Pakistani startups witnessed a significant decline in disclosed equity funding in Q2 2023, raising only $5.2 million across seven deals. This represents a 95% decrease compared to the funding raised in Q2 2022 and a 78% decrease from Q1 2023. Although year-on-year deals decreased by 53%, there was a 17% increase in deals quarter-on-quarter.
In the first half of 2023, Pakistani startups secured $28.3 million in equity funding through 13 deals. However, this figure pales in comparison to the $276 million raised across 27 deals during the same period last year. The trend of declining startup funding and deals from 2022 appears to have continued into this year.
Despite the discouraging state of startup funding, there is a glimmer of hope in the form of a recent $3 billion short-term loan from the International Monetary Fund (IMF). For countries in the developing world, the IMF serves as a lender of last resort. The loan was granted to Pakistan after the government accepted IMF’s austerity measures following a year-long negotiation process.
While the IMF loan provides temporary relief for Pakistan’s short-term needs, it does not address the underlying issues that hinder long-term economic stability. Pakistan continues to grapple with challenges such as high inflation, expensive fuel imports, struggling exports, and difficulties in implementing necessary reforms.
Investors, both local and foreign, seek stability when considering startup investments. They assess not only the business itself but also the economic and political landscape of the country. The IMF loan can serve as a positive signal to investors, indicating a potential stabilization of the economic environment in Pakistan. This newfound confidence may make investors more comfortable and more inclined to invest in Pakistani startups, helping to change the narrative and alleviate concerns about defaults.
While cautious optimism is warranted, it will take time to determine if the IMF loan translates into an actual increase in startup funding. Nonetheless, the deal represents a positive development and has the potential to create a more favorable climate for startup investments in Pakistan.
Several Pakistani startups secured funding in Q1 2023, including Apollo Group, GoldFin, EasyFresh, Qist Bazaar, OkayKer, Pattern, and Neem. These funding rounds demonstrate continued interest and support for startups in various sectors.
Although Pakistani startups experienced a decline in disclosed equity funding in Q2 2023, the recent IMF loan offers a ray of hope for future growth. Stability and confidence in the country’s economic and political landscape are essential for attracting startup investments. While the impact of the IMF loan on startup funding is yet to be seen, it presents an opportunity to change the narrative and encourage investors to consider Pakistan as an investment destination.