Investment in tech startups soars

Spikes nine fold to $176 million in first quarter of 2022

KARACHI:

The foreign investment raised by the Pakistani tech-based startups spiked nine fold to a record $176 million in the first quarter of 2022, aided by emerging proportion of tech-savvy youth that has high appetite for APP-driven products and services.

Surprisingly, foreign investors overlooked the existing shortterm political and macroeconomic instability and focused on the anticipated long-term returns. The tech based startups had acquired initial and advanced level financing from global investors worth $19.7 million in the same quarter of 2021, according to the Alpha Beta Core.

The top three startups in terms of the size of funds raised from foreign financers belonged to wholesale business segment (business-to-business marketplace). Bazaar fetched $70 million, Retailo attracted $36 million and Jugnu received $22.5 million in the quarter under review. They were followed by NayaPak in the fintech sector and Truck It In in logistech sector. Both companies secured financing worth $13 million each.

The sector-wise data suggested that the e-commerce segment attracted the largest chunk, of 32%, of the total investment made during the quarter under review. Heathtech and Coworking segments attracted 11% each while edtech fetched 10%.The remaining financing was received by all other sectors. Out of the total financing of $176 million, startups raised a sizable chunk, of 63%, in seed funding.

The proportion of financing secured in the pre-seed funding stood at 21%. The new businesses attracted 11% in advanced series A level funding while 5% was the financing secured in series B level financing, according to the data. Alpha Beta Core CEO Khurram Schehzad hoped that 2022 would prove to be a pivotal year for startup ecosystem in Pakistan, as funding in the first quarter of 2022 was 45% of the total financing secured in 2021 ($375 million). “With 19 deals in total, the value of quarter 1 deals is nine times higher than Q12021,” he said.

Keeping in view the high growth in startup financing with every passing quarter, “Pakistani startups are expected to attract over $1 billion in 2022,” he told to The Express Tribune. Startups received increased financing in the backdrop of Covid-19 pandemic, as they presented technology-based business models to facilitate people after lockdowns reduced their mobility, he recalled. The tech-savvy youth, sharp increase in number of advanced mobile internet users and conducive infrastructure for online business encouraged global investors to invest in Pakistan, he said.

The startups would continue to fetch significant financing because there is ample liquidity available with global investors while interest rates have remained low in advanced countries compared to Pakistan. Pakistan, being a largely untapped market, would remain in their focus when regulatory regime becomes accommodative, he said. In 2021, Pakistani startups raised $370-380 million in global financing that was more than what they cumulatively received in the prior six years. He said that a massive chunk of foreign investors in Pakistani startups belonged to the US followed by China, Europe and Middle Eastern investors.

“The global investors did account-in the ongoing political and macroeconomic instability such as rapidly depreciating rupee and widening current account deficit, however, they think that the instability will be short-lived and the situation will improve over a period of time,” he said. “They are long-term venturecapitalists as they foresee the situation in their target country for about five to eight years,” he said. He said that people and the government were both willing to move to a digital economy as it is hassle-free and highly efficient in terms of delivering products and services.