TLDR:
Key Points:
- Shifts in consumption patterns contributed to the failure of startups in Pakistan.
- The influx of cash without stress testing of models led to unsustainable operations.
In a recent article on Dawn, the reasons why startups fail in Pakistan were discussed. Rabeel Warraich, Founder and CEO of venture capital fund Sarmayacar, highlighted the challenges faced by startups in the country. Pakistan lags behind in digitization compared to other countries, with only less than two percent digitization in e-commerce. The trend of too much money coming in from international investors led to certain habits that were not conducive for profitability or sustainability. Startups focused on buying customers through marketing and offers, but lacked a profitable business model to retain those customers.
Specific sectors like quick commerce, B2B commerce, and e-pharmacies received significant VC funding but faced challenges in sustainability. The economics of 15-minute grocery delivery services, for example, did not justify the costs involved. Furthermore, the price-controlled market in the e-pharmacy sector disrupted traditional distribution channels and hindered customer retention. Despite these failures, success stories like SimPaisa, a payment aggregator, demonstrated the potential for sustainable models and significant returns on investment.
The article emphasized the importance of realistic business models, efficient operations, and consumer-centric approaches for startups to succeed in the evolving market landscape.
