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Pakistani startups raised $5.2 million in disclosed equity funding across seven deals in Q2 2023.
That’s 95% less than the $104 million raised in Q2 of 2022 and 78% less than the $23 million raised in Q1 of 2023. Deals decreased by 53% YoY but increased by 17% QoQ.
Rather than talk about the dismal state of startup funding this quarter, I'd like to talk about something that I hope will turn the tide in future quarters. You know, the IMF.
Last week Pakistan celebrated Eid-ul-Adha and a $3 billion short-term loan from the IMF. If you live in the 3rd world, IMF is your lender of last resort.
IMF agreed to fund the loan once the Government of Pakistan accepted its austerity measures. It took almost a year for both sides to come to an agreement, leading to unsurmountable pain on the main street.
Pakistan will use the IMF loan to meet short-term needs like debt payments and foreign exchange reserves. But it's a temporary relief, not a magic wand.
It’s like putting a band-aid over a wound that requires stitches. While the loan may ease some of the immediate pain, it doesn't address the underlying issues that must be resolved for true healing - and there are so many.
Inflation is 28%, fuel imports are expensive because of subsidies, exports are struggling because of uncompetitiveness, and the Government is engaged in Game of Thrones - making fundamental reforms difficult.
So how does all this bad news help turn the tide for startup funding?
Startup investors, both foreign and local, crave stability. When founders pitch, investors aren’t just looking at the business but eyeing the country’s economic and political landscape.
This IMF deal could be a nudge in the right direction. It’s like telling investors, “Hey, things might stabilize here.” This could make investors more comfortable and more likely to consider investing. It helps change the narrative and calm default jitters.
I am cautiously optimistic. It will take time to see if the newfound confidence can translate into an actual increase in funding. For now, the IMF deal is a positive development, and here’s hoping it starts to warm things up for startup funding in Pakistan.
Check out the blog post for the list of startups that raised funding in Q2 and H1 2023 funding chart.
💰 Funding (disclosed)
Neem raised $1 million in seed extension.
📑 Reports
Pakistan Economic Survey 2023 published by Ministry of Finance.
Pakistan’s Growing IT Exports and Tech Startups: Opportunities and Challenges published by State Bank of Pakistan.
📰 Learn
Startup funding dips to lowest since Q1-2020. IT sector fighting for survival. Mashreqbank plans expansion in Pakistan. Clients are reconsidering hiring remote tech workers from Pakistan. Life of gig-workers 1 year after Airlift’s shutdown. Bykea hacked. SECP approves the first P2P lending platform. The focus on IT in the FY24 budget. Changing destinies through tech.
🧠 Think
Co-founder of Conrad Labs, Abbas Yousafzai’s next adventure. The focus on IT in the FY24 budget. The fallout from NIFT’s data breach. Navigating supply chains with Zaraye.
🎙️ Listen
Conversation with Salman Shahid, co-founder of Dost, and Mutaher Khan, co-founder of Data Darbar, on the focus on IT in the FY24 budget.
📺 Watch
Conversation with Salman Shahid, co-founder of Dost, and Mutaher Khan, co-founder of Data Darbar, on the focus on IT in the FY24 budget, Faisal Aftab, GP at Zayn VC, Yahya Humayun, co-founder Pattern, Aatif Awan and Shane Shin on MENAP startup investing in the current environment.
Until next month, ✌️