Tech and Telecom

Startup Funding Declined by 86% in Q1 2023

During the first quarter of the year, Pakistani start-ups secured $23.1 million through 7 deals, marking an 86.6% decline from the previous year. This also brought up the total funding to $945.4 million across 321 deals since 2015.

Increase in Quarterly Funding

However, the quarterly funding increased by 55% compared to the previous three months. This upswing marks a reversal of a prolonged trend. Pakistani start-ups garnered $15.2 million in funding in the last quarter of 2022, which was the lowest since the first quarter of 2020 when the funding size was just $5 million.

Data Darbar, a website that monitors investment inflows into the Pakistani tech ecosystem, compiled statistics indicating that the quarterly increase of 52.5% was based on a small foundation, while the number of deals remained unchanged.

Deal Size Increased

Moreover, there was an increase in the size of deals, as both the median and average levels saw an improvement and reached $3.25 million and $3.85 million, respectively. These figures show one of the smallest gaps between the average and median levels as the gap had expanded significantly during the period of capital frenzy around a year ago.

Pakistan’s startup ecosystem has been facing financial difficulties for several quarters. Some well-funded startups, such as Airlift, an instant-delivery service provider, and Swvl, a mobility company, have ceased operations entirely, while other companies have either reduced their services or laid off employees.

Data Darbar co-founder Mutaher Khan said:

Most rounds has a mix of institutional investors, angels and local and international VCs. There’s some recovery. I believe the deal flow will likely improve a little going forward.

During the period under review, the number of deals remained constant at eight, which was the same as the previous three-month period. This number had decreased to single digits for the first time since April-June 2020.

Transports and Logistics In the Lead

Transport and logistics startups received a significant portion of funding in the first quarter of 2023, with $10.1 million or 43.7% of the total funding raised in two deals. Nevertheless, the sector’s share in overall funding decreased from the peak of 2019 when it accounted for almost three-quarters of the total.

Fin-tech startups generated $9 million, or 39%, of the total quarterly amount, while ed-tech’s share remained at 12.1%, with a funding of $2.8 million. E-commerce drew $1.2 million, accounting for 5.2% of the quarterly total.

Khan added:

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.

Published by
Aasil Ahmed