Pakistan’s startups sector witnesses a significant drop in fundraising

According to Invest2Innovate’s (i2i) deal flow update, Pakistan’s startups sector raised $102.7 million in the second quarter of 2022, which is about $69 million less than the amount raised in the first quarter ($172 million), but significantly more than the amount raised in the second quarter of 2021 ($82 million). According to the report, Pakistani startups raised $274.7 million in 37 deals in the first six months of 2022, accounting for nearly 80% of the total amount raised in 2021 ($350 million). Out-Class, a Pakistani edtech startup, has raised $500,000 in funding. So far, 2021 has been the best year for the country’s burgeoning startup sector, with 81 deals completed. The $350 million raised was more than five times the amount raised in 2020, which was $65 million.

E-commerce emerged as Pakistan’s top-funded sector in Q2 2022, attracting $40.4 million in funding. Fintech came in second ($27.7 million), followed by health tech, which received $13.3 million.

 

Kalsoom elaborated on the reasons for the quarterly decline, stating that most international venture capitalists (VCs) are taking a “wait and see” approach, which means there will be less VC investment, particularly in later-stage funding rounds, such as Series A and beyond.

As the global economy faces an uncertain future, startups sector are deferring funding in order to focus on growth and ensuring they have enough runway to weather the storm. This is particularly true in Pakistan, where a number of startups have recently announced layoffs and business closures.

According to Kalsoom, more Pakistani startups will seek bridge financing or extend their funding rounds in order to stay afloat and demonstrate strong business fundamentals. She warned that businesses that are losing money and are losing money will struggle in the coming year.

Also Read: 35 Best Small Business Ideas with Low Investment and Best ZERO Investment Business Ideas in Pakistan

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