Fund Overview
Lakson Venture Capital Fund (“LVCF”) will invest in early and growth stage technology focused companies across most economic sectors that have a discernible competitive advantage, strong management, and credible sponsors. Investments will adhere to the Fund’s investment duration of a five (5) year Investment Period followed by two (2) years of Distribution Period with a target IRR od 25% over the Fund’s life. The Fund Management Company will leverage its financial and analytical expertise in identifying suitable investment opportunities in line with the Fund’s investment strategy and risk parameters to construct a well-diversified portfolio of private companies to generate a desirable return for Unit Holders. The Fund Management Company will have the discretion to invest in companies that meets its defined investment criteria, either directly through cash equity injections or through various investment instruments such as Convertible Bonds, warrants, or high yield securities. The Fund Management Company may use hybrid structures to acquire minority or majority stakes in private and un-listed public companies based on the underlying return and collateral dynamics of the transaction.
Venture Capital Opportunity in Pakistan
With the 5th largest population in the world (c. 220mn) growing at a rate of 1.9% per annum1, Pakistan is a rapidly growing emerging market and stands to benefit from a substantial demographic dividend particularly as more than 67% of the population is less than 30 years old. With a low median age of 22.3 years, and a per capita income of over US$,1,658, a majority of Pakistan’s population is at the start of the spending curve and would will continue to drive future consumption.
Over the past decade, Pakistan has been growing at almost 4.4% per annum to reach a nominal GDP of c. US$ 348 bn, supported additionally by a large informal economy (estimated to be c. US$ 200 – 250 bn), and significant remittances from the expatriate population (over US$ 31 bn last year)3. The rapidly increasing middle class, coupled with one of the highest urbanization rates in the world, will continue to fuel Pakistan’s economic growth over the next decade which is expected to continue growing at 5% for the next 5 years.
In our view, Pakistan is poised for significant economic expansion based on the following:
1. Growing middle class consumption driven by rising incomes. This flourishing middle class has resulted in a monumental increase in consumer spending, attracting international players such as FrieslandCampina, and Arcelik and Alibaba to enter the market through significant acquisitions. Furthermore, MNCs such as Nestle have seen their business double in the last 5 years and are looking to invest further in the Pakistan market
2. A young population with a median age of 22.3 years (27 and 40 years for growth and developed markets respectively) not only provides a significant labor force but a very large consumer base which for the first time at this stage has disposable income to spend
3. High rate of urbanization of 2.3% p.a. between now and 2050. Pakistan’s urbanized population is estimated to rise from a current 40% to 56% by 20504
4. 9th largest labor force in the world at 65% of India’s average labor cost5. Furthermore, a large portion of the working population speaks English
5. Pakistan has a vibrant technology sector employing 300,000 professionals. There are over2,000 technology and business processes outsourcing registered companies and the country is ranked 4th globally in the number of people working as technology experts on freelancing platforms such as Upwork and Fivver. 20,000 technology professionals enter the labor force each year. Software exports reached $2.6 bn in 2022and are expected to grow to $5bn by 2023.
6. Digital adoption is on the rise in Pakistan which provides a big opportunity for the startups to revolutionize traditional processes across various sectors. There has been a rapid growth in internet penetration with 195 Mn cellular subscribers,120 Mn of which have 3G/4G and 98% of households have mobile phones. The country’s digitization pace is at the same point where India and Indonesia were 10 and 8 years ago respectively. India has grown to become the second largest tech ecosystem with over 86,000 startups to date and is home to 86 unicorns. Pakistan is 16% of India’s population and even after adjusting for GDP, the country has significant potential in terms of capital raises and number of startups.
As a result of increasing broadband penetration, ecommerce sales in the country are increasing at a rapid pace, reaching PKR 267 Bn in 2020/2021. Internet and mobile phone transactions have also seen a massive increase, with online transactions reaching PKR 3.2 Tn by Q4 2021. The increase in mobile data penetration will lead to exponential growth in digital industries, ranging from e-commerce, media, logistics and financial services. Digital Payments with mobile numbers and NADRA cards are increasing as they enable digital KYC and act as a catalyst for digitalization of financial servicesPakistan has an increasing number of social media users with over 47m Facebook users (21.3% of the country’s population) and is amongst the top 10 largest countries in terms of facebook users. Pakistan also has 33m tiktok users and 72m youtube users. WhatsApp is also the the primary channel of communication and for sharing of news and video content. Pakistani innovators created the first ever anti-virus software, used to kill – the Brain Virus. Digital ID’s with the National Database & Registration Authority (NADRA) issuing more than 100m ID cards linked to biometrics.
The Pakistani tech ecosystem is in an expansion phase and is poised to be the next hot market for venture capital investment. It has traditionally been overlooked by international investors but in the last 2 years the ecosystem has taken off, raising $700+ with investors like Tiger Global and Seqouia making their first investments in the country. Pakistan recorded some of the largest deals in the last few years, with Bazaar rasing a $70mn Series B round, and Dastgyr raising a $37mn Series A round in 2022.
7. Government reforms over the past few years coupled with an improvement in the security situation has enabled Pakistan to achieve robust economic growth, control inflation to low single digits, rebuild its foreign reserves, and noticeably reduce the budget deficit. Furthermore, tax reforms to improve revenue collection and a restructuring of the power sector has resulted in substantial economic progress. These initiatives have and will continue to help Pakistan achieve solid growth over the next decade
8. Pakistan’s strategic location can enable it to act as a trade / energy corridor between the ‘energy hungry’ Asia and ‘energy rich’ Middle-Far East and Central Asia. Furthermore, Pakistan’s could be the next regional hub with access to Central Asia and Afghanistan, India, China, South Asia and GCC -a region with almost 50% of the world’s population and c. US$ 15 trillion in GDP6
Based on the above, we feel venture capital would be able to benefit from the macro trends and generate the targeted returns for the Unit Holders. We believe that the Fund Management Company’s experience and Lakson Group’s connectivity in the local market will lead to proprietary deal flow and facilitate the due diligence process to identify the right investments and Sponsors across Pakistan.
Even though the Fund is sector agnostic, our broad investment filters include an array of sectors:
-Enterprise & Small to Medium Business platforms
-Digital Payments -E-commerce -Retail -Cybersecurity
-Consumer/Social Apps & Services
-IT & Software Development Cloud Infrastructure
-Data Analytics
-Media Tech
-Ad Tech
-Agriculture Tech
-Solar
-Water
-Energy Storage
-Micro Grids
We also have keen interest in emerging themes such as Blockchain, FinTech, Artificial Intelligence/Algorithms, and Internet of Things. Moreover, we actively seek out other technologies and investment opportunities where our investor capital can make market history.
And last, we expect the market to continue to evolve. The Fund is in the perfect position to identify emerging sectors and technologies, because our team is tracking the entire startup and can identify clusters of companies that are passionate about a promising new technology, with a market demand, and an interested community and investors. The most recent example is technologies relating to the Blockchain, where as recently as two years ago, most people outside the space could not predict when (or if) it would break out.
Our Edge: Differentiated Approach
- We are led by a dynamic team of experienced investmnemt professionals and advisors with a successful track record, and supported by a seasoned equity research team.
- Lakson Investments is one of the largest and most experienced local investment firms with 50+ experienced professionals.
- Our associated with the Lakson Group gives us a distinct advantage over our competitors by giving us access to the best deals, significant discounts and we are able to support our portfolio companies by natural synergies with our group companies.
- We have a unique advnatge of conducting on ground due diligence due to our group connections and deep industry links which allows us to be more selective in our decision making and reducing risk for our investors.
Investment Committee
- Babar Lakhani
Chief Executive Officer - Kashif Mustafa
Managing Partner - Amin Mohammad Lakhani
Director