Pakistan: Big Market, Bigger Risk

Via Forbes, an interesting article on the potential of Pakistan’s nascent online economy:

“…In the game of can-you-top-this entrepreneurial hardship–who slept the least, whose office was tiniest, who choked down the most Ramen noodles–Monis Rahman holds some formidable trump cards.

Four years ago Rahman, a serial entrepreneur, launched, now Pakistan’s largest jobs website, with 500,000 unique visitors a month. While Rahman was raising money in 2007, terrorists bombed the homecoming procession of former Prime Minister Benazir Bhutto. The Pakistani government subsequently suspended its constitution and declared a state of emergency. (A gunman assassinated Bhutto the following month.) When one of Rahman’s potential investors called to express his firm’s misgivings, Rahman e-mailed him a “Top Ten Reasons to Invest” list. Reason number nine was: “‘We’re headquartered in Lahore, where there haven’t been any blasts,'” he recalls. “Then I pressed ‘send.’ The next day in Lahore, the high court was bombed.”

Welcome to the Wild East of Web prospecting. Over tea on a 102-degree morning in Lahore, Rahman explains why now is the time to invest in Pakistan, the world’s sixth-most-populous country, with 187 million people and plenty of inexpensive labor. Obstacles abound, starting with the fact that only 17% of Pakistanis have Internet access. The country also suffers from low literacy rates, massive corruption, frequent blackouts and a weak judicial system.

“You tend to hear the worst 5% of the Pakistan story 95% of the time,” says Rahman, 41. “There’s a perception arbitrage, and it’s providing a window of opportunity for entrepreneurs.”

Rahman was born in Lahore but spent his childhood in the U.S. and Saudi Arabia, where his father worked as an urban-planning advisor for the United Nations. He studied engineering at the University of Wisconsin at Madison and then helped develop the Itanium microprocessor chip at Intel. That experience led to his first venture, a chip-design consulting firm that he abandoned after a year, seduced by the dot-com boom. In 1999 Rahman and a partner started a company that installed cameras in day care centers, allowing parents to watch the video streams online in real time. attracted $2.5 million from investors, including Ron Conway, an early backer of Google and PayPal. A year later the men ran out of money, forcing them to sell the company for stock that was ultimately worthless.

After living on consulting gigs for four years, Rahman–inspired by the success of–decided to start a social networking site for Muslims in the United States and United Kingdom. He named it, or “destiny” in Urdu, Arabic and most other languages in the Muslim world. “I decided not to go head-on as a matchmaking site,” says Rahman. “‘Dating’ has a negative stigma from a Muslim viewpoint.” There was a dating hook, though: Users could fill out a personality test with questions about whether they drank alcohol and how often they prayed–topics Muslims often discuss before they marry, says Rahman. Intrigued, LinkedIn cofounder Reid Hoffmann invested $25,000, as did Mark Pincus and Joe Kraus. (The latter two founded Zynga and Excite, respectively.)

To conserve cash Rahman moved back to Pakistan and into his parents’ house, where he converted a guest room into an office. (He registered his parent company, Naseeb Networks, in the U.S. to make it easier to raise money and subleased a small office in San Jose, Calif.) This time he spent only $60,000 in total startup costs, in part by doing some of the initial programming himself. To prime the market, he used equity in the company to buy the electronic greeting card site, which Muslims used to send cards for Eid, a Muslim holiday. Three thousand people from the site’s 1-million-strong mailing list signed up immediately. Annual memberships cost $40, and by 2005 was generating $300,000 in revenue.

Rahman soon needed more programmers and support staff, and buying ads in local newspapers was expensive. So he decided to build a “quick and dirty” job site to post his own job openings. Other local companies noticed, and Rahman agreed to post their ads for free to help boost Naseeb’s traffic. He offered the largest companies the ability to search for résumés, as well as software to power their own company job boards and the right to post their logos on the front page of his new site. He named it Rozee–which, roughly translated, means “Blessed Livelihood.”

By 2007 was generating more traffic than Rahman’s thinly veiled matchmaking site. He used Naseeb’s proceeds–and $2 million from Draper Fisher Jurvetson and ePlanet Ventures–to hire salespeople to go after large corporate clients, most of which still advertised job openings in newspapers. Today 5,000 companies actively post openings on, paying between $29 for a single ad and up to $20,000 for a suite of services. (For now Rahman isn’t focusing on Naseeb.)

Bartering is a big part of Rahman’s low-cost strategy. Three hundred rickshaw drivers in Lahore use Rozeebranded vinyl wheel covers and glow-in-the-dark stickers that Naseeb provides for free. Rahman convinced Sign Source, an advertising agency, to promote Rozee on 300 baggage trolleys in the Karachi airport in exchange for helping the company build a website that tracks the availability of outdoor media, like billboards. “We have to measure advertising dollars very carefully because it’s easy to spend and not recuperate,” says Rahman.

Huge short-term challenges remain. Turnover on Rahman’s 45-person sales staff drains capital: For every three salespeople he hires and trains, only one stays on for more than a few months. Then there’s the matter of collecting payment. Only 10% of customers–contributing 5% of sales–pay online using credit cards, while 60% pay with checks and 20% pay with cash, mailing payments to one of the company’s four outposts. A rickshaw also travels around Lahore and picks up checks and cash.

Tougher still will be avoiding the fate of and other U.S. job sites that are gradually taking a backseat to LinkedIn, where employers conduct targeted searches through their own professional networks. “I think it’s a difficult business,” says Salim Ghauri, chief executive of software company Netsol Technologies, a client. “If companies don’t get good service, they will find another way, because they can’t stop hiring. The biggest challenge is quality control, which is not that easy.”

Rather than go head-to-head with the big social networks, Rahman aims to join forces with them. When employers post a job on, they can simultaneously broadcast it on Facebook, LinkedIn and Twitter. “We’re prepared so that when the technology evolves here, as it has in the United States, we’ll be in a position where we already have a social graph on our site,” says Rahman.

Easier said than done, perhaps. Monster recently rolled out an application that lives on Facebook, giving users a place to interact with professional contacts, without sharing photos and other personal details. In July LinkedIn prevented users of the application from inviting their contacts directly from LinkedIn.

Rahman says that Naseeb Networks pulled in $1 million in sales last year and turned “cash-flow positive” in March. He wants to mount a broader assault on the Middle East this year. “If I want to get bigger from a market-size perspective, I need to move beyond Pakistan,” he declares.

That means more turbulence ahead–and, chances are, more ways to win that can-you-top-this game.

Big Market, Massive Risk
Pakistan’s nascent online economy has huge potential.

UNITED STATES: 313,232,044
PAKISTAN: 187,342,721

Unemployment Rate2

Per Capita GDP3 (U.S. dollars)
PAKISTAN: $1,010

Mobile Cellular Subscription4 (per 100 inhabitants)

Internet Users4 (per 100 inhabitants)

Fixed Broadband Subscriptions4 (per 100 inhabitants)

Number of Credit Cards In Circulation5
UNITED STATES: 1.1 billion
PAKISTAN: 1.6 million

1JULY 2011 EST. 22010 EST. 3AS OF DEC. 2010. 42010. 5AS OF JUNE 30, 2010.



This entry was posted on Monday, August 15th, 2011 at 4:56 am and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

Comments are closed.

Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

Focusing primarily on The New Seven Sisters - the largely state owned petroleum companies from the emerging world that have become key players in the oil & gas industry as identified by Carola Hoyos, Chief Energy Correspondent for The Financial Times - but spanning other nascent opportunities around the globe that may hold potential in the years ahead, Wildcats & Black Sheep is a place for the adventurous to contemplate & evaluate the emerging markets of tomorrow.