With an illustrious banking experience of 30 years, Mr. Nadeem Hussain stands tall in the technology and startup system of Pakistan as one of the greatest to have graced the field, ever. As the founder and ex-CEO of Tameer Bank and EasyPaisa, Mr. Hussain has impacted millions of lives in Pakistan.
Also being the founder and Coach of Planet N, Nadeem Hussain is helping bring the much-needed change of promoting entrepreneurship in Pakistan. Parhlo got in touch with the man himself, taking his insight and experienced outlook on the technological entrepreneurship ecosystem of Pakistan and how things will pan out in the future.
Q 1) What motivated you to leave the world of banking, getting into a less developed ecosystem of entrepreneurship. The switch must have been hard?
NH: After 27 years at City Group in six different countries I thought it was time to come back to Pakistan and do something for the country. Along with doing something for myself. That was the time I was looking at creating Tameer Micro-Finance Bank. It was a big shift for me from the security of getting a salary every month and getting into Pakistan where I had only worked 5 of the 27 years of my corporate banking and consumer experience. Becoming an entrepreneur at the age of 48, creating a business for which I had no experience before; MicroFinance was something that was totally new to me. Putting all the money I made City Bank over 27 years, into this startup. It was a high-risk proposition.
However, I was convinced that I would be able to learn… I also got 3 people from City Bank to join me. As a team, I thought we would have enough learning power to understand the eco-system. The switch was hard at first, from something you knew so well, to create a company from scratch on a model that had not been done in Pakistan before. But it’s been a very rewarding experience.
Tameer Bank was the most profitable bank in Pakistan, also reviewed by the World Bank as one having a lot of impacts. The joint venture with Telenor that created EasyPaisa earned a lot of praise and success as well. All in all, a very rewarding, learning and fulfilling experience.
Q 2) How do you view the local ecosystem in Pakistan for startups? That, in terms of talent available.
NH: Pakistan with its population, with its demographics where the bulk of the people are under 35 and even 55% of the people are under 25 where you have close to 100 million smartphones, provides a huge opportunity for disruption. All industries are largely old brick-and-mortar industries, they are not looking at disruption they are not driven by disruption, so there is a huge potential for startups that have understood the process. That is what makes Pakistan such an exciting place that a lot of building blocks and railroads exist.
As far as talent is concerned, I have been to India and other emerging markets, Pakistan’s talent is second to none. It’s just creating a more enabling environment, getting the govt and other institutions to provide regulation and tax breaks so that people have a better chance of success. So the talent is there, the eco-system is nascent, but we’ll get there eventually.
Q 3) Since you started Planet N, how would you summerise the types of startups? Is there a success story you would like to share?
NH: Since the time we started Planet N, our desire was to invest in those companies which had a tech-intervention, so it had to be technology-driven. The first statement was again; what’s the problem statement? Can our tech solution solve that? Is it scalable? And how the unit economics works, just the frame under we operate. But my investment methodology is that I invest 70% on the jockey; which means investing in the individual more than his idea. Then 20% I look at the horse, which means the idea. So the first thing is the person capable of delivering it? Second is the idea strong enough? Can it be scaled? Is it innovative enough? Is it disruptive enough?
And the third weightage is the turf, the idea may be great and the person may be great, but it might be too early for Pakistan. It worked with the 11 companies we have under Planet N’s umbrella right now. We have closed more than 10 companies, which means half the companies I created we had to close down. In some cases the jockey was wrong, in some the turf was wrong. So it’s a combination of learning on how to improve our success rate in the companies we have invested in.
Q 4) Startups in Pakistan generally face a lot of problems. Most of them related to regulations. Tell us more about how you are helping the ecosystem in dealing with govt organizations such as SECP, the State Bank, etc?
NH: Compared to many ecosystems our two regulators are very progressive, both the SECP and State Bank of Pakistan, and to some extent the PTA. Having said that there is still a lot be done on the regulatory framework, we do not have a crowdfunding regulation, we don’t have a peer-to-peer regulation, we don’t have a digital banking license, but the State Bank has done a lot with regulations that will allow entities that are using Facebook, Google and other marketing entities to be able to pre-approve so the problem of using credit cards or banks to emit money goes away. State Bank is looking at creating a framework where you can replicate an operating company in a foreign jurisdiction by creating a holding company which allows you to raise capital much easily.
The central bank is looking at the valuation issue that currently exists for sale to a local investor. The SECP is looking at crowdfunding regulations. Unfortunately, you cannot do convertible notes in Pakistan right now but both SECP and State Bank are looking at that. The SECP has already created a sandbox. It’s come up with the EMI regulation so that non-banks can get a wallet. In the last 6 months both the SECP and SBP have come up with regulation changes that have helped the ecosystem and we are heading in the right direction.
Q 5) How do you view the venture-funding ecosystem? Currently, there are very few players in the market. Do you feel this is hurting the growth of startups in Pakistan?
NH: Our startup ecosystem is very nascent, in the entire country only one company has done Series B which is Zameen. Maybe total Series A is less than 50 companies, rest are all at C level. I would say max 10-15 international companies impact investors who have invested in entities in Pakistan. Recently some family offices have created funds, the most successful of that being the Fatima Group, which has been raising funds locally to create the Fatima-Gobi venture. It is a great example of being able to test and figure out how to get into the ecosystem.
We have many incubators but we do not have seed capital. It is still very early days for us, but we are in the right direction. In the last 6 months, we have seen more activity in fundraising at the seed and Series A level than we saw in the last 5 years. People are looking at Pakistan and finding that our valuations are much lower than our neighbors. And the place is not overcrowded and the potential exists for companies to grow. My prediction is that in the next few years we will be getting a lot of foreign investors and a lot more family offices.
Q 6) Is there a startup from Pakistan you envision getting into an IPO stage in the next 5 years?
NH: My sense says that certainly, Zameen.com could do an IPO. Potentially, PakWheels could be an IPO. And then there are other people in the running but not from a startup perspective. So very few companies are in a position of doing an IPO. There could be trade sales for evaluation far higher than the IPO, back in the case of what happened to Tameer Bank that may happen in the case of Mobilink Bank should they desire to cash in or move out of the bank itself.
Q 7) What drives Nadeem Hussain? What makes you passionate about waking up in the morning?
NH: What drives me is the desire to make the lives of Pakistanis better by changing their customer journey. What drives me is working with young people with high potential, high energy and being able to work with them to create a mixture of wisdom, high execution power, and passion in creating successful interventions. I wake up every morning to better the life of Pakistanis, but this is not charitable work. This is work where we create a valuation for our own company as well. At the age of 64, I work longer and harder than many young people, because it’s my passion. And if you can find work that actually fits in with your passion, then it’s a win-win situation.
Q 8) Entrepreneurship is a tough and risky game, especially in a conservation society like Pakistan. What is one advice you would give to future entrepreneurs?
NH: It’s not every body’s cup of tea. Our whole culture is biased against entrepreneurship. From primary school to the secondary school level, there is no talk about startups or entrepreneurship. Then you get into college, and most of them still don’t have incubators. Only business majors have that chance.
And the people who are teaching you have never run a business themselves. Parents don’t want children to take risks and opt for a steady job. So a lot of factors work against young entrepreneurs. But if its this is what you want to do, it is what you should do. The best time is when you get out of college to start your own company. Or you can start a company later like me, if you fail, you can still get by.
People do not take risks when raising a family. We need to change our thinking and ecosystem from the primary school level up that entrepreneurship is not a bad thing. With our forecasted GDP growth and demographics, our industry will simply not be able to absorb these graduates. Entrepreneurship has to be one option in addition to vocational skills. You gotta be tough and get ready to take the knocks. Be hopeful every morning, have a vision and a strong desire to execute and create. If you are resilient and passionate, you have a good chance to succeed. Do not get heartbroken over failing ideas, do not give up, and inshaAllah you will find success.
I believe the best course for young people today is to think about entrepreneurship.