October 07, 2024 (MLN): Despite recent challenges, Pakistan’s startup ecosystem is bouncing back, revealing exciting opportunities as it gradually recovers and grows, according to a report by Nerizel Nawab from Alpha Beta Core.
The first half of 2024 saw a slowdown in investment activity due to global venture capital (VC) funding issues and local economic hurdles. However, the third quarter has brought promising signs of a turnaround.
Although recovery is still in its early stages, Pakistani startups are well-positioned to regain momentum and attract more investment as conditions stabilize. In Q3 2024, the startup funding landscape showed a remarkable 413% increase in quarter-over-quarter funding activity, with four deals finalized, totaling $15.4 million in investments.
As in previous years, e-commerce and fintech continue to be the focal points for investors. These sectors show strong growth potential, especially in a country with a large population and relatively low financial inclusion. Notably, DealCart and NayaPay have made it onto Forbes Asia’s “100 to Watch” list, further highlighting their appeal.
The increase in funding is linked to improving macroeconomic conditions, which have created a more stable investment environment. Factors contributing to this stability include a slowdown in inflation, a cumulative 450 basis points cut in central bank policy rates, and stability in the PKR/USD exchange rate.
Further affirming this positive shift, credit rating upgrades from Fitch and Moody’s signal growing confidence in Pakistan’s improving economic position and investment landscape. Additionally, Bloomberg has recognized Pakistan’s equity market as the world’s best-performing stock market in 2024, further boosting investor confidence.
The tech sector is rapidly emerging as a primary investment focus, attracting $8.7 million in the first nine months of 2024, reflecting a 424% increase compared to last year. The rise in Pakistan’s IT exports, reaching $3.2 billion in FY24 (June-July 2024), represents a 24% year-on-year increase, underscoring the country’s growing capabilities in technology products and services.
A booming capital market, impressive IT export growth, and an expanding tech sector position Pakistan as an attractive destination for investment. The IPO market has also seen a resurgence, with four companies debuting this year and raising Rs 8 billion, surpassing the total raised over the past two years.
Recent trends indicate a shift from early-stage investments to more mature, late-stage deals, including Series A and pre-Series A rounds. As these startups mature, they become increasingly poised for lucrative exits through public markets or IPOs, enhancing the attractiveness of startup investing in the country.
Investors are beginning to look beyond short-term challenges, recognizing the long-term potential within Pakistan’s innovative economy.
In conclusion, as we step into the second half of 2024, a slight spark is igniting positive outcomes for Pakistan’s startup landscape. The gradual rebuilding of investor confidence, fueled by untapped potential in key sectors and improving macroeconomic indicators, paints a bright future for Pakistani startups.
