Digital Financing Revolution Assessing the Impact of Equity Crowdfunding on Pakistani Startup Ecosystem

Impact of Equity Crowdfunding on Pakistani Startup Ecosystem

Abstract

The purpose of this study is to expand the horizon of knowledge for Pakistani startups pertaining to digital sources of financing such as equity crowdfunding. Though crowdfunding is relatively a new concept, yet it is widely recognized as a viable and impactful source of funding across the globe. It is a novel method of funding that allows startups and entrepreneurs to raise capital by a large pool of small investments from the online crowd with no upfront fees. The popularity of this new funding mechanism has risen due to the funding gap that has been created by the conventional source of financing such as banks, especially after the 2008 financial crisis.  Particularly in Pakistan, raising funds is continuing to be a major challenge, where seed-stage startups faced immense difficulties in securing funds from banks and traditional financial institutions. Therefore, equity crowdfunding is emerging as an alternative source of financing option to bridge the funding gap for startups as well as small and medium-sized enterprises (SMEs). Thus, the implication of successful crowdfunding channels in Pakistan is a significant challenge for the government and so the regulatory authorities to devise policies and intellectual capacity in order to implement a startup ecosystem in the country. In terms of capacity and potential, Pakistan has a right mix of talent and relevant resources which creates a suitable equation for the economic model., however, inappropriate strategies may lead to threat for the system.