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Startup Funding Declined by 86% in Q1 2023

Pakistani start-ups raised $23.1 million in the first quarter of the year, representing an 86.6% decrease from the previous year. This brings the overall funding to $945.4 million across 321 transactions since 2015.

Increase in Quarterly Funding

However, when compared to the preceding three months, quarterly funding increased by 55%. This upswing represents a reversal of a long-term tendency. Pakistani start-ups received $15.2 million in financing in the fourth quarter of 2022, the lowest amount since the first quarter of 2020, when funding was only $5 million.

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According to Data Darbar, a website that tracks investment inflows into the Pakistani tech ecosystem, the quarterly increase of 52.5% was built on a small foundation, while the number of deals stayed unchanged.

Deal Size Increased

Furthermore, the size of deals increased, with the median and average values increasing to $3.25 million and $3.85 million, respectively. These figures show one of the smallest gaps between the average and median levels, despite the fact that the gap widened considerably during the capital frenzy a year ago.

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For several quarters, Pakistan’s startup ecosystem has been experiencing financial problems. Some well-funded startups, such as Airlift, an instant-delivery service provider, and Swvl, a mobility company, have completely ceased operations, while others have reduced or laid off workers.

Mutaher Khan, co-founder of Data Darbar, stated:

Most rounds include a mix of institutional investors, angels, and local and foreign venture capitalists. There is some improvement. I think the deal flow will improve slightly in the future.

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The number of transactions stayed constant at eight during the review period, which was the same as the previous three-month period. This figure had fallen into the single digits for the first time since April-June 2020.

Transports and Logistics In The Lead

Startups in transportation and logistics received a large portion of funding in the first quarter of 2023, accounting for $10.1 million or 43.7% of total funding raised in two transactions. Nonetheless, the sector’s portion of total funding has declined from its peak in 2019, when it accounted for nearly three-quarters of the total.

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Fintech startups generated $9 million, or 39% of the overall quarterly amount, while ed-tech stayed at 12.1% with $2.8 million in funding. E-commerce brought in $1.2 million, making for 5.2% of the total for the quarter.

Khan went on to say:

Six of the eight transactions occurred at the seed stage and accounted for the total disclosed funding. The numbers do not include the pre-seed and accelerator rounds, which were never revealed.

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