Start-up funding in Jan-March drops 86.6pc

KARACHI: Pakistani start-ups raised a total of $23.1 million in eight deals in the January-March quarter, down 86.6 per cent from a year ago.

However, the amount of quarterly funding rose 52.5pc from the preceding three-month period. The recovery from the trough of the last quarter of 2022 marks the reversal of a long trend. The haul of Pakistani start-ups in October-December was $15.2m, lowest since the first quarter of 2020 when the funding size amounted to just $5m.

Statistics compiled by Data Darbar, a website that tracks investment flows into the country’s tech ecosystem, showed the quarterly improvement of 52.5pc was on a low base while the deal count remained flat.

There was also an uptick in deal sizes as both the average and median levels posted some recovery and reached $3.85m and $3.25m, respectively. These numbers show one of the lowest gaps between average and median levels as the difference had widened significantly during the period of capital frenzy about a year ago.

Pakistan’s startup ecosystem has been in financial turmoil for many quarters now. Heavily funded start-ups like instant-delivery service provider Airlift and mobility player Swvl shut down operations altogether while other firms have either rolled back services or laid off employees.

“Most rounds has a mix of institutional investors, angels and local and international VCs,” Data Darbar co-founder Mutaher Khan told Dawn on Friday. “There’s some recovery. I believe the deal flow will likely improve a little going forward,” he said.

The number of deals in the quarter under review was eight, unchanged from the preceding three-month period when the figure fell to the single digits for the first time since April-June 2020.

A large part of the funding in the first quarter of 2023 went into transport and logistics start-ups. These firms raised $10.1m or 43.7pc of the total funding in two deals. However, the sector’s share in the overall funding declined from the highs of 2019 when it made up almost three-quarters of the total.

Fin-tech start-ups pulled in $9m or 39pc of the total quarterly figure while the share of ed-tech remained 12.1pc with a funding of $2.8m. Ecommerce attracted $1.2m, constituting a share of 5.2pc in the quarterly total.

“Six of the eight deals took place at the seed stage and accounted for the entirety of the disclosed funding. The pre-seed and accelerator rounds were never disclosed and aren’t, therefore, reflected in the numbers,” said Mr Khan.

Meanwhile, i2i Ventures Founder Kalsoom Lakhani wrote on Twitter that all start-ups are facing challenges in raising funds from international VCs. One of the biggest reasons for the funding slowdown faced by Pakistan-based start-ups is the country’s “political and economic instability,” she said.

Pakistan was the worst performer among Bangladesh and the countries in the Middle East and Northern Africa regions where the dollar is “still flowing well” relatively, she added.

According to a deal flow update compiled by her firm, the top deal was of fin-tech AdalFi ($7.5m), followed by logistics firm Trukkr ($6.4m) and logistics start-up Trax ($3.7m).

Published in Dawn, April 1st, 2023

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