KARACHI: While Pakistani startups witnessed a healthy funding growth in the year 2022, the pace of inflows slowed and they declined to around $15 million in the last quarter of the year, according to data compiled by different firms. 

The Pakistani startups emerged on global funding radar in 2021 and raised around $375 million in a funding rush that was more than the entire funding raised in the last six years.  

The funding grew by $347-355 million in the outgoing year, but the fourth quarter of the year could only bring around $15 million five deals, according to Karachi-based Alpha Beta Core startup advisory firm.    

Foreign investors pulled out of the Pakistani market amid rising interest rates and a sharp fall in the venture capital-backed stocks.  

“The first quarter started really well and was near peak levels, thanks to some big rounds. But the deal flow almost choked by Q4,” said Mutaher Khan, cofounder of the Data Darbar startup- and market-tracking firm.  

“Most foreign investors who jumped on the bandwagon last year had pulled out of the market, leaving few avenues of capital because VCs as an asset class saw a huge correction in 2022 as most of the tech and VC-backed stocks in public markets fell sharply, as much as 98.6 percent in some cases.”

Pakistani startups raised $347.44 million, which was 5 percent less than the previous year's $365.8 million inflows, according to Data Darbar. 

E-commerce led in funding value with $190.27 million raised across 16 deals in 2022, with the majority of funds received in the first quarter, as compared to the $174.6 million inflows of the previous year. Fintech topped with 19 deals and raised $100.3 million. 

Compared to 2021, last year had fewer deals but the average deal size was around $8.7 million, 57 percent higher than the average deal value of $5 million in 2021.

Bazaar remained top Pakistani startup by raising $70 million, followed by Dastgyr at $37 million, Retailo at $36 million, Jugnu Tech at $22.5 million and DBank at $17.6 million, according to Alpha Beta Core.

“Despite a tough year for global and domestic economy, funding for Pakistani Startups remained solid in 2022, with a slight decline of 7 percent when compared with the previous year,” Alpha Beta Core CEO Khurram Schehzad told Arab News.

“Investments in Pakistan’s startups upheld against all odds such as political challenges, currency volatility, devastating floods, high inflation and interest rates amid Russia-Ukraine war that caused energy and food price shocks.”  

According to invest2innovate, Pakistani startups received $355 million during the outgoing year through 57 deals.

“The pace of funding slowed down significantly towards the end of the year,” Kalsoom Lakhani, co-founder and a general partner at i2i ventures, said in a Twitter post.

“In Q4 we raised just 8.6% what we did in Q1. This is both push & pull. A lot of startups held off on raising at the end of the year in Pakistan and may open rounds early Q1 2023.”    

Global VC funding halved during the outgoing year, mainly after an interest rate hike by the US federal reserve. The funding has already gone down by around 50 percent to below $300 billion, steepest decline recorded in the history of global VC funding.  

Indian startups saw a 30 percent decline in funding to $24 billion in 2022, from a record $36 billion the previous year, according to Alpha Beta Core.  

Startup fund trackers, however, paint a brighter picture for the country’s startups and see many opportunities for innovative entrepreneurs to address issues in finance, education and health sectors.