KARACHI: Pakistani start-ups raised a total of $55.4 million in 18 deals in the July-September quarter, down 46.2 per cent from the preceding quarter when the flows amounted to $102.9m.
Statistics compiled by Data Darbar, a website that tracks investment flows into the country’s tech ecosystem, shows the average ticket size remained $4.6m in July-September versus $4.9m a quarter ago.
“Besides a global slowdown in start-up investments amid uncertain macros and a change in monetary stance, there’ve also been spill-overs from the closure of a star start-up (Airlift) as well as fraud allegations against a fintech (TAG),” Data Darbar co-founder Mutaher Khan told Dawn in an interview on Saturday.
Pakistan’s startup ecosystem has been in financial turmoil. Heavily funded instant delivery service provider Airlift shut down altogether while players like Careem, Swvl, Truck It In, VavaCars and others have laid off employees and rolled back services.
“Such bad news along with Pakistan’s economic situation has increased our country risk premium. Getting good valuations has become a lot more challenging of late,” he added.
The year-on-year decline in startup funding in the latest quarter was more pronounced (68.3pc). 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 cumulatively raised $35.85m across eight deals. The second major sector was e-commerce where start-ups attracted $18.9m in five deals.
The top five rounds in July-September were conducted by fin-tech DBank ($17.6m), fin-tech OneLoad ($11m), ecommerce start-up PriceOye ($7.9m), ecommerce start-up 24seven.pk ($6m) and ecommerce start-up DealCart ($4.5m).
Venture capitalists-backed start-ups are struggling to find new funding for rapid customer acquisition. VCs aren’t willing to write blank cheques anymore to help start-ups acquire new customers at a heavy price. Investors are asking entrepreneurs to hit early break-evens instead of focusing solely on revenue mobilisation.
Stage-wise, start-ups 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 latest three-month period.
One female founded business managed to raise $0.5m while four deals by female co-founded businesses pulled in $20.1m in July-September.
The total number of investors in the three-month period was 52 versus 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 numbers. “While investors continue to have significant dry powder, many of them are hesitating from deploying any capital and can afford to wait for one to two quarters,” he said.
There’re also early signs of consolidation. Excluding Cloudways, as many as three merger-and-acquisition deals — Emerce.pk by Bagallery, NexDegree by Venture Dive, and Call Courier by PostEx — took place in the latest quarter. None of these disclosed the size of the deal though.
“The trend of consolidation is likely to continue,” Mr Khan said.
Published in Dawn, October 2nd, 2022