Pakistan’s startup ecosystem contracts sharply in 2024

Pakistan’s startup ecosystem saw a dramatic contraction in 2024, with disclosed equity funding falling to just $22.5 million across 15 deals — its weakest performance since 2018, according to the “Tech & VC Landscape Pakistan 2024” report by Data Darbar.

The funding represents a 70% year-on-year drop from $75.8 million in 2023, with early-stage activity and international investor participation hitting multi-year lows. Despite the grim headline numbers, the report notes that nearly 60% of deals in 2024 were undisclosed, suggesting the actual figures may be somewhat understated.

Venture capital activity in Pakistan is reflecting broader global investor caution. Series A and late-stage deals nearly disappeared, with no Series B rounds recorded for the first time in over five years. Pre-Series A and Seed stages accounted for the bulk of disclosed funding.

Average ticket size increased to $3.8 million, up 68% from the previous year, while the median deal size rose 158% to $3.1 million — indicating fewer but larger checks. However, the total number of equity deals remains significantly lower than during the startup boom in 2021–22.

Sector trends and gender gaps

The report highlights fintech, agritech, and e-commerce as the most funded sectors, though all recorded sharp declines from previous years. E-commerce, once Pakistan’s leading startup vertical, fell to just $8.5 million in 2024 — its lowest level in five years.

Within fintech, average deal sizes jumped, but total capital raised dropped to $10.5 million, down nearly 90% from its 2021 peak. The category still saw investor interest in credit and financing platforms.

Gender disparities widened in 2024, with no capital raised by female-only founding teams. Mixed-gender teams raised just $5.5 million — a 50% decline from 2023 — while male-only teams continued to dominate deal flow.

Beyond equity: Rise of debt financing

The report noted the growing relevance of alternative funding strategies such as venture debt and private credit, particularly in the fintech sector. Companies like Abhi, Neem, and KalPay raised significant debt rounds, with Abhi even issuing a PKR 2 billion Sukuk.

Accelerate Prosperity, a local debt facilitator, closed 96 small-ticket transactions worth $3.2 million in five years, showing that early-stage startups are increasingly turning to debt amid equity market constraints.

ICT outpaces economy, but FDI remains flat

While broader GDP growth remained sluggish at 1.73%, the Information & Communication Technology (ICT) sector grew by 8.5% in 2024. ICT exports surged to $3.6 billion, a 33.7% year-on-year increase, largely driven by computer services.

Deposits held by ICT companies reached PKR 129 billion, and outstanding loans climbed to PKR 27.3 billion — both up over 25% from 2023. However, foreign direct investment (FDI) in the sector remained weak, with minimal year-on-year increases and no inflows into hardware development.

Despite strong tech sector fundamentals, Pakistan continues to struggle in attracting meaningful FDI into startups. Software development FDI rose marginally to $10.16 million, while IT services rose just 5.3% to $36.5 million.

Comparative and global context

Pakistan’s $22.5 million in startup funding compares poorly to regional peers. Indonesia raised $520 million, the Philippines $329 million, Nigeria $323 million, and Bangladesh $46 million. Globally, North America saw a recovery in VC activity in 2024, while Asia continued to experience a funding slump.