In Q1 2023, startup funding fell by 86%.

Pakistani start-ups raised $23.1 million through 7 agreements in the first quarter of this year, a drop of 86.6% from the same period last year. Also, this increased the overall capital since 2015 to $945.4 million across 321 deals.

Funds Increased on a Quarterly Basis

Yet, when compared to the previous three months, the quarterly funding grew by 55%. This upswing signifies the end of a protracted trend. The amount of money received by Pakistani start-ups in the fourth quarter of 2022 was $15.2 million, which was the lowest amount since the first quarter of 2020, when it was only $5 million.

According to information produced by Data Darbar, a website that tracks investment inflows into the Pakistani IT industry, the quarterly gain of 52.5% was supported by a thin base, and the number of deals remained stable.

 

Deal Size Has Grown

Moreover, there was a rise in deal size, with the median and average amounts rising to $3.25 million and $3.85 million, respectively. Given that the gap between the average and median levels had grown considerably during the period of capital frenzy around a year ago, these numbers reveal one of the narrowest differences between the two levels.

The startup ecosystem in Pakistan has been having financial issues for a while. Some well-funded firms, including the rapid delivery service provider Airlift and the mobility company Swvl, have completely shut down, while other businesses have scaled back their offerings or laid off employees.

Mutaher Khan, a co-founder of Data Darbar, said:

In most rounds, institutional investors, angel investors, and local and international VCs are all mixed in. There is some improvement. Going future, I predict a slight improvement in the deal flow.

Eight deals were completed during the time period under consideration, matching the number completed over the preceding three months. This was the first time since April through June 2020 that this number had fallen below 10.

Logistics and Transportation With $10.1 million or 43.7% of the total capital raised in two deals, transport and logistics startups in the first quarter of 2023 earned a sizeable amount of funding. Yet, the sector’s proportion of total funding fell from its 2019 peak, when it made up about three-quarters of the total.

The overall amount generated by fin-tech businesses for the quarter was $9 million, or 39% of the total, while ed-part tech’s stayed at 12.1% with funding of $2.8 million. E-commerce generated $1.2 million, or 5.2% of the total for the quarter.

Khan also said

All of the stated funds was used in six of the eight deals, all of which were in the seed stage. The numbers do not account for the pre-seed and accelerator rounds because they were never revealed.

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