Ecosystem report: amid dwindling startup funding, i2i looks to offer insights

KARACHI: Invest2-Innovate (i2i) released on Thursday the fourth edition of its Pakistan Startup Ecosystem Report 2024 (PSER 2024), aiming to shed light on the country’s landscape where record funding has been followed by dwindling inflows.

A record year for startups in 2021 was followed by another stellar year in 2022 before startup funding depleted to $74 million in 2023, which halved to a mere $37 million (up till November) during the outgoing calendar year, according to data presented in the report.

The report highlighted that in 2024, sectors such as fintech, e-commerce, and cleantech continued to attract attention, with fintech securing $30.5 million of the total startup funding of $37 million in 2024.

Issues such as gender disparity, with women comprising only 39% of the workforce and receiving just 18.75% of total startup funding since 2015, are compounded by brain drain and infrastructure gaps, the report states.

“Connectivity remains a significant hurdle, with 47% of the population lacking internet access and frequent disruptions causing an estimated $238 million in losses in 2023.

“Regulatory complexities, low R&D investment (0.16% of GDP vs. a global average of 2.62%), and limited access to capital further strain the ecosystem’s potential,” the press release added.

Despite these hurdles, the report identifies areas of opportunities, such as the digital economy’s potential. The report also calls for enhancing academia-industry linkages to address skill gaps and fostering local investment to counter the declining international funding landscape.

The report-launch brought together prominent leaders from Pakistan’s entrepreneurial ecosystem, investors, policymakers, and other key stakeholders, and also featured panel talks that discussed the startup sector.

A press release issued by i2i stated that the report comes at a pivotal time for the ecosystem, which has experienced a significant reset after the funding boom of 2021-22.

“With investments plummeting from $355 million in 2022 to just $37 million in 2024 (till November), the ecosystem has shifted focus from rapid growth to building sustainable, profitable businesses grounded in sound unit economics,” the statement added.

Kalsoom Lakhani, founder i2i, said this year’s report also delves into the reasons behind slowdown in funding.

“The absence of credible, data-driven research has been a persistent challenge for stakeholders in Pakistan’s entrepreneurial ecosystem,” said Sarah O. Munir, CEO at i2i. “This report aims to address that gap, offering actionable insights to help Pakistan realise its full potential.”

Copyright Business Recorder, 2024