Experts see next year challenging for Pakistani startups

ISLAMABAD: Experts said Pakistani startups will have to make more effort to raise funds next year in view of slow global investment, higher interest rates and economic uncertainty in the country, reports WealthPK.
According to the Invest2inovate data, a startup consultancy firm, Pakistani startups’ funding declined in the third quarter (July-Sept) of CY2022, as just $65.5 million could be raised compared with $177 million in the corresponding period of 2021.
Talking to WealthPK, Syed Azfar Hussain, Project Director National Incubation Centre (NIC), Hyderabad, said the slowdown in funding [in Pakistani startups] was caused by the global scenario as well as the unfavorable local conditions.
“It is evident that startups raised decent funds during the first half of the year. However, the funding declined, as big venture capital companies such as Tiger Global’s funding shrank in the later period of 2022,” he said.
Azfar Hussain said in 2023, the participants of the sector and founders need to come up with ideas that attract foreign investment.
“If we look at the local ecosystem, we see the majority of products are only serving the local population’s needs. The investors and venture capitalists usually support those ideas, which are scalable on a global level.”
Talking about Airlift and SWVL, he said though both the startups initially raised substantial international funding, they suspended their operations in Pakistan due to a host of factors.
“Attracting funding in the current scenario is becoming a difficult task for the startup founders, as these ventures are high growth and scalable businesses for which the adoption of technology plays a significant role,” Hussain remarked.
The government needs to facilitate an easy and smooth access to technology and its allied products at lower costs to make the technological products scalable and sustainable in Pakistan, he added.
Azfar said in the country’s ecosystem, e-commerce startups lead the way in raising funding. The founders need to go beyond the e-commerce sector and lay the foundation of ideas and products in the sectors such as fintech, EdTech, and Healthtech.
“However, for the success of these startups, it is essential that the founders should come up with the ideas, which resolve the majority of the consumers’ issues rather than targeting a specific segment of the society,” he added.
According to Badar Khushnood, Chairman Pakistan Software House Association (P@SHA), the startup shows an appreciable performance in spite of a challenging environment.
He said when the founders sell shares or when the employees sell options, the government should put a flat tax rate of 5% to incentivize them so that they may bring more remittances in the country.
Badar said Pakistan ought to improve access to finance in the startup business. The startups need collaboration with the commercial banks to facilitate the framework to secure investment. Public-private joint effort is also very important for the startups’ early-stage investment so that they can initiate their idea practically.