Pakistan’s startup sector witnessed a significant drop in fundraising during the second quarter of the ongoing calendar year (April-June 2022), raising a total of $103 million across 15 deals. The amount was 40% lower on a quarterly basis.

As per Invest2Innovate's (i2i) deal flow update, Pakistani startups raised $102.7 million in Q2 of 2022, about $69 million less than the amount raised in Q1 ($172 million), but significantly up from the second quarter of 2021 ($82 million).

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The report said that in the first six months of 2022, Pakistani startups raised $274.7 million with 37 deals, with the amount being almost 80% of what was raised in total during 2021 ($350 million).

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2021 has so far been the best year for the budding startup sector of the country, with 81 deals made. The amount of $350 million that was raised was more than 5x what was raised in 2020 i.e. $65 million.

E-commerce emerged as the top-funded sector in Q2 2022, attracting $40.4 million of funds. Fintech was second on the list ($27.7 million), followed by health tech, which grabbed $13.3 million.

“Our prediction is we’ll reach and pass 2021’s number ($350 million), but not by a significant amount,” said Kalsoom Lakhani, the founder and CEO of Invest2Innovate.

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Elaborating on the reasons behind the quarterly decline, Kalsoom said most international venture capitalists (VCs) have a ‘wait and see' approach, which means there will be less VC investment, especially for later-stage funding rounds i.e. Series A and beyond.

“Startups that will raise later rounds are holding off on raising, for now, focusing instead on building and showing growth and making sure they have enough runway (12-24 months) so that when they do go out to raise it’s when things are slightly better,” she said.

Recently, a number of Pakistani startups, especially those from the logistics sector, have announced layoffs and business shutdowns amid a global economic downturn.

Swvl announced it is suspending its intra-city services while Airlift said it's cutting its global headcount by 31%.

Logistics startup Truck It In also announced layoffs after securing $13 million in funding. More recently, VavaCars – backed by Dutch energy and commodity trading company Vitol – said that it has shut down operations in Pakistan, while Careem has suspended its food delivery business.

“We will see more ‘extensions’ or bridge rounds happen this year as Pakistani startups extend their runway and focus on showing ‘good business fundamentals’ when they grow," said Kalsoom.

“If you’re a business that bleeds a ton of money without any path to profitability, 2021 may have been your year, but certainly not 2022,” she said.