Startups only attracted $5.2 million during the quarter, a decrease of 95% year over year and 77.5% quarter over quarter.
In the three months from April to June, only eight deals were made in terms of funding for Pakistani startup companies, which was the lowest number in three years.
Startups only attracted $5.2 million during the quarter, a decrease of 95% year over year and 77.5% quarter over quarter.
According to data compiled by Data Darbar, a website that tracks investment flows into the nation’s tech ecosystem, startup funding stood at $104.1 million during the second quarter of 2022 and $23.1 million in the first quarter of 2023.
According to Mutaher Khan, co-founder of Data Darbar, “the last time Pakistani startups attracted below $5.2 million was three years ago during the first quarter of 2020, when they got $5.025 million in 11 deals.
“It’s not shocking that startup funding is declining. The fear of default has likely made this the worst year for the Pakistani economy. Most investors would naturally be reluctant to place bets in such a situation, he continued.
However, Pakistan is not the only country with a problem. Around the world, and especially in Asia, startup funding has decreased.
In Asia, where venture capital investments fell below pre-Covid levels some time ago and have not yet recovered, fundraising has been particularly difficult, according to Data Darbar’s report. Global startup funding decreased 44% year over year to $22 billion in May 2023, according to Crunchbase, although data for the most recent quarter has not yet been made public.
Additionally, the average deal size decreased to just $743,000 from $4.7 million the year before and reached its lowest level since the first quarter of 2019.
Fintech dominated the market during the quarter, accounting for $4 million of the disclosed funding and half of the deals.
Total startup funding was $28.3 million in the first half of 2023, which is 60% less than the $70 million it was from July to December. In comparison to the $276.9 million raised in the first half of 2022, the decline was much steeper, at 90%.
The number of deals also significantly decreased, from 46 in January-June of the previous year and 26 in July-December to just 16. These numbers are the lowest by number of deals since the second half of 2020 and the second half of 2019.
Alpha Beta Core CEO Khurram Schehzad told media that the upcoming half of the year “might fare slightly better than this outgoing one.”
“The announcement of an additional $3 billion in funding from the IMF will calm people down. However, there are global liquidity problems. They don’t have as much liquidity as venture capitalists. Startups with strong revenue and potential for profitability will receive funding, the executive continued.
The seasoned investor and advisor in the technology sector added that there are people in Pakistan working on great ideas and that a lack of funding doesn’t necessarily indicate problems in the startup ecosystem.
“It’s simply a result of a lack of liquidity brought on by rising interest rates. Startups require venture capitalist liquidity in order to scale, which is accomplished by using up capital. Venture capitalists can’t bet as much on startups as they once could due to a lack of liquidity.
According to Schehzad, it will take more than a year before the ecosystem begins bringing in the same amount of funding as before.
According to him, Pakistan also needs to address its macroeconomic problems in order to make it more feasible for people to increase investment there.
The tech ecosystem in Pakistan is also not as strong as those in other nations. There isn’t enough digitization. Laptops and cell phones are pricey. Internet access is pricey. Along with other crucial problems like political unrest, these things must also be resolved if the nation is to draw any kind of investment, including startup funding, he continued.