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In Q1, six Pakistani startups raised $23 million in disclosed funding, down 87% from $172 million YoY but up 53% from $15 million QoQ.
It was a forgettable quarter. Funding almost disappeared in January, only to catch up to 2021 levels in March. And when that happened, the deals mainly were hangover deals from 2022.
72% of all funding ($16.6 million) announced during the quarter can be attributed to 2022 – deals closed in 2022 but announced in 2023. So what’s going on?
Nothing, really. Welcome to the new normal.
A ZERO-Interest-Rate-Policy, or ZIRP, caused the funding boom, while an increase in the Federal Funds Rate has slowed things down.
Sure, other factors are at play, such as Pakistan’s struggling economy and volatile political climate. However, Pakistan has never had a booming economy or sustained political stability. So you can’t explain away the funding boom in 2021 and 2022 by silly things like 230 million population and English-speaking youth bulge.
But looking at the Fed Funds Rate, you can make some sense of the funding boom.
ZIRP encouraged investors to look for higher returns in frontier markets like Pakistan once the markets they operated in became overvalued. This largely contributed to the boom in funding in 2021 and 2022.
The next few quarters will reveal whether the startup ecosystem in Pakistan was primarily a ZIRP phenomenon.
Check out the blog post for the list of startups that raised funding in Q1.
🚨 Resources
Lists: A database of angel investors and podcast studios in Pakistan. It is brought to you by Deosai Ventures.
Report: Using e-commerce to promote exports of Pakistani fashion products.
📰 Learn
Pakistan is to produce a unicorn by 2025. IFC will invest $10 million in Fatima Gobi's latest Pakistan-focused fund. Buyer beware in Pakistan’s digital economy. Empowered women, empowering startups. How women spend (digitally) in Pakistan. Payments, a catalyst for merchant growth in the MENAP region. IT success needs perseverance. Freelancers might bring up to $1 billion into Pakistan.
🧠 Think
Can digital media stop polarization? Is there hope for startups in Pakistan? Lahore’s tech renaissance. Banks and digital metrics. Women in tech or lack thereof. Tech-enabled B2B distribution.
📢 Now hiring
Indus Valley Capital is hiring for full-time and intern roles. Remote, in Pakistan.
🎙️ Listen
Conversation with Bazigh Kiani, co-founder of Bhartee, and Mohammad Nasrullah, founder of Integry.
📺 Watch
Muzamil Hasan talks to Qasim Asad Salam (Remotebase) and Hassan Khan (Trax). And my conversation with Jarrar Shah, co-founder of 24Seven.
Until next month, ✌️