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Pakistan’s startup sector had a dramatic dip in funding!

In the first half of 2022, Pakistani startups raised $274.7 million with 37 deals, with the amount being about 80 percent of what was raised overall during 2021 ($350 million)

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During the second quarter of the current calendar year (April-June 2022), Pakistan’s startup sector had a dramatic dip in funding, raising a total of $103 million across 15 agreements. On a quarterly basis, the amount was 40% lower.

According to Invest2Innovate’s (i2i) deal flow update, in 2nd quarter of 2022, Pakistani startups raised $102.7 million almost $69 million less than the amount raised in Q1 ($172 million),  but notably higher from the second quarter of 2021 ($82 million).

As per the report, in the first half of 2022, Pakistani startups raised $274.7 million with 37 deals, with the amount being about 80 percent of what was raised overall during 2021 ($350 million).

Read more: Pakistan’s startups raise $163m in 3 months

So far, 2021 has been the best year for the country’s growing startup sector, with 81 deals finalized. The $350 million raised was more than five times what was raised in 2020, which was $65 million.

E-commerce was the most-funded sector in Q2 2022, collecting $40.4 million. Fintech came in second ($27.7 million), followed by health tech, which received $13.3 million.

Reasons behind the quarterly decline

Kalsoom Lakhani, the founder and CEO of Invest2Innovate said that majority of the venture capitalists (VCs) have a ‘wait and see’ approach, which indicates less VC investment, mainly for later-stage funding rounds i.e. Series A and beyond.

In the midst of a worldwide economic crisis, a number of Pakistani startups, particularly those in the logistics sector, have announced layoffs and firm closures.

Swvl has announced the suspension of its intra-city services, while Airlift has reported a 31% reduction in global headcount.

Truck It In, a logistics startup, also announced layoffs after raising $13 million in funding. Recently, VavaCars, which is financed by the Dutch oil and commodity trading giant Vitol, announced the closure of its activities in Pakistan, while Careem ceased its food delivery service.

Kalsoom shared that this year will see more ‘extensions’ or bridge rounds as Pakistani startups stretch their runway and focus on demonstrating ‘good business fundamentals’ as they grow. “If you’re a business that bleeds a ton of money w/ no path to profitability, 2021 may have been your year, but certainly not in 2022. 3rd, while the “drying up” is scary, it’s also an opp for PK,” she added.