-ups in Pakistan is a mere 20 percent.
However, for a sustainable and healthy economy, these entrepreneurial ventures should be supported by all possible means. In Pakistan, the work that is being done on a larger scale is under Punjab Information Technology Board (PITB) that selects a minimum of 10 start-ups every year and provides mentoring as well as working space to emerging entrepreneurs looking to scale their business.
The CEO and co-founder of Arch Systems – a US-based sensing automation company, Andrew Scheuermann has opined that the start-up culture is gradually gaining momentum in the country.
According to the CEO, the main challenge faced by most of the entrepreneurs is lack of financing. However, this shouldn’t be treated as a setback now. In fact, what these entrepreneurs should do is to create the ‘value’ of their product and look at every way possible to multiply and grow.
Now, a functioning economy is not categorized on the basis of trade balance, etc. But the shift is more towards the adoption of new strategies and policies to boost the economy.
Scheuermann also believes that the country is going in the right direction and the much-needed start-up culture is thriving in the country. According to him, the success of start-ups depends on the energy and motivation of entrepreneurs. Investors can invest a particular amount of money, but at the end of the day, entrepreneurs have the onus to prove that their business is worth the money invested.
Challenges Faced by Start-ups
Among other challenges faced by almost every other entrepreneur, the most common one is lack of funding. This is why ‘investment’ is seen as a profitable sector by many people. Many organizations are basically managing investment funds and are only investing in sectors which will give good return. Since the return so earned by these organizations is most of the time reinvested in their business, such organizations do not want to take high risk and invests in a susceptible and relatively new venture.
What many investors miss is the fact that through this funding, they are not only being entitled to a share in profits, but they are also benefiting the economy by fuelling a segment that has a potential to thrive in the future. This ‘level of faith and trust’ is unfortunately nonexistent amongst many investors.
What Can Start-ups Do?
Alleging investors for showing lack of interest in start-ups will also do no good to the industry, if the other side of the picture is not completely looked at. What many start-ups do is that they do not draft a 5-year plan to strengthen their case in front of potential investors. Many plans are often half baked and many what ifs are involved which tamper with the confidence of an investor. What an entrepreneur should do is give a fair and true view of the performance till date.
Once a detailed outlook of the business is in front of investors, they can make better judgment with regard to the investment. Also, start-ups should also learn how to present their case in pitch rounds — how to compel an investor to shell out money for their venture. Only coherent steps will help entrepreneurs scale their start-ups.