Pakistan set to manage $200m Venture Capital Fund by 2011
By Muhammad Ali Malik

ISLAMABAD—“Pakistan Software Export Board (PSEB) is targeting Venture Capital funds of around USD 200 million by 2011. PSEB intends to launch an Entrepreneurship Development Program which will assist IT companies in assessing overseas Venture Capitalists, building Boards of Advisors and Directors and undertaking IPO”, a spokesman of PSEB said in a statement.
The recent example of two leading US based Venture Capital (VC) firms, ePlanet Ventures and Draper Fisher Jurvetson (DFJ), providing funds to Naseeb Networks, speaks volumes of the trust placed in the potential of the Pakistan IT Industry by foreign investors. Naseeb Networks is a leading provider of online recruitment (rozee.pk), social networking and related services in Pakistan. The spokesman further stated that the funding will be used by Naseeb Networks to accelerate the growth and leadership position in target markets by investing in sales forces and marketing expansion. Another similar example is the leading Pakistan IT Company LMKR, which received an infusion of private equity from a leading UK based private equity fund Actis.
These investments demonstrate an abiding confidence in the Pakistan IT Industry by the international financers. As Naseeb Networks is focused on local market rather than export market, the investment also shows confidence in the economy of Pakistan, Internet penetration trends and online usage. Pakistan’s current internet penetration is around 7.5 percent as compared to India’s 4.5 percent. With over USD $500 million recently invested in the country’s broadband and WiMAX infrastructure, the internet penetration will increase upto 16 percent over the next three years, the spokesman added.
Several Pakistan based IT companies like Scrybe, Ultimus, Mobile Complete, Pixsense and Renaissance 2.0 etc. have already obtained foreign financing from international VC firms and other investors. Just like firms in other industries, IT firms also require funding for growth; however traditional financiers like banks the world over do not prefer lending to smaller IT firms. The prime reason for this reluctance is that the only collateral/asset that small IT firms have is Intellectual Property, which banks find hard to attach a value to. This is why Venture Capital is so essential to the IT industry. In addition, Venture Capital, also referred to as “smart” money, is suitable for small IT firms which are usually run by engineers with limited financial and marketing expertise. Venture Capitalists bridge this gap by providing mentorship and a network of international business contacts.