KARACHI: Pakistani startups raised a total of $55.4 million in 18 deals in the July-September quarter, down 46.2 percent from the previous quarter when flows totaled $102.9m.
Statistics compiled by Data Darbar, a website that tracks investment flows into the country’s tech ecosystem, show the average ticket size remained at $4.6 million in July-September versus $4.9 million a quarter ago.
“In addition to a global slowdown in startup investment amid uncertain macros and a change in monetary stance, there were also spillovers from the closure of a star startup (Airlift) as well as fraud allegations against a fintech (TAG)),” said Mutaher Khan, co-founder of Data Darbar Dawn Saturday in an interview.
Pakistan’s startup ecosystem was in financial turmoil. Heavily funded express delivery service provider Airlift has shut down completely while players like Careem, Swvl, Truck It In, VavaCars and others have laid off employees and scaled back services.
“Such bad news along with Pakistan’s economic situation has increased our country risk premium. Getting good valuations has become much more challenging lately,” he added.
The year-on-year decline in start-up funding in the latest quarter was more pronounced (68.3 pct.). Both the total size of funding and the number of deals in July-September were the lowest since the first quarter of 2022.
The latest three-month period was dominated by the fin-tech sector, which raised a cumulative $35.85 million across eight deals. The second largest sector was e-commerce where startups attracted $18.9 million in five deals.
The top five rounds in July-September were conducted by fin-tech DBank ($17.6m), fin-tech OneLoad ($11m), e-commerce startup PriceOye ($7.9m), e-commerce startup 24seven.pk ($6 m) and e-commerce startup DealCart ($4.5m).
Venture capitalist-backed companies struggle to find new funding for rapid customer acquisition. VCs are no longer willing to write blank checks to help startups acquire new customers at an expensive price. Investors are asking entrepreneurs to reach early break-even points instead of just focusing on revenue mobilization.
By stage, startups raised $9.8m in six pre-seed rounds, $28m in four seed rounds, $6m in two pre-Series A rounds and $11m in a single Series A round during the last three months period.
One female-founded venture managed to raise $0.5 million while four deals by female co-founded ventures pulled in $20.1 million in July-September.
The total number of investors in the three-month period was 52 against 81 in the preceding quarter, data showed.
Mr Khan expects a further slowdown in start-up funding as many of the delayed rounds have already been reflected in the latest figures. “While investors still have significant dry powder, many of them are hesitant to deploy any capital and can afford to wait for one to two quarters,” he said.
There are also early signs of consolidation. Apart from Cloudways, as many as three M&A deals – Emerce.pk by Bagallery, NexDegree by Venture Dive, and Call Courier by PostEx – took place in the latest quarter. However, none of these disclosed the size of the deal.
“The trend of consolidation is likely to continue,” Mr Khan said.
Published in Dawn, October 2, 2022