Going Critical.

The technology scene in Pakistan heads towards a transition to something bigger and different.

It is a hazy morning in Karachi. As the doors open on a 3rd floor office near Hill Park eighteen odd young men and women stream inside a large pastel colored meeting room. The city is still in the process of waking up but at 8:20 am these twenty year old are set to start their ten day boot camp for tech founders and startups. Part of the third incubation cycle at The NestIO, the twelve teams will spend four months transforming proof of concepts and slide decks into viable technology businesses.

In three private schools, off Clifton beach, thirteen years old are learning how to teach their computers to calculate prime numbers using Scratch, an online education tool prepared and shared by MIT. Up north on the same longitude, a group of returning expats in Lahore and Islamabad are putting together a nationwide curriculum for teaching high school students science subjects online. In Peshawar, this winter, side by side with their daily battle for the right to live a normal life, startup teams and mentors fast track new product launch plans using the startup weekend acceleration program. In Punjab and KPK province wide projects integrating government services and technology are being rolled out every other month. The groundswell created by MIT and Cambridge alum Dr. Umar Saif at the Punjab IT Board is setting the pace for similar teams in Islamabad, Peshawar and Quetta.

In religious seminaries across the country a new fad is turning heads and headphones. Huffaz (individuals who memorize, teach and recite the Quran) are buying laptops and signing up in droves to Skype and WhatsApp networks. No it is not a new terrorist threat in the making or a conspiracy to baptize Facebook from the inside — they are using the internet and VOIP to teach Quran to children of expatriate families in Europe, Far East and North America.

In Sialkot, Faisalabad, Gujranwala, Hyderabad, Sukkur, Quetta, Mardan, Hunza and Gilgit, young men and women are using technology to do something their elders only dreamt of. Change a small part of their world — without capital, without resources, without institutional support, without government handouts. In their own small way, contributing here, taking a stand there, and making a difference by starting an underground revolution in their individual communities. Seeded by the energy of youthful dreams, powered by hope, technology and the internet.

Pakistan has walked a long road when it comes to its domestic technology scene. Starting with the formation of Systems Limited, the very first home grown technology business in the late 70’s, the industry now employs between 25,000–35,000 individuals across the world. It forms an invisible back bone that runs domestic ATM switches, communication networks, financial security exchanges, airlines, enterprise applications, payment systems and games for smart phones. In 1994 when PASHA, the association of technology companies, was formed the group of tech founders were counted on a single hand and fit around a small conference room table. Fast forward to 2016 and there are over eighteen hundred businesses that earn their living through technology, software and IT enabled services.

At three recent tech meet ups in Karachi, Lahore and Islamabad you could clearly see diversity at work when it came to technology companies in the country — across demographics, age groups, opinions, focus, customer foot print and size.

However the biggest change across the four decades the industry has evolved in, is not in numbers. It is a shift in focus. There is now a clear preference, a road map of sorts that leads to startups, products and exits for young men and women in the field. A computer science graduate in the early nineties in Pakistan would be lucky to get to pick between System Limited, Aga Khan University Hospital ISD, IBM, Oracle (then Oratech Systems) and a few other local software houses in Karachi, Lahore and Islamabad. Multinational companies as well as government organizations essentially ran operations and networks and were not great fit for adventurous souls.

Today the same talent is likely to opt for boot strapped, organically funded startups that begin as collections of free lancers bidding for work on online platforms and evolve into product companies. Young companies formed in senior years at local universities are hiring interns from their own junior and sophomore batches. If you are a little more risk averse, rather than starting out with your own capital, you can have a choice of joining growing teams in your neighborhood with stars in their eyes and cash in their wallets.

The local ecosystem is close to going critical. Term sheets, investors and incubators abound. Ideas, teams and deal flow are picking up pace. Well publicized exits and seed rounds help. In 2015 six month old startups were justifying valuations at under half a million US dollars. 2016 will see the first series A round close in the million dollars plus valuation for a year old team. And the first 5 million dollar plus exit for a local seller led by a local buyer. The proliferation of cheap smart phones and mobile broad band internet is driving demand for services as well as localization. And it is feeding an army of young technology teams refining their craft in the local market. Experienced expatriates returning home to be close to aging parents and family are bridging gaps with capital, expertise and networks.

But there are challenges.

Decades old business models are being contested by young upstarts — not just in Pakistan. A tax break on technology exports earnings is up for renewal later this year. A revised electronics crime ordinance has been mired in controversy. The debate on technology policy, governance, privacy, access and control is going around in circles because good data on the industry and its impact on the national economy doesn’t exist. Growth rates are restricted by the availability and quality of talent, across all organizational levels. The financial services eco-system and the cross border payment network still hasn’t upped its game. In many respects Pakistan still remains in the dark ages when it comes to payment systems and online transfers. While mobile payment solutions have hit the ball out of the park with their numbers on domestic bill payments and offline money transfers, young freelancer in Karachi, Lahore and Islamabad are still restricted to the aging SWIFT network for international engagements.

The biggest challenge of all however has been isolated and inconsistent decision making in Islamabad. Policy reversals and U-turns send wrong signals to investors, global partners and entrepreneurs. If only the working relationship between the industry and the government improves, if the government could for once pull in the same direction, lost ground can be covered in the areas of policy, logistics, infrastructure, academia and jurisprudence. It is the final missing link that can mean the difference between discarding baggage, breaking through barriers and taking off or fizzling out and slowing down to a crawl on the final stretch.