Thread by @kayzafar

1. Ever wonder why foreign investors shy away from funding Pakistani tech companies directly & instead, end up investing in holding Cos in foreign, business friendly jurisdictions? Pakistan gets peanuts to cover expenses & real wealth creation happens outside. Read on to know!

2. I am not talking about huge $100M+ investments by large multinationals & sovereigns. For those, everyone from the PM to the section officers are mobilized to fast track everything. I am talking small $500K-$2M type investments critical for our startups. Those are a nightmare!

3. @47_ventures has made 4 tech investments IN Pakistan in the past 1 yr so I speak from personal, painful experience. If things do not improve, we will have no choice but to fund foreign companies instead of Pakistani.

4. It all starts frm the hassle of negotiating a fair exch rate frm the bank fleecing u for sending money in to an account they operate. They have u by nuts, so try to offer a shitty exchange rate. You leverage ur network, call the bank president, get good rate but owe a favor.

5. Next you have to secure the Proceeds Realization Certificate (PRC) from the receiving bank which serves as a proof that you remitted foreign investment into the startup's account. It's a physical paper, so needs someone to pick up from the startup disrupting their work.

6. Now you need to get the shares issued against the investment. SECP requires 9 copies of the following documents attested by a notary public in the country where the investment is coming from and then consularized by the Pakistani embassy in that country. Here is the list...

7. That's eight different categories of documents with multiple documents in each category depending on number of directors. This easily becomes a 50 page bundle and you need to pay for notorization/consularization for 9 copies in the foreign country where fund is located!

8. If you'd like to place a foreign director on the startup's board, guess what? Depending on the type of business, u need clearance frm Board of Investment & Ministry of Interior which means u need to be prepared for visits by shady looking men frm covert agencies. Takes months!

9. Next comes the painful process of registering the investment with the SBP so the investor can remit dividends and capital gains back eventually. Below is the list of 15 different documents & again each one contains multiple docs. But wait, that's not enough!

10. Now starts the process of exchanging love letters with the SBP trying to explain to them why the foreign investor valued the Pakistani company higher than the breakup value. Yes, seriously! Investors should invest in Pakistani companies at low valuations!

11. Now you need a QCR rated accounting firm with absolutely no idea on how to value tech businesses to give you a valuation certificate. So you exchanging love notes with the firm and try to explain how you valued the tech business, what IP is, what sweat equity is, etc, etc.

12. It has been over 14 months & we still do not have our first investment registered w the SBP. We do not know how long it will take without leveraging the network again & owing a favor to someone. We know it will happen one day, but we'll be made to feel it :)

13. Alongside all of this, all these documents are flying back and forth and incurring courier charges because we do not accept electronic documents and scans.

14. That's not all. The company law leaves a lot to be desired to fulfill the needs of investors, shareholders and sponsors of science and technology based, knowledge economy business. IP valuation, stock options, sweat equity, vesting, share buy backs, etc.

15. All that means fancy lawyers need to be engaged to craft water tight work arounds for what should be simple contracts. And that results in an increase in transaction costs. If there are disputes, it's difficult to find arbitrators who understand tech and VC investments!

16. So what can be done? Here are a couple suggestions:
A. Accept electronic docs at all regulatory institutions especially when the law supports them now
B. Register investors once in some database and save them the pain of all this doc exchange for every txn.

17. More suggestions:
C. 1 window op for investors to deal w all depts & track workflow w strict time limits
D. Train special arbitrators/judges to handle tech/vc/ip cases
E. Solicit & make amends to company law for the knowledge eco startups/investors
F. Eliminate redundancy!

18. More suggestions:
G. Incentivize funding Pakistani companies instead of foreign holding cos.

Given the current account deficit scenario in the country, we should be rolling out red carpets for all foreign investors, yet we are not even aware of the issues they face!