The previous year kick-started the momentum for Pakistani entrepreneurial ecosystem to gain traction as one of the attractive emerging economies to invest in the Asian region. There have been major disruptions in the ecosystem with the influx of international capital and launch of indigeneous funds. Local investment stakeholders have been collaborating with international partners launching Pakistan-focused venture capital funds, and inidgenous funds are strengthening their foothold.
Karavan is the newest venture capital fund to announce its activity in Pakistan with its investment in Mauqa Online led by i2i Ventures and Queno. The fund has already invested a total of $75,000 in two startups and is closing another round of $50,000 in the coming two weeks.
Created with a purpose to provide smart capital to deserving high potential startups while remaining cognizant of their needs beyond just the funding. Karavan partners are not typical venture capitalists, but are equipped with industry knowledge, a vast global network of domain experts with years of experience working within the startup ecosystem in Pakistan.
In conversation with TechJuice, Partner Karavan Amad Mian shares the motivation behind kick-starting Karavan,
“Even with a new number of venture capitalist firms opening their doors to Pakistan in the past one year, there is still a need gap for early stage capital, smaller ticket sizes, and capital that comes with knowledge, expertise, and network connections, as well as kindness, compassion and empathy towards the entrepreneurs.”
Partnering up for a mission
Karavan is being led by three partners, Amad Mian, Jawad Mian, and Meenah Tariq with years of experience in the technology and entrepreneurship sector of Pakistan and the Middle-East region.
For the next two years Karavan will source the funding of startups only through partner capital. By being early investors, Amad believes they will have ample runway to capture and contribute value. Building upon this experience they will then raise a larger fund to follow on and support their companies through Series A funding rounds.
Amad has experience working in digital strategy and e-commerce sectors, and brings the expertise of product, marketing, and technology. Additionally, he is the founder of Project Code, cultivating digital literacy in the Gulf.
Jawad’s experience is in principal investments. He specializes in finance, strategy, and fundraising to help companies scale. He is also the founder of Stray Reflections, a global macro research firm and brings to the table a vast network of connections to funds and experts in the Middle East and beyond.
Meenah has helped early-stage startups to scale. She was previously the Head of Strategy and Accelerator at Invest2Innovate, and serves as mentor, problem solver, and connector for the founders, providing expertise and insights to accelerate growth.
Exploring Pakistani startups
The Karavan VC Fund is industry agnostic, looking for high quality founders creating customer-centric businesses with an eye on the potential to scale.
The fund is closely connected with most of the incubators and accelerators across the country, and invite others to reach out and connect as well. It is actively sourcing deals from these support programs as well as personal networks with a collaborative approach.
Amad has observed that in most cases, startups here are looking to raise $200-500k (seed or pre-A), and therefore Karavan aims to co-invest with other VCs and angel investors, and also come in on bridge round to cater to the gap in funding before startups can raise larger rounds.
Karavan is looking for founders that have hunger and ambition, are resourceful and resilient, and have the conviction required to ‘sell’ their vision. It puts a strong focus on integrity, as well as their openness to critique or advice, valuing vulnerability and authenticity beyond all else.
One interesting observation of Amad indicates that a number of startups that speak about scaling outside of Pakistan in their pitch decks, without truly giving a snapshot of how they plan to scale within the country. Pakistan is a huge market, and a lucrative one for most types of businesses, and yet we’ve seen that a number of startups do not sketch out how to move from Islamabad to Lahore, or Peshawar, Multan, Karachi, Sialkot. Amad shares,
“We have come to the realization that one of the biggest tests for any startup from elsewhere in Pakistan is to crack Karachi, or from Karachi to move to Lahore. That tests out a lot of their assumptions around scale and growth, and we’d like to see more startups take this leap.”
Are Pakistani startups investment ready?
Amad has been observing that the Pakistani startup ecosystem is maturing extremely fast, with a host of startup support programs and a growing focus on entrepreneur quality. The investment readiness of the startups we have thus far met has been across a wide spectrum. He shares,
“Startups need to focus slightly more on their financials, tax and regulatory structures, to become investment ready. A lot of this work currently falls to the investors, adding to their time costs, which is a contributing factor to a number of startups falling short during the due diligence processes.”
Amad believes that there is over all improvement and more startups are now doing their homework better before connecting with investors. The one additional thing that startups need to be very clear on is their pathway to growth, and the use of the funding that they’re raising.
Does the Pakistani ecosystem understand startup investment?
As more venture funds set up and start to deploy capital, Amad believes it will organically improve terms and valuations. Right now investments are happening across a spectrum as well, there is some exploitation but there are also very smart, sophisticated investors that are on the ‘side’ of the entrepreneur. The entrepreneur needs to be smart in selecting whom they want to partner with, and what the investor brings to the table beyond just the dollars. It is a simple market, and the demand and increasing supply of capital for startups will help create a more equitable ecosystem over time.
There have been multiple instances in the local ecosystem when investors have removed the founders and taken the wheel. Amad understands that there are multiple angles to every situation, however, Karavan believes the founder-investor relationship is one that has to be built upon trust first and foremost, and this trust stems from both parties looking to find a win-win situation and believing that they are on the ‘same’ side – the side of profitability, value creation, and growth. He points out,
“We believe issues come up when there is a breakdown in trust, particularly when the founder and the investor have different ‘why’s or differing opinions on where the company should go in the future. These are the values and ideals that need to be aligned before a deal is forged, to create stronger and more trusting relationships that will last.”
Karavan will focus on giving startups the insight into global trends and a view into staying ahead of the competition with strategic mentoring to hit funding milestones. Leveraging its global network, Karavan will draw support through expertise and will help startups connect with investors beyond the seed funding. The fund may invest small amounts but promises to devote large amounts of time and care, empathizing with founders who are trying to build meaningful businesses.
Karavan has a number of startups in the investment pipeline currently, and are actively searching for more startups to partner with. The fund will be closing its third investment of $50,000 in the coming two weeks. Amad shares that Karavan wants to be the founder’s most valuable partner over a long period of time. That means the fund will only get involved in companies where the partners can personally make a difference.