Where Pakistan is ramping up efforts to digitize its retail grocery industry ranging from quick commerce to strict B2B business models, the downturn in the startup funding space is also real. The startups are finding it hard to raise capital as funding and deals slow across the startup ecosystems.
The recent quarter has been the worst since 2020 globally in terms of global funding, driven by the global economic downturn. As a result, even in the tech startups space, the investment that picked up staggeringly after COVID to unprecedented levels in 2021 has dropped in 2022.
At home, the startup ecosystem faces the same challenges. For example, the recent news about Airlift shutting down entirely has created a gloomy atmosphere primarily because it was one of the most funded startups in Pakistan that only had its latest round of funding in 2021.
However, a look at the Deal Flow Roundup for Q2 of 2022 by invest2innovate shows that things are not as grim. Even though the second quarter of 2022 was slower than the first quarter by 40 percent, the overall YTD progress is that the startups in 2022 raised almost 80 percent of what was raised in total in 2021. Moreover, the first quarter of 2022 was the best for Pakistan in terms of funding; The tracker shows that the amount raised in the second quarter of 2022 was $102.7 million across 15 deals, whereas the total amount raised in 2022 so far stood at $274.7 million across 37 deals. The total raised from 2022 till June 30 was $275 million versus $350 million in 2021.
The highlight of the performance in Q2 has been the high amounts raised by some deals, such as Dastygr’s $37 million Series A, Abhi’s $17 million Series A, and MedznMore’s $11.5 million Pre-Series A. In terms of sectors, E-Commerce led the growth followed by fintech and healthcare.
Startup players must know that what happened with Airlift is nothing out of the ordinary for a startup space. Some startups succeed; many startups fail. This is why startups are high-risk investments. In a recent interview with BR Research, Mohib Hassan, COO of Sastaticket.pk, also highlighted that high inflation puts contractionary pressure on riskier investments such as startups. He also mentioned that startup ecosystems evolved worldwide and hoped that the startups in Pakistan are too able to attract additional capital. He also pointed toward an emerging trend of local investors stepping up for Series A and Series B rounds of investments in startups, with more advanced stage investments happening with greater involvement of local angel investors.