Venture capital fund fails to attract investment for ICT sector

By Muhammad Yasir

KARACHI: The National Information and Communication Technologies Research and Development (ICT R&D) Fund has failed to attract investment through its ICT Venture Capital Fund for Pakistani start-up companies in the ICT space.

The organisation planned earlier to develop a fund in a way to support start-up and growing companies with various mechanisms from available financial sectors.

We tried to involve investors to support growing ICT industry in which opportunities are immense and returns are handsome against their investment, however the respond was discouraging, an official of the organisation said.

National ICT R&D Fund is an autonomous body though and its contributors deposit its shares duly and timely but it is supervised by the Ministry of IT and Telecommunication, which could be the reason that investors are reluctant in this case, he further added on the condition of anonymity.

The ICT R&D initiative intends to attract foreign and local investment in ICT industry. The fund is aimed at generating monetary resources for rapid expansion of projects in ICT industry and multiplying the contribution of telecom and broadband operators in new projects.

The official said that the stakeholders of the ICT industry particularly broadband, telecom operators and banking sector should have come up with the investment, which could have enhanced entrepreneurship with creation of scores of employments.

Venture capital was associated with job creation, the knowledge economy, and used as a proxy measure of innovation within an economic sector or geography. It was planned to provide handsome profit to investors by owning equity in the companies it invests in, which usually have a novel technology or business model in ICT.

In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists get significant control over company decisions, in addition to a significant portion of the company’s ownership.

National ICT R&D Fund floated Request For Proposal (RFP) last year in July but despite its marketing the response from investors was not viable to work on the project.

Sources said the organisation practically shunned its plan to work on it further as a matter of fact it took waste of money for marketing and approaching investors in this regard.

The funding mechanisms are attractive for newly formed hi-tech companies with high-potential products and services ideas but limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering.

The ICT industry in the Pakistani context can help accelerate Pakistan’s economic and social development but there is lack of risk capital in Pakistan, which is one of the factors that has hampered growth in this sector.

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