KARACHI: The Pakistani startups raised $14.9 million across six deals in the fourth quarter of 2022, down 79 per cent, compared with the same quarter of 2021, a report by I2I Ventures showed.
The funding raised in the fourth quarter clocked-in at $355 million across 57 deals year to-date.
The funding in the quarter under review went down 77 per cent, compared with the third quarter and down 91 per cent from the first quarter of 2022.
During the period under review, Remotebase raised $2.1 million in a pre-series A round in October; BusCaro raised $0.5 million in an angel round, Waada raised $1.3 million in a seed round and Finja raised $10 million in a series A round in November.
Eat Food Pakistan raised $1 million in seed funding and Valeem raised an unknown amount in pre-seed funding in December.
Among the highest funded sectors, fintech and finance took the lead by attracting $10 million; followed by the software development with $2.1 million raised and insurance and insurtech raising $1.3 million during the fourth quarter.
In terms of gender, men-founded startups raised $14.4 million across five deals, while a woman-founded startup, BusCaro, raised $500,000 in a single deal. There were no women co-founded companies who announced any funding during the fourth quarter.
Overall, a lot more money was flowing at this time last year. There has been a remarkable slowdown in the deal flows, as the year has progressed with various regional and global disruptions.
“The startup ecosystem was impacted by external factors and perhaps this year more than ever. Pakistan’s inflation reached 23.84 per cent in November 2022, ranking the 19th highest in the world, mirroring the climbing global inflation numbers,” the report noted.
Additionally, the State Bank of Pakistan’s (SBP) foreign exchange reserves rapidly depleted and reportedly stood around $6.1 billion due to external debt repayment, barely enough to cover a month’s imports.
Faisal Aftab, managing partner of Zayn Bitrate Fund, said that the world is entering a global recession and a tough year, as the global rates will remain relatively high for most of 2023. Pakistan’s economy will be in stagflation, owing to debt restructuring and political chaos, he added.
“The startup ecosystem will see more pain than in 2022, as many startups will run out of capital with no incremental funding in sight most likely before the second quarter of 2024. Those that survive will be the funnel for the next investment cycle,” he remarked.
Pakistan, with an elevated external debt profile and a persistent external account imbalance, was also inflicted with major political upheaval and disastrous floods in 2022.
The local currency depreciated 21 per cent against the dollar over 2022, despite import restrictions placed by the central bank in the latter half.
The Pakistani rupee may continue to depreciate against the dollar and the inflation may continue to be in the range of 20 to 23 per cent.
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