Pakistan’s startup landscape faced a significant downturn in Q3 2023, with funding plummeting by more than 87% compared to the previous year. According to data released by Data Darbar, investments in startups in Pakistan dwindled to a mere $6.8 million during the July-September 2023 period, marking a stark contrast to the $55 million recorded in the same timeframe the previous year. This drastic decline has brought the cumulative figure for the first nine months of 2023 (9MCY23) down by nearly 90%, resting at just $35.1 million.
While there was a quarter-on-quarter (QoQ) increase of 30.8%, with funding rising from $5.2 million in Q2, the deal count exhibited a gloomy picture. Year-on-year (YoY), the deal count dropped by 50%, and on a QoQ basis, it fell by 37.5%. The total number of deals for 9MCY23 remained stagnant at 21, a figure that was matched by Q1-2022 alone.
The average ticket size in Q3-2023 also took a hit, plunging by 70.5% YoY to $1.36 million from $4.26 million. However, there was a slight uptick compared to the previous quarter, which recorded an average ticket size of $742,900.
In terms of funding stages, seed funding dominated Q3, with five startups securing seed rounds in different industries. Notably, Edtech, represented by Taleemabad, took the lion’s share with $2.6 million. Throughout 9MCY23, fintech emerged as the leading sector, both in terms of dollar amount ($14 million) and the number of transactions (7). Transportation and logistics followed with $11.1 million in funding across four transactions.
Indus Valley Capital stood out as the sole investor completing two deals in the quarter, while Sarmayacar closed one. However, Zayn VC, i2i Ventures, and Fatima Gobi did not disclose any investments in Q3-2023, revealing only one each for 9M2023. This may indicate that local VCs are deploying funds without making public announcements.
On a global scale, CB Insights reported global venture capital at $60.5 billion in Q2-2023, the lowest level since the first quarter of 2018, before the COVID-19 pandemic. Pakistan also witnessed the closure of high-funded startups like Medznmore and Jugnu, contributing to a record number of startup closures in the current year.
Amid these challenges, certain sectors, such as banking and the energy industry, have managed to thrive, capitalizing on Pakistan’s structural imbalances.