Ayesha Mudassar

The current global economic conditions have seriously impacted startups, creating a host of serious obstacles and challenges to their growth. The government and its relevant institutions must play a prudent role in supporting the startup ecosystem, saidStrategy Managerat the Universal Service Fund (USF) Tania Sufi. Talking to WealthPK, she said uncertainty and unpredictability associated witheconomic instability posed significant risks to startup operations,disrupting their supply chains, increasing costs, and deterring investors to make long-term investments. She saidthe businesses are hesitant to invest in new projects or expand their operations, leading to decreased innovation and progress in the startup world. In addition, the economic downturn reduced consumer spending, causing a decline in the demand for goods and services provided by the startups. This consequently decreased their revenue and profits, putting additional pressure on the startups already struggling to survive.

Muhammad Shoaib Aslam, Domestic Business Facilitation Officer at the Pakistan Software Export Board (PSEB), saidlack of stability has made it difficult for such businesses to access capital, and other resources, which are crucial for their growth and success. Most startups rely on the venture capital funding, which has become inadequate in recent times due to investors being more cautious with their investments. Startup funding stood at $28.3 million during the first half of 2023 compared to $276.9 million raised in the first half of 2022, according to the statistics compiled by Data Darbar – a website that tracks investment flows into the country's tech ecosystem. Recent data demonstratesthat 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. This shortage of funding is a major challenge for startups, leading to huge exits ofinternational companies and major shutdowns.

However, the decline in startup funding is not shocking, as Pakistan’s economy has gone through its worst year with looming fear of default. In such an environment, most investors would understandably be reluctant to make bets, Shoaib added. Moreover, the number of unemployed people has increased, making it challenging for the startups to attract and retain the best talent. The cost of hiring and maintaining employees has also increased, putting an additional financial burden on the startups. Despite these difficulties, Pakistani startups must remain resilient and adapt to the changing circumstances by being creative and innovative. This will only be achievable if the government and its relevant institutions take proactive measures to support startups. A supportive environment for entrepreneurship and startups can be attained through offering incentives, enabling connectivity, facilitating funding for research and development, and implementing a favorable regulatory environment. Furthermore, the government must also encourage collaboration among the startups, academia, and the industry to foster an exchange of ideas and knowledge and drive economic growth.

Credit: INP-WealthPk