Pakistan's Startup Ecosystem Battered: 70% Funding Dive in 2023 as Challenges Bite
The local companies raised about $360 million in 2021 and $350 million the following year, but by the end of 2022, their capital flow slowed.
Karobar
KARACHI: According to reliable tracking firms, Pakistani entrepreneurs raised over $70 million in 2023. This is a huge fall of over 70% from the major capital influx in the two preceding years, as reported by Arab News.
Different Pakistani startup funding monitors provide varying 2023 amounts, ranging from $71.5 million to $75.6 million. These businesses blame global and domestic political and economic difficulties for the decline in investment.
Data Darbar, a website tracking investment flows, reported that local startups raised half of the 2023 total in the fourth quarter alone, generating $38.6 million across 15 deals.
Alpha Beta Core (ABC), a startup financial advisory firm, noted a significant rebound in funding for these companies, witnessing a 553 percent surge on a quarterly basis in the last three months of 2023 after a dry spell earlier in the year.
“In Q4 2023, 12 startups disclosed funding rounds, notably Retailo securing a $15 million Series-A round for its expansion in Saudi Arabia,” ABC said in its report this week.
These rounds collectively raised over $38.7 million, constituting 53 percent of the total funds in 2023, instilling renewed confidence in the country’s startup landscape.
The other notable rounds in Q4 were KraveMart, Edufi, Sehat Kahani and Blink raising $6.25 million, $6.1 million, $2.7 million, and $2.1 million, respectively.
Invest2Innovate (I2I), another organization that keeps track of the funding, puts the cumulative inflow figure at $74 million, adding it was raised through 38 deals.
“The year 2023 was slow in terms of investment activity compared to 2022,” I2I said in a funding insight released on Thursday.
The first half of the year was marked by macroeconomic uncertainty, but the fourth quarter saw a significant surge in fundraising activities, with a 150 percent increase in both the amount raised and the number of deals compared to the same quarter in 2022.
Pakistani funding monitors are optimistic about 2024, expecting a more promising year for local startups.
Following the general elections in February 2024 and the implementation of the major structural reforms to be carried out by the new government, particularly with the assistance of a new and larger International Monetary Fund program, "we expect the startup funding market in 2024 to gain momentum with political and macro clarity," said Sarwat Khan, an investment analyst at ABC.
Co-founder and general partner of i2i Ventures Kalsoom Lakhani had a similar opinion.
"We had a better outlook for 2024 at the end of the year," she stated. "In the new year, we anticipate seeing more businesses engage in fundraising initiatives."
Local startup observers observed that investor trust has been restored by Pakistan's ongoing economic recovery and the announcement of elections, which is anticipated to strengthen the startup ecosystem in the nation.
