Pakistan must relax IPO requirements for startups and lower capital thresholds for stock market listings to attract investment and provide founders with alternatives to costly offshore registrations, a new policy report recommends.
The report, Closing the Funding Gap for Startups in Pakistan, supported by Telenor Velocity, Visa Foundation and Ignite, highlights regulatory hurdles that discourage startups from going public and limit investor exits. Without credible exit pathways, investors hesitate to deploy long-term capital, and founders struggle to recycle equity, stifling growth in the country’s innovation economy.
Easing IPO rules for startups
Startups face steep barriers under Pakistan’s Public Offering Regulations, 2017, including a two-year profitability mandate and extensive disclosure rules, standards many young firms cannot meet. The report recommends relaxing profitability and reporting requirements to encourage more startups to list domestically.
The Pakistan Stock Exchange’s (PSX) Growth Enterprise Market (GEM) Board, designed for smaller firms, currently requires a post-issue paid-up capital of PKR 25 million ($90,000), which remains out of reach for many early-stage startups. The report suggests slashing this to PKR 10 million while introducing clear graduation criteria to the Main Board.
“These reforms would make public markets more accessible, provide liquidity for early investors, and complete the financing continuum from seed to IPO,” the report states.
Telenor, Invest2Innovate, and the Special Technology Zones Authority, along with support from the Ignite National Technology Fund, Telenor Velocity and Visa Foundation, co-hosted a roundtable discussion to help drive these reforms at the +92Disrupt Conference in Karachi — Pakistan's leading tech and startup summit.
Strengthening entrepreneurial support
Despite a rise in incubators and accelerators, 73% of incubated startups fail to secure funding within two years due to poor investment readiness and lack of tailored support.
The report calls for customized incubation programs addressing sector-specific needs, nationwide investment readiness training led by the National Vocational and Technical Training Commission (NAVTTC), and subsidized legal, tax and IP services for startups via National Incubation Centers and the Special Technology Zones Authority (STZA).
Fragmented regulations and weak coordination between Entrepreneurial Support Organizations (ESOs) and regulators often delay startups’ access to incentives like tax breaks and licensing. The report proposes a joint working group under the STZA Act to streamline processes.
To ensure sustainability, the report recommends tax credits of up to 20% for SECP-registered ESOs, contingent on performance tracking.
Macroeconomic stability critical
While reforms are urgent, the report warns that political volatility and inflation could undermine progress. “Low and stable inflation, predictable interest rates and policy continuity are prerequisites for restoring investor confidence,” it states.
Pakistan’s startup ecosystem has shown promise, but funding dropped sharply in recent years. Without action, the report warns, startups will continue relocating offshore, and local capital will remain untapped.
“By addressing regulatory, tax and financing bottlenecks, Pakistan can unlock its entrepreneurs’ potential to drive jobs and economic growth,” the report concludes.
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