KARACHI: After suffering almost 90 percent funding drop in the first half of the current year, Pakistani startups are hoping for the revival of funding rush after the country got positive signals from the International Monetary Fund (IMF) in recent weeks, said startup monitors and advisers on Tuesday.
Pakistani startups raised about $375 million of global funding in 2021 which exceeded the overall financing received by them in the previous six years.
However, they only received around $28 million in the first half of 2023, including $5 million received in the second quarter, depicting a 90 percent decline in their funding, as compared to $277 million raised in the first half of 2022, according to Alpha Beta Core (ABC), a startup funding advisory firm, and Data Darbar, a startup and market tracking firm.
“This funding decline was aligned with the global slowdown coupled with macroeconomic crisis at home,” Khurram Schehzad, ABC’s chief executive officer, told Arab News. “The rupee-dollar parity issue, slow industrial activities, and high inflations created a context where investors chose to remain on the sidelines instead of putting their money in risky startup businesses.”
The number of funding breakthroughs has largely remained stagnant during the second quarter of the 2023. Major deals in this quarter include Fintech startups such as GoldFin securing $2 million and Neem raising $1 million.
In addition, smaller pre-seed and accelerator level deals were struck by Apollo Group, Qist Bazaar, OkayKer, and Pattern App, according to ABC.
Pakistan, which has been grappling with deteriorating economic conditions, finally reached a staff-level agreement (SLA) with the IMF last month over a $3 billion bailout program which rekindled startup funding hopes.
“The recent news of the IMF bailout is a welcome respite though, at least in the short term, in stemming some of the uncertainty,” Kalsoom Lakhani, co-founder and general partner at i2i Ventures, a funding company, said in a statement.
“I also think more startups will raise toward the end of this year (provided our relative respite holds and elections go as planned as well),” she continued, adding: “We definitely won’t reach our 2022 numbers, but here’s hoping 2H2023 finishes out better than the first half of this year.”
Schehzad agreed with Lakhani, saying the recovery would be gradual since “the IMF deal would improve investors’ confidence and help improve liquidity situation in the market.”
However, he noted the investors would adopt “pick and choose” strategy, instead of funding across the board.
“Now the investors are betting on smart startups or entrepreneurs – they will now pick and choose only smart startups which have shown resilience.”
Pakistani startup experts said the startup operating in ecommerce, fintech healthtech, agritech and education have substantial potential to attract funding from investors in the future.
However, Pakistani startups will have to go the extra mile, as a global slowdown combined with a tough national macroeconomic situation is definitely an uphill climb, according to i2i Insight, the research arm of i2i Venture.
Pakistani startups have raised approximately $953 million through 329 deals since 2015, according to i2i Insight.
