First time in three years: no startup deal for Pakistan in April 2023

Dwindling startup funding in Pakistan took another hit in April 2023 as not a single deal was closed for the first time in three years.

According to Data Darbar Co-founder Mutaher Khan, the last time this happened was in May 2020, when Covid had gripped most of the world.

Data Darbar is a website that tracks investment flows into the country’s tech ecosystem.

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The decline in startup funding has little to do with the economic crisis in Pakistan, says Mutaher.

“The fall was seen due to global downturn in funding and it is not exclusive to Pakistan,” Mutaher told Business Recorder. “Globally, deals and funding value have slipped below pre-Covid levels.

“Global funding clocked in at $58.6 billion with 7,024 deals closing in the first quarter of 2023- the lowest at least since the first quarter of 2018,” he said.

“The decline has been particularly sharp in Asia where the first quarter of 2023 amounted was $12 billion, down by 66.6% year-on-year and far lower than the beginning of 2018,” he added.

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Pakistan is faring no better with regard to startup funding either.

Although startup funding jumped 55% to $23.1 million in the first quarter of 2023 compared to the previous quarter (October-December 2022), the amount declined by a significant 86% against the same period last year, as startups had attracted $172 million in the first quarter of 2022.

Quarterly funding has been falling since the first three months of 2022 and it hit a low of $15 million in the last quarter of 2022.

According to experts, the downward trend is not only because of economic issues facing Pakistan but also due to global developments as central banks, especially the Federal Reserve, have been jacking up interest rates.

According to the figures compiled by Data Darbar, Pakistan’s startups raised $366 million in 2021.

The year 2022 started off well with an investment of $172 million in the first quarter but the numbers dropped to $15 million in the last quarter. Cumulatively, the number came at $347 million which was 5% lower than the previous year.

Following a slow start in 2023 with only one deal in January, the pace of funding grew as six new deals were inked till the end of March, indicating slight signs of revival in the startup ecosystem.

Startups eventually managed to attract investment at seed and pre-seed levels.

Alpha Beta Core CEO Khurram Schehzad told Business Recorder last month that turmoil in the country has disrupted funding “otherwise Pakistan has great potential in the startup space and when the country comes out of this crisis, funding will flow in the country.”

However, until economic issues prevail in Pakistan, the startup space in the country will largely remain thirsty for funding, said Schehzad.