Pakistani Startups Struggle with Zero Funding in Q1 2024

During the first quarter of 2024, Pakistani startups encountered a notable setback as they failed to secure any investment. It marks a concerning trend in the entrepreneurial landscape. The absence of funding can be attributed to investors exercising caution. The major reason is the impending general elections that were scheduled for February 8. Anticipated to significantly impact market sentiment, the elections likely contributed to investor hesitation, resulting in a lack of capital influx into the startup ecosystem.

The year 2024 commenced on a subdued note for local startups. It marks a stark contrast to the previous year’s fundraising endeavors. In 2023, Pakistani startups managed to raise a modest sum of $75 million. It reflected a downturn from the more robust funding activities witnessed in 2022, where a total of $315 million was secured. Mutaher Khan, the co-founder of Data Darbar, highlighted the challenges faced by startups in 2023, citing factors such as insufficient support from global venture capital and a sluggish domestic GDP, which recorded a mere 1 percent growth in October-December.

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Additionally, the high interest rate environment further dampened investor sentiment, curbing the flow of capital into Pakistan’s startup ecosystem. Despite the subdued fundraising landscape, there was one undisclosed investment recorded in Q1 2024. It indicated a potential single tranche of a larger funding round that went unreported.

The dry spell witnessed in the first quarter of 2024 can be primarily attributed to the anticipation surrounding the general elections held earlier in the year. With the political landscape in flux, investors adopted a cautious stance. Most of them opted to withhold significant investment decisions until there was clarity regarding the outcome of the elections. This cautious approach created a temporary slowdown in fundraising activities within the startup ecosystem as investors awaited a more stable political environment before committing to new ventures.

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In contrast to the current performance in 2024, 2023 emerged as a standout year for female-founded startups. It garnered considerable attention and investment. Out of the total funding raised, amounting to $75.6 million during that period, female-founded startups secured a noteworthy $10.5 million. However, following the formation of the federal cabinet, there has been a discernible uptick in foreign investment inflows into the capital markets. It totals $38 million from February 8th onwards.