Friday, August 28, 2015

Top Silicon Valley Incubator Y-Combinator Picks Pakistani-American as COO

33-year-old Qasar Younis, a Lala Moosa born Harvard-educated Pakistani-American, is the new Chief Operating Officer of Y-Combinator, a spawning ground for emerging tech giants Dropbox, Airbnb, and Stripe in Silicon Valley, according to Fortune Magazine.

Qasar Younis (Source: Linked-In)
Younis was born on a farm in Lal Moosa, Gujarat, Pakistan. He was brought by his parents as a 6-year-old boy to the United States where his parents found work as blue collar workers in the auto industry in Detroit, Michigan.

Younis' start-up TalkBin was offered a $7 million seed round by Y Combinator. However, it was acquired by Google in 2011 even before signing the seed-round term sheet. Younis joined the Google Maps team where he worked to bring local businesses onboard them. He stayed there for three and a half years.

Y Combinator is set to graduate 222 startups, including Pakistani start-up Markhor, this year. There are currently 7000 startups vying for 106 spots in the program, according to ProPakistani.pk. Markhor, co-founded by Waqas Ali and Sidra Qasim is the first Pakistani company based in Pakistan to be accepted into Y Combinator as a part of the Summer 2015 class, according to Tech Crunch. Markhor launched a Kickstarter campaign that brought in over $107,000 in seed money from 508 backers in two months.

Silicon Valley is home to 12,000 to 15,000 Pakistani Americans. Thousands of them are working at Apple, Cisco, Google, Intel, Oracle and hundreds of other high-tech companies from small start-ups to large Fortune 500 corporations. Pakistani-Americans are contributing to what Erik Brynjolfsson and Andrew McAfee describe as "The Second Machine Age" in a recent book with the same title.

Pakistani-American entrepreneurs, advisers, mentors, venture capitalists, investment bankers, accountants and lawyers make up a growing ecosystem in Silicon Valley. Dozens of Pakistani-American founded start-ups have been funded by top venture capital firms. Many such companies have either been acquired in M&A deals or gone public by offering shares for sale at major stock exchanges. Organization of Pakistani Entrepreneurs (OPEN) has become a de facto platform for networking among Pakistani-American entrepreneurs in Silicon Valley. It holds an annual event called OPEN Forum which attracts over 500 attendees. 


Here's a video of a recent presentation I made at University of Chicago Booth School of Business on Pakistani-Americans in Silicon Valley:


Talk by Riaz Haq for Pakistan Club Chicago May... by urduonair

http://www.dailymotion.com/video/x1t1orh_talk-by-riaz-haq-for-pakistan-club-chicago-may-2014-event_tech



https://www.youtube.com/watch?v=1VZSUo4jH3w

A PDF version of my full presentation at University of Chicago Booth Business School is available on PakAlumni WorldWide

Related Links:

Haq's Musings

Pakistani-Americans in Silicon Valley

Pakistani Diaspora World's 7th Largest

Pakistani-American Population Second Fastest Growing Among Asian-Americans

Organization of Pakistani-American Entrepreneurs

Karachi-born Triple Oscar Winning Graphics Artist

Pakistani-American Ashar Aziz's Fire-eye Goes Public

Two Pakistani-American Silicon Valley Techs Among Top 5 VC Deals

Pakistani-American's Game-Changing Vision 

Minorities Are Majority in Silicon Valley 

US Promoting Venture Capital & Private Equity in Pakistan

Pakistani-American Population Growth Second Fastest Among Asian-Americans

Edible Arrangements: Pakistani-American's Success Story

Thursday, August 27, 2015

Top Global Investor Mark Mobius Sees "Brighter Future For Pakistan"

Joseph Mark Mobius of Templeton Emerging Markets Group sees "many reasons for a brighter future for Pakistan".  Mobius, armed with B.A. and M.S. degrees in Communications from Boston University, and a Ph.D in economics from MIT,  is a top global fund manager with a good track record of investing in emerging markets.

In a blog post titled "Building Corridors to the Future in Pakistan", an obvious reference to China-Pakistan Economic Corridor (CPEC), Mobius says he and his team "have been investing in Pakistan for a number of years, and see it as an overlooked investment destination with attractive valuations due to negative macro sentiment". It should be noted that Karachi Stock Exchange listed companies' average price-earnings multiple of just 10 is less than half of regional markets such as Mumbai with PE ratio of over 20.

Source: Bloomberg


In addition to new foreign investment in CPEC and low PE ratios, Mobius offers the following key reasons for his bullish outlook for Pakistan:

1. The Pakistani stock market has been one of the top-performing markets in the last five years (ended June 2015).

Source: Economist Magazine
2.  The MSCI Pakistan Index has more than doubled with a 129% return during that time frame, compared with a 45% return for the MSCI Frontier Index and 22% increase in the MSCI Emerging Markets Index in US dollar terms.

3. Even after KSE-100 strong performance, valuations of Pakistani stocks still remain relatively attractive. As of end-June 2015, the trailing price-to-earnings ratio of the MSCI Pakistan Index was 10 times, versus 11 times for the MSCI Frontier Index and 14 times for the MSCI Emerging Markets Index.

4. Pakistan government efforts on expenditure control and divestments have been positive, but the government will need to remain committed to the economic and structural reform program.

5. An internal anti-terrorism drive was made in the wake of the tragic Peshawar incident in December 2014, which targeted schoolchildren. Mobius thinks these efforts need to be maintained over the longer term to develop a better security climate for businesses and the society as a whole.

6. In the political environment, delays in the implementation of reforms or deterioration in the political or security situation could adversely impact the country’s macroeconomic development and fiscal position, hinder investment and weaken investor confidence.

Bottom line for Mobius: Despite a number of ongoing challenges, there are "many reasons for a brighter future for Pakistan".

Related Links:

Haq's Musings 

Time to Go Long on Pakistan?

China Deal to Set New FDI Records in Pakistan

Post Cold War Realignment in South Asia

Haier Pakistan to Expand Production From Home Appliances to Cellphones, Laptops

Pakistan Bolsters 2nd Strike Capability With AIP Subs

3G, 4G Rollout in Pakistan

Pakistan Starts Manufacturing Tablets and Notebooks

China-Pakistan Industrial Corridor



Friday, August 21, 2015

Time to Sell India Short and Go Long on Pakistan?

Is it time to sell India short and go long on Pakistan?

Indian shares are highly overvalued while Pakistan and Hong Kong shares are trading at very attractive valuations, according to latest data published by Bloomberg. The Indian shares listed in Mumbai are trading at nearly 22 times earnings, more than twice the price-earnings multiples of Karachi and Hong Kong listed stocks.


Source: Bloomberg



Hong Kong's Hang Seng benchmark gauge for $4.3 trillion of shares was valued at 9.8 times reported earnings on Thursday, a 44 percent discount to the MSCI All-Country World Index, according to Bloomberg. That’s the cheapest level among developed markets worldwide and compares with a multiple of 10.2 for Pakistan’s KSE 100 Index. Russia’s Micex has the lowest valuation among major markets, trading at about 9.5 times profits.

Talking about Pakistan,  Charlie Robertson, London-based chief economist at Renaissance Capital Ltd.  told Bloomberg that “It (Pakistan) is the best, undiscovered investment opportunity in emerging or frontier markets...What’s changed is the delivery of reforms -- privatization, an improved fiscal picture and good relations with the IMF.”  Pakistan is a reform story like neighboring India’s, but only better, Renaissance’s Robertson added.

The massive Chinese commitment to invest $46 billion in Pakistan's energy and infrastructure projects as part of China-Pakistan Economic Corridor has added to the excitement about Pakistan's brightening prospects.

CPEC Projects Map


China-Pakistan Economic Corridor (CPEC) is highly strategic for both China and Pakistan. It is expected to dramatically boost investment and trade activity in Pakistan via 29 industrial parks and 21 mining zones along the western, central and eastern routes.

This (China's $46 billion investment in Pakistan) can not be purely politically driven. Beijing is commercial: CEO’s, not think tank intellectuals, travel with politicians. Barron's Asia

Spurred by Chinese investment, the smart money is taking notice of Pakistan as an attractive investment destination. The investors are looking at the fact that Pakistani stocks have been outperforming both emerging and frontier markets for several years. The benchmark index of the Karachi Stock Exchange (KSE100) is up more than 20% in the last 12 months, according to NASDAQ.com.

Pakistani Shares in 2015:

After a dismal March, MSCI Pakistan rebounded strongly this month, returning 9.1% so far. In April, the iShares MSCI Frontier 100 ETF (FM) rose 4.3%, the WisdomTree India Earnings Fund (EPI) dropped 1.2%, the iShares MSCI India ETF (INDA) fell 1.9%, according to Barron's Asia.

Source: Economist Magazine
KSE-100 Performance:

In 2014, the KSE-100 Index gained 6,870 points thereby generating a handsome return of 27% (31% return in US$ terms), making Pakistan's KSE world's third best performing marketTotal offerings in the year 2014 reached 9 as compared to 3 in the year 2013. After a gap of seven years, Rs 73 billion were raised through offerings in 2014 as compared to a meager Rs 4 billion raised in 2013. Foreign investors, that hold US$ 6.1 billion worth of Pakistani shares -which is 33% of the free-float (9% of market capitalization)-remained net buyers in 2014.

Pakistani Shares Valuation:

Even after outperforming both emerging and frontier market indices, Pakistani shares can be bought at deep discounts which make them very attractive, according to Renaissance Capital’s chief economist Charles Robertson.  MSCI (Morgan Stanley Composite Index) Pakistan trades at only 8.4 times forward earnings, a 17% discount to MSCI Frontier Markets. For comparison purposes, fellow frontier south Asia markets Sri Lanka and Bangladesh trade at 13.4x and 21.4x respectively. India, included in the emerging market index, trades at 16.8 times.

Key Sectors: 

Chinese investment in energy and infrastructure will help stimulate all sectors of Pakistani economy. But the sectors benefiting most from the $46 billion investment will likely include banks, energy and building materials, the sectors which are the favorites of  Pakistani billionaire investor Mian Mohammad Mansha.

Being close to the ruling Sharif family makes Mansha the ultimate insider. Beyond his investments in banking, cement, energy and textiles, Mansha is also starting to invest in consumer products sector benefiting from rising incomes, growing middle class and increasing jobs created in Pakistan by the massive Chinese investment. Mansha owns a big chunk of Muslim Commercial Bank (MCB) share. He has recently been pumping more money into energy, cement and dairy businesses. Mansha's DG Khan Cements has announced plans to build a $300 million cement plant near Karachi. In additions, his Nishat Dairies has imported thousands of dairy cows for a dairy farm in Lahore.

Summary:

The $46 billion Chinese investment in energy and infrastructure has brought attention to tremendous investment opportunities in Pakistan, a nation of nearly 200 million people with rising middle class and growing consumption.  Pakistani military's recent successes against the terrorists and China's massive investment commitments are expected to boost investor confidence in the country. Higher confidence will help draw other significant investors to invest in Pakistan over the next several years.

Monday, August 10, 2015

Google Picks Indian-American CEO

Silicon Valley tech giant Google has named Indian-born IIT-educated Sundar Pichai to head its search, ads, maps, Play Store, YouTube, and Android businesses as part of a major reorganization announced by the company. Current Google CEOs Larry Page and Sergei Brin have kicked themselves upstairs to lead Alphabet, a new holding company which will include Google as well as affiliated companies like the life-extension project Calico and a drone delivery venture called Wing, according to media reports.

FOBs and ABCDs:

Pichai and other Indian-born individuals in Silicon Valley are often referred to as "FOBs" (Fresh Off the Boat) by American-born Indians. FOBs return the "affection" by calling American-born Indians "ABCDs" (American Born Confused Desis). For those unfamiliar with the Indian vernacular, Pichai's first name Sundar means beautiful. All joking aside, it's a matter of great pride and joy to Indians and other immigrants for one of their own to be picked to head an iconic Silicon Valley tech giant.

Google Revenue Growth Slowing



Google Revenue Growth:

While Google continues to generate billions of dollars in cash, its revenue growth is clearly slowing. Google's revenue growth has halved in a year-- from 22% annual growth in Q2/2014 to 11% in Q2/2015. The trend is clear: High growth can not be sustained as new social media competitors like Facebook and Twitter grow to target the same ad market.


Boston Consulting Group's Market Share vs Growth Matrix



Cash Cow Management:

It seems that Google founders Brin and Page have decided to delegate the tending of the cash cow called Google to Pichai.  This will free up the founding duo to focus on investing in new ideas to grow other large high-growth tech businesses in the future as Google's ad revenue growth continues to decline. It's a well-known concept first documented by Boston Consulting Group in a matrix with four quadrants: Stars, Dogs, Cash Cows and Question Marks.

Difficult Transition:

Other high-growth tech companies have found this transition from a cash-cow to new high-growth products very difficult. Apple did well with the PC business but almost failed with its decline until Steve Jobs returned with iPod, iPhone and Tablets to reclaim its high-growth trajectory.  Intel and Microsoft continue to struggle since the growth of Wintel PCs flattened. It will be a big test for Google founders to manage this major transition.

Summary:

Major reorganization announced by Google today is a recognition of the difficult transition its founders face. With all its talent, Google probably has as good a chance as any tech company to meet this challenge head-on. Brin and Page must continue to focus on hiring and retaining the top talent to pull it off.

Related Links:

Haq's Musings

Indian-American Satya Nadella Appointed Microsoft CEO

Minorities Are Majority in Silicon Valley

Pakistani-Americans in Silicon Valley

Pakistani-American Shahid Khan in the Richest South Asian in America

Google, Hezbollah and Taliban

First Pakistani-American Tech Billionaire

Wednesday, August 5, 2015

Surging Sales of Smartphones and 3G Subscriptions in Pakistan

Over 1.5 million smartphones and an equal number of 3G subscriptions are being purchased every month in Pakistan, according to data released recently. The number of broadband subscriptions has more than quadrupled from under 4 million in 2013-14 to nearly 17 million in 2014-15 as a result of 3G and 4G rollout in the country last year, according to data released by Pakistan Telecommunications Authority.

Broadband Subscription Data. Source: PTA


3G/4G Expansion:

3G/4G subscriptions in Pakistan soared to 13.49 million, up from 9.83 million in May, according to data from Pakistan Telecommunications Authority (PTA). Telenor led the 3G/4G market with over 4.16 million subscribers, followed by Mobilink (3.65 million 3G subscribers), CMPak (3 million 3G/4G subscribers, and Ufone (2.57 million 3G subscribers). Warid had 106,211 LTE network subscribers at end of June. These carriers have laid thousands of kilometers of fiber to support 3G servicesMobilink alone has fiber optic network that currently spans over 8,000 kilometers.

Soaring Smartphone Sales:

Monthly smartphone sales in Pakistan are averaging 1.5 to 2 million, according to a publication named Mobile Payments Today.  Over 70% of these new smartphones are based on Google's Android operating system.  Rapid growth in smartphones in the country has attracted Chinese company Haier to set up a factory in Lahore to take advantage of the opportunity.

Mobile Broadband Apps:

Several operators are now offering 3G 4G mobile broadband connectivity in over 200 cities and towns across Pakistan. The ubiquity of access is laying the foundation for Pakistan 2.0 with a wide range of apps to improve the lives of Pakistanis. Such apps are starting to appear for education, health care, social networking, ride-sharing, banking, e-commercegovernment services, etc.

It is also bringing in mobile payments companies to allow consumers to pay using direct carrier billing. Centili, a mobile payments processor, has announced its plans to work with Mobilink, Telenor, Zong, Ufone, and Warid, which have a combined 136 million subscribers in Pakistan.

Summary:

Expansion of mobile broadband and increasing sales of smartphones are beginning to help stimulate Pakistan's economy, as are the increasing cement sales from both private and public sector.

Construction work on China-Pakistan Economic Corridor (CPEC) is stimulating economic activity in Pakistan as indicated by rising domestic cement demand in the country.  It was up 8% year over year in 2014-15.  Cement sales are considered a barometer of development activity.  A recent assessment by Ruchir Sharma, head of Morgan Stanley's emerging markets, has said Pakistan's economy is growing more than twice as fast as emerging markets other than India and China.  In a piece titled "Bucking stagnation elsewhere, the quiet rise of South Asia",  Sharma particularly mentions the Chinese CPEC investment of $46 billion as a positive for Pakistan. "Pakistan’s manufacturing sector is now growing, due to both increasing electric output and the fact that – like Bangladesh – its young population and labour force is expected to continue expanding for at least the next five years", says Sharma.

Related Links:

Haq's Musings

3G 4G Rollout in Pakistan

E-Commerce Growth in Pakistan

Haier Expands to Start Smartphone Production in Pakistan

Pakistan 2.0: Technology Driving Productivity

Public Sector Apps in Pakistan

Online Education in Pakistan

Growing Fiber Connectivity in Pakistan