KARACHI: Pakistani start-ups raised a total of $15.1 million in eight deals in the October-December quarter, the lowest since the first quarter of 2020 when the funding size amounted to $5m.

Statistics compiled by Data Darbar, a website that tracks investment flows into the country’s tech ecosystem, showed on Saturday the quarterly funding plunged 79.2pc on a year-on-year basis. The drop was 72.6pc from the preceding quarter.

The average ticket size dropped to $2.5m while the median ticket size slipped to $1.1m — the lowest since the first quarter of 2021.

“Rising inflation and an increase in the US Federal Reserve’s policy rate has been a dampener for VC (venture capitalist) asset class, which has been underperforming the markets this year. The phenomenon is global and not specific to Pakistan. But due to our small base, any change is more amplified,” Data Darbar co-founder Mutaher Khan told Dawn in an interview on Saturday.

Pakistan’s startup ecosystem has been in financial turmoil. Heavily funded start-ups like instant-delivery service provider Airlift and mobility player Swvl shut down operations altogether while other firms have either rolled back services or laid off employees.

As for the possible change in the global trend, Mr Khan said it depends on the reversal in the US Federal Reserve’s stance. “For Pakis­tan, it might come with a further lag, by the beginning of 2024 possibly,” he said.

The deal count fell to the single digits (eight) for the first time since April-June 2020 when the number of deals clocked in at seven. The count declined 68pc and 55.6pc on an annual and quarterly basis, respectively.

Mr Khan said cash-starved start-ups are trying to survive by being leaner. They’re renegotiating terms with vendors, executing hiring freezes and cutting down on expenses like software, he said.

“That’s the usual playbook. Some are also turning to their existing investors or relatively more expensive capital (compared to 2021) such as accelerators,” he said.

On an annual basis, the total start-up funding amounted to $347.4m, down 5pc from a year ago. The number of deals also fell to 70 from 84 in 2021.

Sector-wise, e-commerce led in the funding value as $190.3m was raised across 16 deals in 2022, with the lion’s share flowing in during the first quarter. The amount was higher than $174.6m recorded in 2021. But the number of deals remained lower than that in the preceding year (21).

Fintech topped the list in terms of the number of deals (19) as its start-ups raised $100.3m. Again, the amount was higher than $93.3m raised in 2021. But the number of deals was lower than last year’s 23.

Published in Dawn, january 1st, 2023