In 2021, Pakistani young startups ecosystem raised $373 million in funding, increasing nearly fivefold from $77 million in 2020. Foreign investors, including well-known international venture capitalists, contributed 95 percent of the entire investment. Furthermore, with funding announcements virtually every other week, 2021 could be dubbed “the Year of Pakistani Startups.”

The growth of investments in Pakistan’s ecosystem has been fueled by ‘Wapistanis,’ or Pakistani ex-pats who have returned to the nation to build new businesses using the local talent at a lesser cost than they could elsewhere.

Over 50 Pakistani firms have received funding worth a total of $1.5 billion. In 2021, investors in Pakistani startups will have taken on an average of 25% stake.

Pakistani Startups funding in 2021

According to the Pakistan Startup Ecosystem Report 2021, which was released on Tuesday, startups in Pakistan have funded $563.5 million in 255 deals since 2015, with $350 million raised in 83 deals in 2021 alone.

Invest2Innovate’s Insights team acquired data from 150 businesses, 17 investors, and 20 entrepreneurial support organizations through surveys, and then triangulated it with 52 interviews with founders, investors, support organization executives, and legislators.

“Investors in industrialized economies have increasingly attempted to diversify their holdings into emerging and frontier countries, particularly Pakistan, in recent years.

“Part of the ecosystem’s progress can be credited to a more accommodating governmental regime,” it stated.

Pakistan Startups Ecosystem Report 2021

“A significant majority of the investors who participated in this study also stated that a lack of regulations allowing for the seamless entry of foreign investment money into the country, as well as adequate venture capital–friendly legislations and processes, is a significant impediment,” the report added.

Access to money is a challenge for female-founded businesses, according to the survey. Only 1.4 percent of all investments raised in the last seven years have come from solely female-founded businesses.

According to the research, founders with prior international education and job experience raised a total of $230 million.

Three to ten years is the most generally quoted time range for when investors anticipate seeing a return on their investments in local start-ups.

According to Reuters, Bazaar, a business-to-business finance firm, announced on Tuesday that it has raised $70 million in a Series B fundraising round, bringing its total capital to $100 million in less than two years.

The current round of funding, led by Dragoneer Investment Group and Tiger Global, positions the platform as one of the most well-funded in the country’s growing startup sector.

Pakistani Startups Funding Achievements in 2021

In May 2021, the International Telecommunication Union nominated Ignite’s National Incubation Center (NIC) network as a Champion initiative in the enabling environment category.

A Pakistani business called myTM, which was incubated at NIC, won the Supernova competition in the creative economy category for the first time in GITEX Future Stars history. The influence NICs are having across Pakistan’s startup ecosystem is shown in such achievements at highly credible global tech gatherings.

Over 860 firms have been incubated in the NICs to date, with $57 million in investment commitments. To enhance the startup ecosystem, Ignite wants to expand its NIC network horizontally and vertically over the next two years. In Faisalabad, Hyderabad, Multan, Sialkot, and other cities, new NICs are being planned.

Fintech (27.1 percent), E-commerce (26.3 percent), RetailTech (19 percent), Delivery/logistics (9.4 percent), HealthTech (four percent), and Edtech (four percent) were the hottest investment areas in 2021. (3.9 percent).

Top Ten Pakistani Startups in 2021

In terms of funding, the top ten Pakistani startups in 2021 accounted for over half of all funding:

Many firms are shifting to series A and B funding, indicating that they are growing and contemplating national and worldwide expansions.

From $1.2 million in 2020 to over $6.2 million in 2021, the average deal size has increased fivefold. In 2021, eight businesses received multiple rounds of investment. Furthermore, firms led by foreign-educated entrepreneurs received the majority of the funding (around 87 percent).

More than 34% of the firms that received funding were started or cofounded by women, indicating the growing influence of female entrepreneurs in Pakistan’s startup ecosystem.

Kleiner Perkins, Y Combinator, 500 Startups, Draper Associates, 20VC, Visa, Stripe, Tiger Global, Prosus, Buckley Ventures, Next Billion Ventures, SparkLabs, Golden Gate Ventures, Hustle Fund, First Round Capital, Global Founders Capital, Raptor Group, MSA Capital, and Shorooq Partners were among the leading international venture capitalists who invested in Pakistani startups last year.

Indus Valley Capital, Fatima Gobi Ventures, 47 Ventures, KASB Securities, BitRate, Invest2Innovate, Zayn Capital, Sarmayacar, HBL Ventures, and Systems Limited were among the top local investors who participated during the year.

Conclusion

Foreign venture capitalists and angel investors made the majority of the investments. With the ever-expanding Pakistani startup ecosystem, now is an excellent time for local investors to consider investing in Pakistani startups, which can provide significantly greater returns over time than other investment opportunities such as the stock market and real estate.

However, as more firms mature and require later rounds of investment, there will be a need for growth stage money, and a talent shortage will continue to be a concern continuing into this year.

Healthtech, with a lack of access to quality health care, edtech enterprises to bring online education to millions of Pakistani children, and fintech startups to assist address Pakistan’s undocumented economy and 75% unbanked people, are new themes to watch in 2022.

In 2022, momentum will continue, with some of the world’s largest venture capitalists (VCs) eyeing Pakistan.