Great!!! I hope, this is just the start.
http://www.arabnews.com/Article.asp?ID=18667
By Ehtesham Shahid, Special to Arab News
RIYADH, 17 September — The prediction of shrinking returns in the West has driven venture capitalists to the developing world. Big players in the United States’ Silicon Valley are now interested in financing startups in Asia, where economies are growing strongly. In addition, big and small indigenous players in the local markets are making their presence felt.
TMT Ventures Limited is the first venture capital company registered under laws promulgated by the Securities & Exchange Commission of Pakistan (SECP). The company has the mandate to invest in startup companies in the technology, telecommunications and media industries. TMT Ventures Chief Executive Sohaib Umar has brought a global outlook to venture capitalism (VC) in the country. Before taking over at TMT Ventures, Umar worked as regional Internet/e-commerce analyst for CLSA Emerging Markets in Hong Kong and accumulated eight years of regional research experience in the telecommunications, utilities and Internet sectors, working for top-tier brokerage firms.
On the prospects for VC in Pakistan, Umar said, “In Pakistan VC has just started, and we are the pioneers. We would very much like to see more venture capitalists coming into the market, as the industry can only exist when multiple players are present. As compared to the United States, VC is at a nascent stage in nearly all Asian countries, including India. However, Pakistan is even behind India in terms of the stage of development.”
According to Umar, VC needs two major ingredients to start with: A favorable regulatory/fiscal regime and the availability of institutional risk capital. It was only in 2001 that the Securities and Exchange Commission of Pakistan introduced new VC rules, which allowed income tax exemption to VC companies and funds for a specific period. Umar feels that now institutional risk capital will become available, but investors will come forward gradually as the acceptability of the concept grows. While TMT Ventures has received offers to invest in other Asian countries, the company plans to keep a strong focus on Pakistan and hopes that experience combined with hard work and smart decisions will result in profitability.
“This is our mandate as per the VC license issued to us,” Umar explained. “There is so much to do in Pakistan in the telecom, media and technology sectors that it does not make sense to go out and invest elsewhere. VC is typically a geography-centric business, or at least our VC model is like that, just as is the US model. It is not like stock market investing where you can invest in any market globally, which is open to foreigners. A VC-funded business grows and prospers due to the relationships, synergies and support provided by the VC. For this, a strong local presence from the VC is necessary.”
To further its plans, TMT has tied up with Pak Kuwait Investment Company (PKIC) to form TMT-PKIC Incubation Fund, with an investment of 50 million Pakistani rupees from TMT, 75 million Pakistani rupees from the Pak-Kuwait Investment Company and additional funding from a consortium of institutions. The TMT-PKIC Incubation Fund, worth 250 million Pakistani rupees, will invest in startup and early stage companies in Pakistan’s telecom, media and technology sector. The fund has already invested in four companies; three in the technology domain, and one in media. It is expected that by year-end the fund’s investments will exceed 100 million Pakistani rupees.
Detailing the fund’s investment strategy, Umar said, “TMT is largely unfazed by the fluctuating fortunes of the information technology sector, but we are clearly unwilling to put all our eggs in the same basket. IT has suffered over the past two years, both in terms of valuation drops and shrinking business opportunities as companies reduced their IT spending. However, it does not mean that IT is dead. The need to automate businesses and make the best and most efficient use of resources with the help of technology is genuinely there.”
He also cited another very valid reason for continuing to fund Pakistan’s IT sector. “With the cost cutting drive now in full swing, the trend toward outsourcing from high-cost North American and European markets to low cost markets is bound to increase in the medium to long term. This is positive for those IT companies that have proprietary software, or serve a market niche, which is loyal to them, and are more cost effective than their competitors. We look for companies with these characteristics and we are confident that they have a bright future ahead.”
Despite the fund’s goal of supporting the growth of Pakistani companies, Umar emphasized that this is not philanthropy and that hard facts must be used in deciding where investments are made. In fact, it is the fund’s fiduciary duty to its shareholders to invest in the most lucrative projects. However, Umar felt that this does not mean that venture capital cannot be empowering for the common man.
“We believe venture capital as a phenomenon has huge positive effects for both the economy and society,” he said. “VCs empower people at the grassroots level, both in terms of grooming entrepreneurs and providing employment to young professionals. With this backdrop I believe we do not have to go an extra mile to fund a project for purely social purposes.”