Islamabad, May 19, 205: In 2024, Pakistan’s startup ecosystem faced a sharp contraction in venture capital funding, signaling a steep decline in investor confidence.
Venture capital investments tumbled by 70%, shrinking to $22.5 million from $75.8 million in 2023, according to fresh insights from Data Darbar.
This downturn highlights growing hesitation among investors, putting a spotlight on Pakistan’s startup funding challenges.
The drop in funding was mirrored by a significant fall in the number of deals — only 15 deals were finalized in 2024, a 61% decline compared to 39 deals the previous year.
Interestingly, while deal volume shrank, the average size of each investment swelled by 68%, reaching $3.75 million.
The median deal size surged even more dramatically, jumping 158% to $3.1 million.
This pattern suggests that investors are concentrating on fewer startups but making larger, more focused investments.
Early-stage funding remained dominant throughout the year, with pre-Series A rounds capturing 48% of disclosed capital and seed-stage deals accounting for 38%.
In contrast, Series A investments declined to just 14%, down from 25% in 2023, and there were no recorded Series B deals, reflecting a cautious approach toward later-stage funding.
A persistent gender disparity continues to shape the startup funding landscape.
Male-only founded startups secured a substantial 75.6% of total investment, while mixed-gender teams received 24.4%.
Alarmingly, female-founded startups failed to attract any funding in 2024, underscoring the urgent need for greater inclusivity.
Debt financing provided a partial buffer against the equity funding slump, raising $20.5 million across 28 debt deals.
Fintech emerged as the leading sector, receiving nearly half (46.7%) of debt capital, followed closely by e-commerce with 37.8%. Real estate and CleanTech also attracted smaller shares of 8.9% and 6.7%, respectively.
Mergers and acquisitions (M&A) activity also decelerated sharply, with just five deals completed a 44% drop from nine in 2023 and significantly fewer than the 17 deals in 2022.
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Notably, 80% of 2024’s M&A deals were domestic, reversing a trend of predominantly cross-border transactions observed between 2020 and 2024, when 25 of 38 M&A deals were international.
Product-based companies led with 14 transactions, service firms accounted for 18, and mixed business models completed six.
Despite the dip in startup funding, Pakistan’s technology sector demonstrated robust growth. The ICT industry expanded by 8.5%, outpacing the country’s overall GDP growth of 1.73%.
Export figures reflected this momentum, with ICT exports surging 33.7% year-on-year to $3.6 billion.
Computer services formed the bulk of exports at $3.1 billion, growing 38.5%, while information services exports skyrocketed 341.5% to $22.4 million.
Telecom services also contributed significantly, bringing in $550 million.
This data paints a nuanced picture: Pakistan’s startup funding has slowed considerably as investors become more selective, yet the country’s export-driven tech sector is gaining strong global traction.
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As investor sentiment shifts, startups and policymakers alike must strategize to sustain growth and attract diverse capital.
