Investment in startups slows down to $15m

Although 2022 was a relatively good year despite adverse global developments and internal political rift and economic uncertainty, its last quarter turned out to be tumultuous for Pakistani startups as they saw a sharp decline in fund inflows.

According to available data, the injection of funds into startups slowed down to $15.15 million in the fourth quarter (Oct-Dec) of 2022, the lowest since the first quarter of 2020, when investment came in at $5.025 million, according to Data Darbar that tracks developments in the tech industry.

The investment in Oct-Dec 2022 represented a year-on-year decline of 79.2% and quarter-on-quarter drop of 72.6%. The number of deals fell into single digit at 8 for first time since the second quarter of 2020, a decrease of 68% year-on-year and 55.6% quarter-on-quarter.

The average ticket size of investment deals dipped to $2.53 million, their lowest since Jan-Mar 2021 while the median contracted to $1.15 million.

“Despite a tough 2022 for the global and domestic economy, overall funding for Pakistani startups remained relatively stable, with a total investment of $347.44 million, a slight decrease of 5% from the $365.8 million raised in 2021,” said Data Darbar Co-founder Mutaher Khan.

In 2022, the number of deals came down to 70 from 84 in 2021. Among different sectors, e-commerce led the way in terms of funding as it received $190.27 million in 16 deals. However, the deals reflected a decrease from the 21 deals struck in 2021.

Fintech was the sector that saw the most deals at 19, which brought an investment of $100.3 million. Still, the 2022 deals were lower than the tally of 23 in 2021.

Among different stages of investment deals, Series A registered the highest funding inflow of $133.5 million, followed by seed money at $83.35 million and Series B funding at $80 million, according to Data Darbar.

“Despite encountering many challenges such as political issues, currency volatility, natural disasters as well as global recession fears, Pakistani startups were able to secure solid funding in 2022,” remarked Alpha Beta Core CEO Khurram Schehzad.

It was in contrast to the global venture capital (VC) market, which saw a sharp contraction of around 50% to below $300 billion, the steepest decline in the history of VC funding.

Schehzad said that the top deals in Pakistan in the outgoing year included Bazaar at $70 million, Dastgyr at $37 million, Retailo at $36 million, Jugnu Tech at $22.5 million and DBank at $17.6 million.

“While the economic downturn has posed challenges, 2023 holds many opportunities for innovative entrepreneurs to address issues in legacy sectors such as finance, education and healthcare,” he said.