Why do startups fail in Pakistan? Here are the 5 reasons entrepreneurs should avoid it

IT enterprises make it challenging to start a business in Pakistan, due to which Startups fail in Pakistan. Even in the usual sequence of events, starting and maintaining a startup is demanding.

Lack of capital, a lack of opportunities, and a lack of entrepreneurs with expertise in developing a profitable product-based B2C (Business to Consumer).

On the other hand, not everyone is cut out for a life in the startup world, and the sole reason that Startup failed in Pakistan. Entrepreneurship is not for everyone, nor do most people possess the necessary skills to succeed. On the other hand, entrepreneurs face some of the most difficult challenges in the industry. In Pakistan, nine out of ten new businesses fail within the first year of operation.

Why do startups fail in Pakistan? Top 5 reasons entrepreneurs should avoid it

The startup services in India are far more comprehensive than those in Pakistan, and they cover a wider range of topics which can also be among the reasons why Startups failed in Pakistan. These benefits help a startup’s most critical phase of development: putting a concept into action and making it marketable.

The National Startup Honours is an Indian government-sponsored program recognizing and rewarding successful start-ups. To be eligible for this award, a startup must be innovative, active, and have the potential to change the market.

On the other hand, Pakistan is a much less developed and advanced country than India, due to which Startup failed in Pakistan. Over 90% of Pakistani startups fail each year, whereas only 80% of Indian startups fail in the first five years of operation.

Additionally, Pakistanis face limited funding or revenue generation, operational issues, and a lack of development potential or adaptability in their businesses.

Here are a few reasons why Startups fail in Pakistan.

Not Thinking Big:

The “Billion Dollar Concept” is one of the most common omissions among business owners and is also why Startups failed in Pakistan. Most business owners lack a comprehensive vision. To put it another way, they have too small of a vision.

This includes not pursuing international expansion, new markets, addressing a “major issue,” and not marketing to a more significant niche.

To grow into multi-billion dollar enterprises, startups must focus on problems that can be expanded internationally, not to make Startups fail in Pakistan.

The Funding Curse:

However, companies that do receive investment often fail because of the fundraising mindset of VCs and “investment firms” in Pakistan, not because their concept was flawed or their staff was ineffective, which resultantly causes Startup failure in Pakistan.

“Take $50 000 and give me 52% of your company” is a common approach by regional investors, but it may have long-term consequences. This, for example, makes it more difficult for businesses to secure additional funding because they lack corporate rights. As a result, the company was wiped out by investors. “Management rights to zero rate of success,” as the saying goes.

Copying Others:

Since the beginning, Pakistani entrepreneurs have been making copies of successful startups, which is also one of the primary reasons startups failed in Pakistan. It is common for entrepreneurs to spend hours on Google looking for a business model they can copy.

This is usually the fatal flaw in a new business venture. Even if something is a success, it doesn’t mean you’ll get a piece of the pie. Most Pakistani businesspeople attempt to imitate other countries’ successful start-ups and business models, most notably India.

In their minds, the economies and work cultures of the United States and India are comparable, but this is not the case.

Indian culture, economics, and entrepreneurship are distinct from our own. The exact opposite is true. Aiming to understand and “correct” this idea is a good goal for us to pursue. There are two examples of this: UBER and Careem.

Entrepreneurs in Pakistan started developing similar ride-hailing apps to Uber and Careem after seeing the American company’s popularity soar in Pakistan. Which Startup failed in Pakistan for obvious reasons.

As a result of the Uber team’s vision, an actual problem was addressed rather than just another idea being floated. However, you can have a clear vision for the startup’s future.

They are not focused:

A new business shouldn’t try to be everything to everyone. Lacking resources, it focuses on a wide range of market categories and has a limited budget and staff, due to which the Startup failed in Pakistan.

Instead, it is meant to be focused on a specific area of expertise. Due to the lack of a distinct customer niche, businesses that grow too quickly and lose focus are more likely to fail.

As a result, the first and most important principle is to focus on your area and gain strength there. You won’t be willing to branch out into other markets until you’ve established a solid foothold in your niche.

Poor Business Location:

Businesses in poor locations can’t effectively communicate with their customers, and this is true. Customers won’t buy from you if they can’t find you, so you’ll lose money. Many other factors can affect a small business, such as how your building looks, how many people live nearby, and whether or not your business is located near competitors, which can cause Startup failure in Pakistan.

‍Bad Management:

All of the aforementioned issues arise due to a small business owner’s inability to manage and make decisions. Lack of focus and inefficient use of resources can result from poorly managed small businesses.

As a small business owner, it’s impossible to anticipate all of your company’s challenges. Don’t ignore these concerns if you want your small business to be a success. What do you think? Lack of experience in your field can be detrimental to your company’s success.

Small business owners who lack expertise in finance, advertising, and sales are required to perform various tasks. Our fear of failure will be confronted head-on this month.

To elaborate further on why Startup failed in Pakistan, we interviewed local founders who’ve had their businesses fail, searched through the archives of failed i2i companies, and analyzed analysis posts written by founders brave enough to discuss what went wrong.

According to Silicon Valley experts, nine of ten new businesses fail within the first year of operations. In Pakistan, analysis of Startup failures is almost nonexistent. But to recover from the reasons for Startup failure in Pakistan, be honest about your mistakes and learn from them if you want your community to be a successful

Experience:

It took me only five months after starting work at a start-up before it went bankrupt. Even though I wasn’t a founding member, I was a member of the founding team, which gave me a unique perspective on what went wrong.

If I were to list all of the reasons why we had to close down operations, it would look like this:

1) Failure to bootstrap for longer than we needed to – Immediately after we secured our first major client/deal, we moved into a pricey office space, purchased furniture, expanded our team, and hired administrative staff. We might have been able to keep our doors open longer if we had avoided all of these fixed costs.

2) Not having the right people on our board – Because the board and management were not on the same page about the company’s future, we spent a lot of time-fighting fires instead of concentrating on our product and sales.

 3) Not understanding the client’s needs and timelines well enough – I believe the team could have done more to solicit feedback regularly so that our product could be tested to the fullest extent. In our first big demo, I realized in the middle of the meeting that some features didn’t work as they should, and some didn’t meet client expectations.

4) Not having the technology capabilities in-house – Outsourcing the development of our platform resulted in a lot of wasted time and pushed back delivery dates.

Of course, this isn’t just a Pakistani phenomenon; there are many other of why Startups failed in Pakistan. Running out of money is the second most common cause of startup failure in a CB Insights study of the top 20 causes.

There are many people to blame for financial management issues, not just the founders. Investing in Pakistan is notoriously tricky because of this. Eighty-four percent of entrepreneurs in Pakistan say that raising capital is challenging or somewhat tricky, according to our Pakistan Entrepreneurship Ecosystem Report 2016. Almost all of the people we talked to for this have agreed. The biggest issue is still a lack of VCs and deals in the ecosystem.

Despite the existence of angel and venture capital funds, there has been a significant decrease in investment activity, from 23 deals in 2016 to just 11 deals in 2017. According to the GALI Accelerating Startups in Emerging Markets report, accelerators’ positive impact in emerging markets may be limited because of investor and entrepreneur cultural bias and misaligned goals. According to the study, investors and entrepreneurs can better connect through acceleration programs.

Also Read: How to raise funds for a startup In Pakistan- Complete Guide

Some essentials as your blueprint to establish a startup company to counter all Startup fails in Pakistan:

Plan your business; however, it is essential to have a vision, but it is also necessary to put together a standard business plan. You lay out your goals and devise a strategy for accomplishing them. An effective business plan concisely describes how you envision your company’s future growth. These strategies will be implemented over the next two to five years to eliminate the reasons why the Startup fail in Pakistan.

Have a secured funding source; you’ll need enough money to get off the ground. There is no one-size-fits-all strategy for businesses. As a result, the best course of action is to design your company from the ground up according to your vision so that the initial startup costs are tailored to your specific industry. As a result, your company may require more funding than others or the other way around. The unique idea will always be sold and liked in the market.

Let the right people work for you. You’ll undoubtedly require assistance in the early stages of establishing your business. What do you need to do before this? According to research, finding the few people who recognize your potential is the best way to begin a startup.

Get a location for your business or build a website. It’s critical to have a presence online, whether in a physical storefront or a website. Your business needs a place to operate, whether it’s a workplace, a retail store, or a manufacturing facility.

The link between migrant entrepreneurship and economic growth is a topic that can be discussed, as many countries have implemented policies to encourage migrant entrepreneurs. A startup visa is a temporary residence permit granted by various governments to entrepreneurs seeking to relocate to another country to start a new business or raise additional capital.

Also Read: Which Are The Most Successful and highly Funded Fintech Startups In Pakistan 2022?

Because a startup can have a profound impact on individuals and the world as a whole, many countries offer visas for startups. Startups have the potential to impact the economy significantly, and we need to eliminate all the reasons why Startups fail in Pakistan. You need to follow the guidelines to make startups successful in Pakistan collectively.