Islamic Finance

VC firm Gobi bullish on Pakistan’s Muslim-friendly 'Taqwatech'

KUALA LUMPUR - Shariah-compliant investors should fix their sights on Pakistan’s technology industry or risk missing the boat amid rising valuations, according to Jamaludin Bujang, managing director of venture capital firm Gobi Partners in Malaysia.

The VC that coined the term Taqwatech for Islamic-friendly investment is fresh from furthering its investment in Pakistani financial services start-up TAG this week.

Right now, says Jamaludin, Pakistani start-ups are ripe for the picking, but soon the country will follow along the path of India and China, which are now established—and relatively expensive—destinations for investment.

“Investors who have missed China or missed India, they definitely don’t want to miss Pakistan,” Jamaludin told Salaam Gateway.

Gobi, which was founded in China by Thomas Tsao, has since 2015 looked for start-ups that appeal to a Muslim market but that may not be strictly halal. Its first Taqwatech play was for online travel agency Tripfez, which merged with HolidayMe, a Dubai-based travel site and another Gobi acquisition, to form in 2018 the world’s biggest Muslim-friendly travel platform.

"Things have changed a lot in Pakistan, even since I first went there in 2018 to meet a friend who was keen to set up a fund,” said Jamaludin, referring to Ali Mukhtar, who now runs the $20 million Fatima Gobi Ventures fund from Lahore. The fund has so far made up to 15 investments in Pakistan.

“It’s only been about two years now but Pakistan’s grown a lot in terms of the tech space there. I have been totally surprised—blown away by the way it’s grown. There’s a lot of expats who worked overseas and have returned to set up tech companies in Pakistan. It’s just like how India used to be.”

A year after Jamaludin’s visit to the country in 2018, the fund announced its first batch of investments. These included local travel start-up Sastaticket, e-commerce marketplace Tajir, and delivery service Airlift, each for between $1.5 million and $10 million. It also put money into Safepay, a payments solution also backed by Y Combinator, and InventHub, a San Francisco-headquartered software-as-a-service start-up with an engineering team in Pakistan.

Most recently, Gobi made its second investment in Islamabad-based TAG, which secured $12 million from investors for a $100 million valuation, after the Shanghai and Kuala Lumpur-headquartered VC had also participated in its pre-Seed round earlier this year. It also took part in the pre-Seed round of edutech Maqsad, which raised $2.1 million, this week.

Pakistan has cemented itself on Gobi’s Taqwatech radar largely because of the size of its population and the need for start-ups there to appeal to a Muslim audience. 

Although the VC still has a strong interest in investments in Malaysia—it is currently in discussions with targets there—it cannot deny the appeal of Pakistan’s population of over 220 million consumers, while the high number of unbanked individuals—100 million, according to the World Bank—adds pistachios to the sewaiyan, particular in terms of fintech plays.

“When you look at countries with big populations, the top three [China, India and the United States] have already been through their tech revolutions, and all the money has gone to those countries already,” said Jamaludin.

“But Pakistan is the fifth biggest country; there aren’t many other countries with more than 200 million people, and I think that makes it an opportunity to invest there.”

Notwithstanding Pakistan’s potential, does the country’s difficult relationship with stability—political, economic, social or in terms of security—give investors pause when they want to limit risk beyond the forecasts of the company they are probing?

Jamaludin thinks not, asserting that the rewards from getting into the market early outweigh the instability.

“If you compare 20 years ago with where Pakistan is now, a lot has changed. Of course there is a question mark over political stability and if [prime minister Imran Khan] will stay around or who will replace him—at least they aren’t under the military,” he said. 

“But VCs invest in early stage companies—seed companies—and we take the risks, we evaluate them and we still want to compare their potential. The other option would be to wait another five or 10 years before investing, but that’s not what early-stage investment is about.”

As a smaller fund, Fatima Gobi Ventures has to get in when the prices are low, whereas giants like Silicon Valley’s Sequoia, whose investments amount to a fifth of the value of Nasdaq, can afford to take their time and pay a premium.

“Nevertheless, big funds like IMF, CDC are already investing in Pakistan, so they are taking a strong view on it. We are a small fund with just $20 million, $30 million to invest, so we can’t wait. We have to take our chance, and we think that approach is justified,” Jamaludin added.

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