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So last monthās claim that the increase in funding in the Pakistani startup ecosystem during 2021 and 2022 might be more or less a zero-interest-rate-policy phenomenon didnāt sit well with some folks. I got ācorrelation isnāt causation, the cyclical nature of funding, global economic trends, etc.ā type comments.
I appreciate that. All valid points to some extent. More than one factor can indeed play a role in an increase or decrease in ecosystem funding, but thereās a clear pattern.
When interest rates are low, money looks for opportunities that result in demand, while supply (startups) stays the same.
This results in a higher valuation for startups (check), lackadaisical due diligence (check), and a select few startups with pedigree getting all the funding (check).
Does that sound familiar? It should. Thatās precisely what happened with startup funding in Pakistan in 2021 and 2022.
Politics, the economy, etc., nothing has changed. Sometimes, the most straightforward answer is usually the correct answer.
Sure, FE Circular made it easier to own foreign subs for Pakistani founders, but that was more or less a convenience than a game changer.
And just between you and me, a "giving back" sentiment has significantly driven funding in Pakistan. This is particularly true for Pakistanis living abroad, who comprise most LPs in Pakistan-focused VC funds.
Add to that the ESG types who see Pakistan as a check-the-box investment to satisfy their investment mandate, and you get an unsustainable funding environment - all thanks to ZIRP.
Letās do the numbers.
š° Funding (disclosed)
GoldFin raised $2 million in funding.
Apollo Group raised $500k (YC).*
* I include accelerator rounds (YC and Orbit) after the demo day.
š Reports
State of B2C E-commerce in Pakistan
Pakistan Telecom Industry Report - 2023-2030
š° Learn
Pakistan raises the key rate to a record 21%. Trella exits Pakistan. Bazaar launches Bazaar Prime. e& takes a $400 million majority stake in Careem's Super App. Can startups in Pakistan disrupt management consulting? Mapping the AI startup space in Pakistan. Tech is helping to build new millionaires across Pakistan. Google launches App Growth Lab. Groceries are 24% cheaper on DealCart.
š§ Ā Think
Navigating the cash crunch. Inflation hindering tech growth. The Realist Optimistās conversation with Kalsoom Lakhani, GP i2i Ventures. How long does it take to get the EMI license? Understanding digital payments at UBL, Easypaisa, and BAF.
š¢ Now hiring
Metric and Oraan are hiring for multiple roles, SocialBu is looking for Sr. Marketing Strategist, and i2i Ventures is looking for a Summer Fellow.
šļøĀ Listen
Conversation with Rooshan Aziz, co-founder of Maqsad, and Aamir Bhagat, founder of ITeachStuff.
šŗ Watch
A conversation between Princeton professor Atif Mian and Dr. Reza Baqir, former Governor of the State Bank of Pakistan.
Until next month, āļø