Ayesha Mudassar

The uncertainty and unpredictability associated with the economic downturn have posed significant risks to startup operations, deterring long-term investments, reports WealthPK. Most startups rely on the venture capital funding, which has become inadequate in recent times due to investors being more cautious about making investments. Data compiled by Data Darbar, a website that tracks investment flows in Pakistan's tech ecosystem, highlights a worrying trend.

The funding attained by Pakistani startups on a quarterly basis fell to the lowest level in three years during April-June 2023, with just eight deals over the three months. During the quarter, startups attracted only $5.2 million, a decline of 95% year-on-year and 77.5% quarter-on-quarter. The recent data also demonstrates that startup funding stood at $28.3 million during the first half of

2023 as compared to $276.9 million raised in the corresponding period of the last year.

The decline in funding is not limited to Pakistan alone but the entire world has faced it. CrunchBase reported a 44% year-on-year decrease in global startup funding to $22 billion in May 2023. Muhammad Shoaib Aslam, Domestic Business Facilitation Officer at the Pakistan Software Export Board (PSEB) told WealthPK that shortage of funding had proved horrendous for Pakistan’s startup sector with the country experiencing major shutdowns. Shoaib attributed the decline in funding to Pakistan's struggling economy. The country has gone through its worst year with a looming fear of default.

In such an environment, most investors would understandably be reluctant to make financial commitments, he added. Businesses are hesitant to invest in new projects or expand their operations, leading to decreased innovation and progress in the startup world. Despite the challenging circumstances, he remains cautiously optimistic about the future. “Through improvements in macroeconomic conditions and resilience of Pakistani entrepreneurs, the startup ecosystem will gradually recover and regain its momentum in attracting funding and driving innovation,” he said. Furthermore, fostering collaboration among startups, academia, and industry can nurture a culture of innovation and drive growth.

Credit: INP-WealthPk