Karavan is a VC startup.
The problem we want to solve is lack of early stage and follow on funding for Pakistani startups. Perceived risks act as strong deterrent for institutional capital creating a big funding gap. Our solution is to identify strong founders and back them with an initial investment of up to $100,000.
Karavan is set up as a partnership. For the next two years we will deploy only partner capital. By being early investors, we will have ample runway to capture and contribute value. Based on our experience, we will then raise a larger fund to follow on and support our best companies through Series A.
Why we exist
Pakistan, home to over 200 million people, is one of the most exciting countries in Asia. But startup growth lags rest of the world. There are obvious reasons for this: a strikingly young population, late arrival of 3G/4G, and lack of early-stage funding.
Pakistan’s median age is 23.5 and by 2030 it will still only be 25. An average 23-year old in the country is yet to start a career and does not have much discretionary income. By comparison, the median age is 25.3 in Egypt, 27.5 in Bangladesh, 29.3 in Indonesia, and 32.6 in Vietnam.
India’s median age today is 28.2, compared to 25 ten years ago. In this time, Indian startups have raised over $35 billion in funding and created over $90 billion in value. There are twelve unicorns in India today and 65 startups that are valued between $100 million and $1 billion.
India got 3G in 2008 with Pakistan starting only in 2014. We have the media industry to thank for this, which lobbied to delay the rollout. Feeling threatened because video consumption would increasingly switch to mobile as is now the case, one media executive had privately said, “We won’t let 3G/4G come for the next decade.”
As a result, total venture funding as a share of GDP is only 0.01% in Pakistan, versus 0.4% in India, 0.6% in US, and 0.8% in China and Indonesia. Outside of Chinese investments, Pakistani startups raised approximately $30 million in 2018.
Given the nascent ecosystem, there’s a massive spread between talent in the country and the resources available to support them. Our mission is to close that gap by providing capital and expertise at the earliest stage.
How we operate
We want to be the founder’s most valuable partner over a long period of time. That means we will only get involved in companies where we can personally make a difference.
Create a space to work together: Build dashboard to track KPIs and coach founders until they hit post-seed/series A milestones. Collaborate with them on strategic questions or decisions.
Activate our global network: Draw collective support from our growing community to offer expertise and insights across the entire spectrum of company building.
Arm busy founders with insights and global intel: Give companies insight into global trends and a view into where the industry is going to keep them ahead of the competition.
Pinpoint follow-on investors: Identify strategic or financial investors for the next round to get a head start on fundraising. We’ll help with connectivity.
Show love: We may invest small amounts of money, but we devote large amounts of time and care. We empathize with founders and know how hard it is to build a meaningful company.
We take a collaborative approach. In most cases, startups here are looking to raise $200-500k (seed or pre-A), and therefore we will co-invest with other VCs and angel investors.
What we look for
We do not like to take product risk and prefer to invest in post-revenue companies. The biggest factors in our decision making are 1) founder quality, 2) business scalability, and 3) the ability to raise more funding.
We believe founder quality drives results: Do they have the hunger and ambition? Are they resourceful and resilient? What’s the level of conviction? Have they made sacrifices to get to this point? Then there’s all the typical stuff: integrity, credibility, market understanding, learning ability, et cetera.
Scaling up matters: Is the company working on a solution to a real, burning problem that has not been solved before? Is the product a must-have or nice-to-have? Can this be a $100 million company? Can the market support this? Timing is the number one reason most startups fail.
Fundraising potential: Do founders have the ability to tell an amazing story and raise more funding? Can the team achieve the milestones needed for a successful fundraise? We will focus on companies with quality unit economics at scale, founders who are focusing on burn rate, profitability and the path toward self-sufficiency (five years or less).
Alignment of values, vision, and trust is an essential part of our investing: We only want to invest in people we feel proud to work for.
Our investment strategy is guided by these five investment themes. They are secular trends and provide useful reference points for us when analyzing the Pakistan opportunity set in a global context.
Demographic trends: Peter Drucker called this the future that has already happened. Pakistan is at the start of its digital journey and there are 140 million people below the age of 30 who will shape spending in the decades to come. Pakistan’s GDP per capita, at $1550, is comparable to China in 2004 and India in 2014.
Solution to an economic problem: Startups that emerge to resolve business and economic inefficiencies and to satisfy unmet demand across the country. The on-demand economy will create winners across a range of services, including domestic services, transportation, and logistics.
Disruption of an industry: Technology-enabled companies will leapfrog traditional business models and help transition the country’s offline sector to online commerce. Examples include marketplaces, digital health, and fintech. Pakistan has 5% of the unbanked population of the world.
Digital colonization of the world map: Pakistan’s blossoming online consumer market is the new battleground for the world’s biggest internet companies. Amazon currently dominates North America and Europe, while Alibaba controls China and has made a web of strategic partnerships and investments in Southeast Asia. Both companies are making large bets in India and Pakistan is going to be the next frontier.
Follow the talent: Talent remains the bedrock on which great companies are built. We track executives leaving successful startups like Careem, Daraz, and Zameen to start their own, as well as Pakistanis returning from the Bay Area who have worked at the top technology firms or previously founded companies.
Our commitment to the nation
If startups in Pakistan are going to create $1 billion in new value in the coming decade, $300 million of institutional capital is needed to fund that journey. Considering total VC dollars in Pakistan are less than $50 million today, an overwhelming majority of capital to address this funding gap would have to come from international investors.
With Karavan, we hope to take Pakistan’s startup story global and set the stage for greater participation and impact. We want to personally take responsibility for channeling over $100 million into Pakistan’s tech ecosystem by 2030. This is no easy feat, but nothing worth doing ever is.
If you’re excited and inspired by our mission, the prospect of catapulting Pakistan into the digital age, then we’d like to hear from you.