There is no doubt that the global economic downturn has seen a subsequent slowdown in foreign investment coming into Pakistan. According to a prediction from Profit Pakistan, there is a funding crunch that dictates the overall annual raise for 2022 to be less than that predicted based on the momentum from last year.
However, William Bao Bean was present at +92Disrupt: ISL Edition to reassure us that this does not spell the end for foreign investment in Pakistan and to shed light on what we can learn from other markets.
Who is William Bao Bean?
Those familiar with the startup ecosystem are aware of Bao Bean’s expertise, having been termed a celebrity in the VC world. William is the Managing Director of Orbit Startups and the General Partner of SOSV.
- SOSV is the 4th most active VC investor globally, as per Pitchbook
- SOSV currently has $1.3 billion in assets under management
- SOSV provides $150,000 in capital and introductions to raise follow-on rounds for companies under Orbit’s portfolio
- Orbit Startups is the first and longest-running startup program in Asia
- Orbit invested in 40+ new startups in Asia, the Americas, and the MENA region in 2021
Putting it simply, Orbit Startups is a program that invests in and helps startups get to where they want to go. However, they differ from most VCs in that they are interested in investing in a range of verticals. Their goal in Pakistan is to make a difference by bringing international learning and foreign investment into the country.
Bringing Technology-Driven Change to Pakistan
William spoke at great length regarding technology as a tool for disruption – a means rather than an end. Addressing misconceptions people often have regarding tech, William posited that one should approach technology as a solution to problems.
Thereby even enabling new opportunities to arise by bringing in fresher innovation:
“We’re looking at technology as bringing new ways of doing things. In many countries around the world, things have been done the same way for a very long time and we’re here to disrupt that.”
To its credit, Orbit has been successful thus far in identifying the needs of the Pakistani market when it comes to digitization and strengthening them by backing pre-existing players. These include eCommerce, fintech, retail, B2B, and B2C startups such as PriceOye, 24SEVEN, Dastagyr, and DigiKhata amongst others.
Lessons Pakistan can Learn from Foreign Markets
Suspicion in e-commerce and q-commerce platforms is not a problem that is solely limited to Pakistan. In foreign markets all over the world, there is a huge issue of lack of trust that exists between buyers and sellers when it comes to purchasing products online.
The Agent Model
A foreign model that William Bao Bean believes can be applied successfully to a Pakistani context is the agent model. This builds upon the trust that has existed for generations between mom-and-pop shops and the consumer.
William Bao Bean cited 24SEVEN as an example of a startup that pivoted to the local agent model successfully, having recently closed a $6mn pre-series A round. 24SEVEN realized that instead of competing with kiryana stores, they could empower these small retailers by providing B2B and B2C services through digitization with the launch of Apni Dukan.
Since the pivot, the community commerce platform now has 2,000 kiryana stores onboard across five cities in Pakistan, with its GMV reportedly growing 40% monthly with positive contribution margins.
Wiping Out the Middle Man
To ensure a smooth flow of operations it is important to remove the middle man. This can occur through the digitization of small businesses and connecting the supply directly with end customers, users, and community agents.
Bao Bean emphasized the power tech holds to drive a leapfrog effect that can fundamentally change the Pakistani market. SOSV-backed B2B marketplace, Dastagyr which raised $37m in its Series-A round is proof of how digitization can change physical logistics and the supply chain.
It’s All About the Ecosystem!
Bao Bean also acknowledged that foreign investors coming into the Pakistani market may disregard partnerships. However, you can’t do it alone, especially when not physically present on the ground.
This is why, according to William it’s important to partner with large companies, VCs, and ecosystem leaders like +92Disrupt wherein conferences become a primary means of bringing all players together.
Partnerships between the companies that Orbit has in its portfolio are also essential when it comes to cross-promotion. Cross-promotion and encouraging companies to work together in return for revenue share also makes them resilient. This creates a strong network that is difficult to compete against.
According to William Bao Bean, the kind of cooperation Orbit pushes for is one where the companies do not have to spend money on advertising. Instead, they work with each other in partnership to acquire users and then share the revenue.
Capital & Foreign Investment in Pakistan
The third learning from Pakistan that William Bao Bean drew upon was that of monetization. Bao Bean highlighted how Orbit’s role as a global player in the local market is to bring in international expertise and foreign investment to Pakistan rather than telling entrepreneurs what to do and how to run their businesses.
The way that a business makes money is often not through its core service. Another aspect of foreign markets that William Bao Bean believes Pakistan can benefit from is leveraging payment to make money in several different ways. This is the reason he gave for Dastagyr raising the largest series A in the history of the country. Simply because they didn’t need the money.
Spend a Dollar, Make More Than a Dollar
William rejected the blitz scaling model, focusing instead on the need to build companies with solid fundamentals. Referencing his experience running Soft Bank’s venture capital in China, Bao Bean emphasized that money is not a weapon.
“Anything that you’re spending a dollar and getting less than a dollar back is an experiment. It’s all about positive unit economics. The easiest way to raise money is not to need it.”
Pakistan for Pakistan
Above all, William posited that Orbit wants to give entrepreneurs the ability to have a choice. To do Pakistan for Pakistan.
Drawing upon examples from foreign markets, William stated:
“Do you want to be like Indonesia which is a battlefield between Chinese Internet companies and Western Internet companies? Do you want to get colonized again? Like India did? Where it is a battle between Indian proxies backed by Chinese Internet companies and American companies? Our goal here is to be able to have a choice. If you want to get bought out by a Chinese player that’s your choice. But at least you should have a choice.”
Getting to the heart of Orbit’s philosophy, Bao Bean said the goal was to bring learnings from foreign markets to Pakistan in order to create a resilient business that can survive in the face of fluctuating economies.