Startups face steep funding downturn

KARACHI: The total funding raised by Pakistani startups in 2023 was $75.8 million, experiencing a sharp decline of 77 per cent compared to the preceding year, according to a Pakistan Tech and VC landscape report by Data Darbar and Indus Valley Capital. Similarly, the number of deals also decreased by 41.8pc to 39pc, the lowest since 2019.

Consequently, the average ticket size shrunk by 64.2pc to $2.2 million, while the median deal size fell by 60pc to $1.2 million. Seed-stage deals accounted for the lion’s share of funding, with 60.1pc of the total investment. However, pre-seed rounds almost vanished as investors demanded more traction before writing checks.

E-commerce remained the dominant sector, attracting 46.4pc of the total funding and 21.2pc of the deals over the past five years. Within e-commerce, the groceries vertical garnered the most significant share of capital. Fintech also witnessed a sharp correction, raising $20.1m, down almost 80pc compared to 2022.

The global venture capital ecosystem experienced a similar downturn, with funding value nosediving by 34.9pc year-over-year to $345.7 billion in 2023, reaching the lowest level since 2019. Asia fared relatively better than other regions, with a 36.8pc decline in funding compared to North America’s 30pc drop.

The report also highlighted the participation of 97 unique investors across deals in Pakistan, a significant decrease from 209 in 2022. Local investors remained underrepresented, accounting for only 24.4pc of the total count in Q42023. Prominent investors like Zayn VC, SOSV, Fatima Gobi Ventures, and Indus Valley Capital were among the most active.