Aitizaz Hassan

ISLAMABAD, August 4, (INP-WealthPK): The Pakistani startups have been advised to focus on structure instead of investment to develop their businesses on sound footings, WealthPK reports.

The Pakistani startups raised $102.7 million during the second quarter of the calendar year 2022. The local startups showed 80 percent growth as compared to the second quarter of 2021, yet they witnessed a 40 percent decline against the first quarter of 2022. In the first quarter of 2022, Pakistani startups raised $172 million, which was 50 percent of the amount raised in the entire year of 2021.

Kalsoom Lakhani, the chief executive officer of Invest2innovate, a startup consultancy firm, said that it was predicted that the local startups would surpass $350 million but the second quarter of 2022 did not show significant growth.

She said that most international investors were in a holding pattern by adopting the policy of wait and see. “It means that there will be less international investment, especially for later stage funding rounds,” she said. She advised the startups to focus on structure instead of investment in the current circumstances.

“We will see more ‘extensions’ or bridge rounds this year in Pakistani startups. Pakistani startups should extend their runway and focus on showing good business fundamentals when they grow. We will also continue to see a steady amount of early stages like pre-seed and seed stage deals, but given that later rounds raise a lot more money. That’s why we believe that we won’t surpass the last year’s amount unless a shift occurs in the third quarter of 2022,” said Kalsoom Lakhani.

She termed the situation an opportunity for Pakistan-focused investors to step up their financing activities and invest jointly with locals in startups. “We are already doing this, but the only way to combat the drying up is more collaboration. It is also an opportunity for corporate inverters like VEON, which led Dastgyr’s $37 million funding round,” she told WealthPK.

According to the data released by invest2innovate, Pakistani startups raised $274 million in the first two quarters of 2022 in 37 deals, showing a growth of 167 percent as compared to the same period of the year 2021.

The e-commerce sector secured the highest investment by raising $40.4 million. The fintech startups remained second by raising $27.7 million while the emerging health tech sector earned $13.3 million in the second quarter of 2022. The mixed startups, owned by local and International founders, got $79 million while those by international investors raised $ 23.2 million in the second quarter of 2022.

According to different stages of investments, the A series startups received the highest investment of $54 million in two deals. The pre-series A stage got an investment of $11.5 million. Similarly, B series raised $10 million and the startups at the pre-seed stage secured an investment of $8.2 million. The seed stage startups raised $8.3 million initially but also got an extension of $10.7 million.

The startups in the second quarter of the year also showed gender disparity as women were discouraged to invest. About 99 percent of the investment is made by male owners of startups. The male-founded startups raised $99.4 million while $1.5 million and $1.8 million were raised by female co-founders and female founders, respectively.

Credits: Independent News Pakistan—Wealthpk