Red alert for startups too?

Pakistan’s startup space has witnessed tremendous growth over the last two years. And while the country has long been hailed for beingthe fertile ground for entrepreneusrhsip ad startups because of its rising population, the youth bulge, significant English-speaking population, increasing tech savviness, and broadband and internet usage; what’s fueling the country’s emerging startup ecosystem is the burgeoning VC funding and interest. Among the startups emerging, the startups have been propelling growth while the ecommerce and finch horizontals have been captured most funding’s in the last two years.

2021 was a golden year for Pakistan’s startups where they attracted investment worth over $370 million. But just as the local startup ecosystem moved growth gears, speed breakers and global headwinds might just slow down the momentum. This is primarily because of funding opportunities drying up. Apart from the local macroeconomic instability fueled by inflation that raises costs for startups, global recession has triggered a shift in investor and VC funding appetite. This is significant in United States of America that is a major part of the VC funding received by Pakistani startups. Headlines are reading that bad times are coming for startups globally as high interest rates and recession has created credit crunch in the developed world especially the US. So drying upfunding taps in the US will have a domino effect in VC funding in countries including Pakistan. The slowdown is witnessed in Indian as well in African startups. Definitely Pakistan is next in line.

Layoffs are just the first sign of distress for early-stage startups facing an economic downturn – local or global. Besides the global wave of layoffs at startups, significant startups in Pakistan have also been seen to send their staff packing. Careem, Swvl, Truck It In, and Airlift have recently announced cut in operations and staff due to economic conditions and global capital downturn. Airlift, an ecommerce startup announced closingdown operations in South Africa as well as some cities in Pakistan. Swvl has paused its daily rides within major cities. Careem has suspended its food delivery vertical. And like Airlift and Swvl, Truck It In has also laid off around 30 percent of its employees. All this foretell a slow year of VC funding and startups growth.