The year 2021 was a defining moment for tech firms, with significant global expansion. The trend continued through the beginning of 2022, when the effects of global conflict, the European energy crisis, supply-chain disruptions, skyrocketing inflation and interest rates created a state of instability in the markets. Inflation eventually started dropping in 2023 with growth in economies showing some resilience. The startup ecosystem in Pakistan also transitioned with global trends, growing tremendously in 2020-2022 – but tapering growth in 2023.
During 2023, 29 startups in Pakistan raised a meager $75 million in disclosed venture capital funding across 30 deals. These include 4 pre-seed fundings, 23 seed-level fundings, and 2 series A funding rounds. This list doesn’t include undisclosed rounds less than $250,000. Compared to 2022, funding in 2023 fell by 77 percent year-on-year, while the number of deals fell by 29 percent. During the last month of the year – December 2023 – there were four funding deals that raised over $7 million in disclosed funding. The reasons experts give for the falloff funding in the local startup ecosystem are the high interest rates and global economic turmoil. Recall that in the startups attracted $365.8 million – the highest ever – and $332.4 million, respectively in 2021 and 2022.
Sector-wise, e-commerce grabbed the largest chunk of startup funding continuing its dominance for another year. The year however was the best for female-founded startups that saw the share in total startup funding going up to 13.9 percent from the average of 1.34 percent between 2019-2022.
Global recession has been critical for local startup space as it has dried up sources of capital with banks and VCs less interested to invest. Startups are vulnerable to economic turmoil, and the one at home has been the worse in decades. The fall in funding and delas is a depiction of that.
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