Invest2Innovate – in collaboration with UK Aid-funded Sustainable Energy and Economic Development (SEED) Program – has recently released the report, Khyber Pakhtunkhwa Startup Ecosystem Report 2021, a first of its kind ecosystem mapping study at the provincial level.
The report collates both secondary and primary data gathered from key stakeholders such as entrepreneurs, entrepreneurship support organisations (ESOs), policymakers, and investors/funders into a detailed diagnostic of the startup ecosystem in KP.
The study was conducted under UK Aid-funded Sustainable Energy and Economic Development (SEED) program supporting provincial economic development and sustainable energy in Pakistan. The program aims to mobilize investment in Khyber Pakhtunkhwa from both public and private sources to generate greater economic, social, and environmental returns.
As nascent entrepreneurship ecosystems such as that in KP are constrained by a shortage of data, the report addresses this information gap by taking a systems view of the ecosystem with an analysis of its key pillars. Subsequently, SEED will employ these insights to design interventions for stakeholders in the ecosystem and add to the overall economic development of KP.
Currently, 63% of Pakistan’s population is below the age of 30, and while the country recorded its highest overall employment rate of 11.56% among the age group 20-24 years in 2020, Pakistan’s third-largest province by population, Khyber Pakhtunkhwa, has the largest youth unemployment rate.
Over half of KP’s residents are young people, who represent an untapped opportunity in helping the province transition towards a digital economy.
Atif Khan, Minister of Science and Technology and Information Technology for the KP Government, emphasized, “The government fully realizes the potential of the startup segment to become a significant contributor to the provincial economy, create jobs, raise exports, and support livelihoods across the province.”
The study uses the Aspen Network of Development Entrepreneurs (ANDE) Ecosystem Survey Instrument focused on five key pillars: business support, finance, policy, human capital, and market. The report suggests that one of the biggest challenges faced by the KP ecosystem is the lack of formal and institutional funding, with 83% of entrepreneurs perceiving the lack of venture capital friendly laws and processes as an impediment.
The lack of funding is an even greater challenge for startups with female founders, as the study found that of the 18 startups that raised funding in its sample, only 3 were female-founded/co-founded (16.7%) compared to 15 male-founded (83.3%).
Additionally, data showed that entrepreneurs (76%), policy individuals (100%), ESOs (100%), and investors (91%) felt that the availability of an adequately educated/trained general workforce is a significant constraint on the ecosystem reaching its full potential.
Entrepreneurship support organizations (ESOs) seemed to echo this sentiment in interviews where they highlighted that often the relative lack of originality in the ideation of businesses in KP (which is a common feature of nascent ecosystems worldwide) could also potentially be attributed to the inadequate entrepreneurial training and education provided to the youth early on.
On-ground engagement with the stakeholders through a focus group discussion helped develop a deeper understanding of the gaps and challenges faced by the key stakeholders. It enabled i2i and SEED Programme to put forth recommendations on ways to remove/reduce these constraints.
Mehvish Arifeen, CEO Invest2Innovate, said, “This study is going to play a critical role in setting up the entrepreneurship ecosystem in KP for success in the future. The insights from this study will give all stakeholders a strategic direction for the way forward.”
Hasaan Khawar, SEED Team Leader, highlighted, “An enabling policy framework is essential to put in place startup-friendly regulations in taxation and registration. Continuous investment in human capital is required. Linkages to new and existing markets need to be established. Women entrepreneurs need a level playing field to access opportunities that are rarely available to them”
“SEED is grateful to the Government of Khyber Pakhtunkhwa, particularly, the Science and Technology and Information Technology Department for its continued support and we hope that this report informs future government policies and plans for this promising sector,” he added.
You can download the complete report here.