KARACHI: Pakistan’s startup ecosystem endured one of its toughest years in 2024, with disclosed equity funding plunging to just $22.5 million -- a 70 per cent year-on-year drop and the lowest figure since 2018 -- amid a broader regional downturn and tightening capital conditions, according to a report by tech consultancy firm Data Darbar.
Only 15 equity deals were announced throughout the year, marking a stark reversal from the boom of 2021-2022, when quarterly funding regularly exceeded $80 million. The number of transactions fell to a third of their 2021 peak, reflecting global investor caution as well as the country’s ongoing economic and political uncertainties.
Yet, as Data Darbar’s annual Tech & VC Landscape 2024 report notes, the headline figures may obscure underlying activity. Of the 15 deals, nine were undisclosed in value, suggesting that the total capital raised could be somewhat understated. Debt financing, meanwhile, emerged as a viable alternative, particularly for fintech, with companies such as Abhi and Neem reportedly tapping into non-dilutive capital to fund loan books.
While the volume of deals has diminished, average ticket sizes rebounded to $3.8 million -- up 68 per cent from 2023. The median also surged 158 per cent to $3.1 million, suggesting a smaller pool of startups are absorbing relatively larger cheques. Notably, Pre-Series A rounds accounted for nearly half of all disclosed equity funding, indicating investor preference for companies with early traction over riskier seed-stage plays. Late-stage investment has all but evaporated. The report notes a complete absence of Series B rounds for the first time in five years, underscoring the liquidity constraints and limited exit opportunities that have discouraged follow-on capital.
One of the report’s more sobering insights is the complete exclusion of all-female founding teams from the funding landscape in 2024. This marks a regression from 2023, when women-led startups raised over $10 million. Mixed-gender teams secured $5.5 million, down from $11 million a year earlier.
Fintech remained a bright spot despite the downturn, attracting $10.5 million across just four deals. While this is well below the $100 million-plus highs of 2022, the average deal size jumped to $5.25 million, suggesting targeted, high-conviction investments.
E-commerce fared worse, with funding falling to $8.5 million -- down 67 per cent from the previous year. Yet, registrations of new e-commerce companies remained resilient, with 942 incorporations in 2024, just shy of 2022’s peak.
This suggests entrepreneurial interest in the sector remains intact, even as capital retreats. With equity capital becoming scarce, a growing number of startups are turning to debt. Accelerate Prosperity, a notable player in this space, has disbursed 96 loans worth $3.2 million over five years. Islamic instruments like sukuk are also gaining traction, as evidenced by Abhi’s Ra2 billion issuance.
Still, the debt ecosystem remains nascent, hampered by low bank participation and limited credit appetite. Pakistan’s private sector credit-to-GDP ratio declined to 10 per cent by the end of 2024 -- down from 13 per cent in 2020 -- underscoring the underdevelopment of domestic financial markets.
Despite the bleak funding climate, there are signs of structural resilience. The ICT sector grew by 8.5 per cent in 2024 -- five times the pace of overall GDP -- while tech exports hit a record $3.6 billion. Deposits and credit to ICT companies have also surged, and the sector accounted for 15 per cent of all new business registrations in FY24.