Startup funding takes a dip

Published September 7, 2020
E-commerce led the way in terms of both volume and value, taking up 41pc and 65pc of the aggregate figures, respectively. — Shutterstock/File
E-commerce led the way in terms of both volume and value, taking up 41pc and 65pc of the aggregate figures, respectively. — Shutterstock/File

Amid a contracting economy, funding in local startups fell nine per cent to $10 million in the first half of 2020, down from $11m a year ago, according to a recent report by MAGNiTT, a Dubai-based data portal that has just expanded into Pakistan.

Even though the overall funding was down by $1m, the number of deals jumped 13pc to 17 during the first half of 2020. This number was 15 in the corresponding period of last year. A further breakdown shows that $4m poured into nine Pakistani startups in the first quarter while eight companies raked in a total of $6m in April-June.

Meanwhile, the average ticket size of disclosed deals dipped 14pc to $0.6m between January and June. As opposed to the Middle East and North African (Mena) countries, Pakistan was towards the bottom end in terms of both funding and number of deals. It was ahead of only Kuwait in value and Jordan in volume. To give some context, the combined population of these two nations is less than that of Karachi or even Lahore.

The average ticket size of disclosed deals dipped 14pc year-on-year to $0.6m in Jan-June

In contrast, the United Arab Emirates topped the funding chart with $385m invested in the period under review, followed by Egypt ($126m) and Saudi Arabia ($95m). The same trio of countries led the number of deals as well with 62, 63 and 45, respectively.

Figures for the local ecosystem seem to be in line with the global trends even if there was absolutely no comparison in terms of overall values. According to another report published by Crunchbase, a directory for investors and startups, global venture funding slipped by 6pc during the first half of 2020. The decline is more pronounced at 17pc if we take out the outrageous amounts poured into Reliance Jio, the Indian giant owned by Mukesh Ambani.

As the coronavirus broke out across most major countries, there were warnings and predictions about a possible dip in investment with fund managers becoming more cautious. However, Crunchbase states, “There does not seem to be a strong relationship between the toll Covid-19 has taken on a country and venture funding yet, although China and Spain suffered.”

Coming back to the MAGNiTT report’s findings, e-commerce led the way in terms of both volume and value, taking up 41pc and 65pc of the aggregate figures, respectively. In terms of the number of deals, healthcare came in second with a 24pc share, followed by multimedia (12pc), advertisement and marketing (7pc) and data analytics (7pc).

For funding, multimedia was a distant second, making up 15pc of the aggregate, followed by healthcare (10pc), advertisement and marketing (3pc) and data analytics (1pc).

Taajir bagged the biggest deal during the period at $1.8m, followed by Bazaar ($1.3m), MandiExpress ($0.7m), Healthwire.pk ($0.7m) and Screen IT ($0.25m), cumulatively making 49pc of the total funding during the period. Most of this money seems to have come into seed rounds, including four of the above-mentioned five.

Even in e-commerce, the business-to-business marketplaces were particularly lucrative. Two of the biggest rounds, making up 31pc of the investment value, were from this space.

The period saw participation of 25 institutions, with Sarmayacar leading the tally at four investments and Karvaan at two. The rest only took part in one deal each. According to the publication, international investors accounted for 76pc of the investment activity during the six-month period versus the corresponding share of 30pc across the Mena region.

It must be mentioned that the total funding in Pakistani startups during the period under review was matched on the very first day of the second half, as Airlift announced raising another $10m on July 1. More activity has taken place since then, including the rounds of PriceOye (undisclosed) and Grocer App raking in $1m just the past week.

As per the newly introduced deal flow tracker of invest2innovate — an Islamabad-based accelerator and VC — the startups other than the ones already mentioned to have raised money as of Sept 4 include Xylexa, Sadapay, Oladoc, Shahi Sawari, Instacare, Emeds.pk, Dawaai, Dot and Line and Eat Mubarak.

Published in Dawn, The Business and Finance Weekly, September 7th, 2020

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