Pakistan startups rebound with homegrown funding as foreign investors pull back

Pakistan's venture capital ecosystem has rebounded in the first half of 2025, with domestic investors increasingly filling funding gaps as international backers grow more cautious about emerging markets, according to a new report released Saturday.

The recovery marks a significant turnaround for Pakistan's startup scene, which struggled through a difficult 2023 as global economic uncertainty dampened investor appetite for riskier markets across South Asia and beyond.

Alpha Beta Core's semi-annual funding report shows Pakistani investors are now playing a more prominent role in financing early-stage companies, stepping in at a time when foreign venture capitalists are showing increased risk aversion toward developing economies.

The shift represents a maturing of Pakistan's investment landscape, where local capital is becoming less dependent on international funding flows that have historically driven the country's startup ecosystem.

"Pakistani investors are becoming more active, stepping in at a time when global investors are showing caution," the report states, noting this domestic investment surge is helping stabilize the local funding environment.

The report identifies a clear change in investor priorities, with funding now flowing primarily to companies demonstrating sustainable revenue models rather than those pursuing rapid growth at the expense of profitability. This mirrors global trends that have emerged since high interest rates and economic uncertainty began reshaping venture capital markets worldwide.

Leading sectors attracting investment include financial technology, business-to-business logistics, software-as-a-service platforms, and agricultural technology — industries that align with Pakistan's infrastructure needs and economic development priorities.

Potential bright spot

The funding recovery comes as Pakistan works to stabilize its economy following a severe financial crisis that required a bailout from the International Monetary Fund. The country's startup ecosystem has emerged as a potential bright spot for economic diversification beyond traditional agriculture and textiles.

Another indicator of market maturation is a surge in mergers and acquisitions, with companies consolidating to achieve scale and survive in what remains a tighter funding climate compared to the boom years of 2020-2022.

The report emphasizes that continued macroeconomic stability and tax reforms will be critical to maintaining investor confidence, with government policies and regulatory clarity playing an increasingly important role in shaping investment decisions.