The latest edition of the Pakistan Startup Ecosystem Report 2024 (PSER 2024), launched by Invest2Innovate (i2i), was unveiled at a critical juncture for the country’s entrepreneurial landscape. The report, the fourth edition of i2i’s flagship research, reflects on the impact of the 2021-2022 investment boom and the subsequent sharp decline in startup funding.
The fourth edition of i2i’s flagship report, recently launched t an event attended by investors, policymakers, and key stakeholders, reveals a stark shift in the funding landscape.
Pakistan Startup Ecosystem 2024
Startup investments have plummeted by 89.58% from $355 million in 2022 to just $37 million in 2024 (as of November 2024). This decline follows the rapid scaling observed during a record year in 2021, when startups raised $365 million, and a stellar 2022 when they raised $355M. However, the ecosystem is now recalibrating, with a greater focus on building sustainable, profitable businesses rather than chasing rapid growth.
“Since 2014, i2i has been benchmarking the Pakistan startup ecosystem, tracking both historic highs and more challenging periods,” said Kalsoom Lakhani, founder of i2i. “This year’s report not only examines the data behind this challenging time but also the reasons for it and how founders are adapting. Pakistani founders are among the most resilient in the world, and 2024 proves this once again.”
Authored by i2i’s Head of Insights Amna Masood, under the guidance of CEO Sarah O Munir, the report synthesized data from interviews with over 60 industry stakeholders and three targeted surveys involving investors, entrepreneurial support organizations, and founders. It is bolstered by extensive secondary research.
“The lack of credible, data-driven research has consistently challenged Pakistan’s entrepreneurial ecosystem,” remarked Sarah O Munir. “This report aims to fill that gap, offering actionable insights to help Pakistan unlock its full potential on the path to innovation.”
Key Findings
- Resilience amidst challenges: Despite the funding dip, the report highlights that Pakistani founders remain some of the most resilient in the world, adapting to shifting market conditions.
- Comprehensive Insights: The report draws from interviews with over 60 industry stakeholders and three targeted surveys. This data-driven approach sheds light on the ecosystem’s potential and challenges.
- Demographic Dividend: With a youthful population of 241.5 million, 65% of whom are under 30, and a $3.2 billion IT export market in FY24, Pakistan is poised to tap into its demographic dividend. Rising digital adoption adds another layer of optimism, suggesting significant opportunities for innovation.
- Emerging Sectors: Key sectors such as fintech, e-commerce, and cleantech continue to attract investor interest, with fintech securing $30.5 million of the total $37 million raised in 2024.
Fintech, E-commerce, and Cleantech Lead
Despite the funding drop, certain sectors remain resilient and attractive to investors. Fintech, e-commerce, and cleantech continue to dominate, with fintech alone securing $30.5 million of the $37 million in funding for 2024.
Noteworthy developments in these sectors include the $2 billion acquisition of SadaPay by Turkey’s Papara and PostEx’s $7.3 million pre-Series A funding. These milestones illustrate the potential for growth despite the broader challenges in the funding landscape.
Challenges: Connectivity, Gender Disparity and Research Gaps
While there are opportunities, the report emphasizes several persistent hurdles.
- Gender Disparity: Women make up 39% of the startup workforce but have received just 18.75% of the funding since 2015.
- Connectivity Issues: 47% of Pakistan’s population lacks reliable internet access, causing an estimated $238 million in losses in 2023.
- Brain Drain: An increasing number of skilled individuals are leaving Pakistan for better opportunities abroad, further straining the talent pool.
- Low R&D Investment: Pakistan invests only 0.16% of its GDP in research and development, well below the global average of 2.62%. Furthermore, regulatory complexities continue to stifle growth.
Path Forward: Opportunities and Necessary Reforms
The report outlines several key recommendations for unlocking Pakistan’s potential:
- Improving regulatory frameworks and streamlining policies to support startups.
- Fostering targeted support for women entrepreneurs and addressing gender imbalances in funding.
- Investing in infrastructure and improving internet connectivity to bridge the digital divide.
- Enhancing academia-industry linkages to address the skill gap and reduce brain drain.
While the ecosystem faces significant challenges, Pakistan’s entrepreneurial spirit is as strong as ever. With the right policy and investment support, we can unlock its immense potential, according to experts.
Despite the funding slump, the report ends on a note of optimism. Recent venture capital rounds, such as Gobi Partners’ $50 million Techxila Fund II and Sarmayacar’s $40 million Climaventures Fund, signal renewed investor confidence. The digital economy is projected to contribute Rs 9.7 trillion by 2030, making it a cornerstone for future growth.
