Despite recent challenges, Pakistan’s startup ecosystem has shown resilience, hinting at opportunities with gradual recovery and growth. While the first half of 2024 was marked by subdued investment activity due to global VC funding slowdowns and domestic economic challenges, the third quarter has brought encouraging signs of a rebound. Though the recovery is still in its early stages, Pakistan’s startups are positioned to slowly regain momentum and potentially attract further investment as conditions begin to stabilize.
Building on this momentum, Q3 2024 witnessed a modest recovery in the startup funding, with a 413% increase in QoQ funding activity. A total of four deals were finalized, attracting US$15.4 million in investments. As in previous years, e-commerce and fintech remained the key focus of investors, reflecting their strong potential for growth in a country with a large population and relatively low financial inclusion. The attractiveness of these sectors is further validated by the recognition of DealCart and NayaPay making their way in the Forbes Asia’s “100 to Watch” list.
The revival in deal funding is linked to improving macroeconomic conditions, which have contributed to a more stable investment environment. These include the slowing pace of inflation, alongside advent of monetary easing (a cumulative 450 basis points cut in the Central Bank Policy Rates (600-700bps in market interest rates) and stability in the PKR/US$ currency parity. Further validating the shift, credit rating upgrades by Fitch and Moody’s, with Positive Outlook, signal increasing confidence in the country’s improving economic position and investment landscape.
Q3 Deal Value ($Mn)
Key Sectors 9M CY2024
Q3 CY2024 Deals
Sources: ABC Research
The recognition of Pakistan’s equity market as the world’s best-performing stock market in 2024 by Bloomberg highlights the increasing confidence investors have in the country’s economic prospects. The tech sector has emerged as a key focal point for investment, attracting US$8.7 million in 9M 2024, a striking 424% increase SPLY. The uptick in Pakistan’s IT exports, which reached US$3.2 billion in FY24 (Jun-Jul24), a 24% YoY increase, further emphasizes the country’s expanding capacity in technology products and services.
The convergence of a flourishing capital market, robust IT export growth, and an expanding tech sector, positions Pakistan as an attractive investment destination.
There has been a resurgence of the IPO market, with debut of four companies this year, raising PKR 8.0 billion—surpassing the total raised over the past two years. As recent trends in startup funding indicate a shift from early-stage investments to more mature, late-stage deals, including Series A and pre-Series A rounds. As these startups advance, they are increasingly well-positioned for lucrative exit opportunities through public markets/IPOs, thereby enhancing tractions of startup investing in the country.
These factors have encouraged investors to look beyond short-term concerns and recognize the longer-term potential in the country’s innovative economy.
In conclusion, the start of second half of 2024 shows a slight spark, yielding positive outcomes for Pakistan’s startup landscape, as anticipated. Moreover, the gradual rebuilding of investor confidence, driven by untapped potential in key sectors and improving macroeconomic indicators, positions the future of Pakistani startups in a favorable light.
Nerizel is a finance enthusiast with a Bachelor’s degree in Business Administration, specializing in Finance. She is committed to leveraging her analytical skills and financial acumen to excel as a financial analyst.