Pakistan’s startup sector saw a sharp decrease in fundraising during the second quarter of the current calendar year (April-June 2022), raising a total of only $103 million across 15 deals. This amount is 40% lower than last quarter’s total.
According to Invest2Innovate’s (i2i) deal flow update, Pakistani startups raised $102.7 million in Q2 of 2022, which is about $69 million less than what was raised in Q1 ($172 million), but still significantly higher than Q2 of 2021 ($82 million).
According to the report, Pakistani startups raised $274.7 million in the first six months of 2022 with 37 deals. This amount is nearly 80% of what was raised in total during 2021 ($350 million), which has been the best year for the country’s budding startup sector with 81 deals made. The $350 million raised in 2021 is more than 5 times the amount raised in 2020 ($65 million).
E-commerce was the top-funded sector in Q2 2022, attracting $40.4 million in funds. Fintech was second on the list ($27.7 million), followed by health tech at $13.3 million.
We predict that we will reach and exceed the amount raised in 2021 ($350 million), but not by a significant amount,” said Kalsoom Lakhani, the founder and CEO of Invest2Innovate.
Elaborating on the reasons behind the quarterly decline, Kalsoom said most international venture capitalists (VCs) have a ‘wait and see approach, which means there will be less VC investment, especially for later-stage funding rounds i.e. Series A and beyond.
As the global economy faces an uncertain future, many startups are holding off on raising funds, instead of focusing on building growth and ensuring they have enough runway to weather the storm. This is especially true in Pakistan, where several startups have recently announced layoffs and business shutdowns.
In light of recent events, Swvl has announced that it will be suspending its intra-city services. This comes after Airlift announced that it would be cutting its global headcount by 31%. Truck It In, a logistics startup has also announced layoffs after securing $13 million in funding. VavaCars, backed by Dutch energy and commodity trading company Vitol, has said that it has shut down operations in Pakistan. Careem has also suspended its food delivery business.
Kalsoom noted that more Pakistani startups will extend their funding rounds or seek bridge financing in order to stay afloat and demonstrate strong business fundamentals. She warned that businesses which are unprofitable and continue to haemorrhage money will not fare well in the coming year.