Quarterly Deal Flow Update Q3 2023
The third quarter painted a mixed picture of Pakistan's economy. We kicked off with the positive news of the IMF bailout, reinforced by deposits from Saudi Arabia and the UAE. While this provided much-needed oxygen, the persistent uncertainties led to some serious ramifications:
Brain Drain - The worsening economic landscape intensified the brain drain, with skilled individuals seeking opportunities abroad.
Inflation & Interest Rates - Prediction of high inflation rate and attractive interest rate is causing investors to pivot towards secure, risk-free investments — potentially leading to the spike in bank deposits.
Foreign Exchange & Fuel - Volatile foreign exchange rates combined with escalating fuel costs posed further operational challenges for businesses.
Startup Ecosystem Snapshot
The broader economic tremors didn't spare the startup world. Two notable events underscored the headwinds: Medznmore's shutdown and Jugnu's strategic pivot. This sentiment was mirrored in the investment trends as well:
Investment Slowdown - We recorded a stark 42% decrease in deal count and a whopping 89% drop in fundraising amount, YoY.
Silver Lining - Despite the grim majority, the quarter concluded with an encouraging uptick in funding activities, hinting at potential resilience and optimism in the ecosystem.
Our Take - Yes, the challenges are real, and the figures do seem daunting. But let's not lose sight of the larger picture. Investing isn't about the immediate reactions to quarterly trends; it's about playing the long game. We've seen markets rebound, innovations emerge, and entrepreneurs rise against the odds.
With this spirit, we present our in-depth Q3 2023 deal flow update. Dive in!
This quarter, Pakistani startups raised $6.8 million across 5 publicly disclosed deals, and 3 additional undisclosed ones. This brings 2023’s total funding amount to date to approximately $35.5 million across 21 deals. Notably, this quarter’s investment amount surged by 20% from Q2, and the deal count increased from 6 to 8.
The past quarter posed significant challenges for the global startup ecosystem due to the prevailing global macroeconomic downturn. This adversity was not unique to any particular region; it affected countries worldwide.
Bangladesh raised $4M across 6 deals, a decrease in fundraising compared to Q2 2023 ($7M, 10 deals).
Egypt raised $11.6M across 16 deals, an increase in fundraising compared to Q2 2023 ($5.8M, 9 deals).
💰Reported deals this quarter:
Pasimo raised $1.3 million in a seed round led by Indus Valley Capital.
Raptr Games raised undisclosed angel investment from Sandhill Markets.
Zyp Technologies raised $1.2 million in a seed round led by Indus Valley.
Edversity secured an undisclosed seed round from a Saudi-based accelerator, The Garage.
Elphinstone raised $1 million in a seed round led by Y combinator.
MotoVest raised an undisclosed amount from Accelerator Prosperity.
Truckistan raised a $1 million seed round.
Taleemabad raised a $ 2.3 million seed round from Malala funds.
*To see a detailed breakdown of reported deals in the startup landscape please visit i2i’s public Deal Flow Tracker (DFT) here.
The percentage of seed funding stood at 74% (6 out of 8) of the total publicly disclosed deals in the current quarter. The seed funding stood at 34% (2 out of 6) in Q3 2023 and 29% (4 out of 14) in Q2 2022. The increase in seed funding signals that investors are moving away from early stage startups and are more prone towards investing in sustainable and scalable startups.
🧮Highest funded sectors:
Edtech: Emerged as the quarter's champion with $2.3 million funding, highlighting the global potential for Edtech, projected to reach a $433 billion market by 2030.
Fintech: After dominating for ten quarters, it took a back seat this Q3. However, it still remains the top funded sector year to date with a total of 6 deals out of 21 deals amounting to $13.4M out of $35.5M.
New Focus: Investment gravitated towards HR-Tech, EV mobility, and Motorcycle safety, indicating a diversified interest beyond E-commerce and Fintech.
Among a total of 8 publicly disclosed deals, 7 male-founded startups closed deals with a total of $5.5 million. There was only one deal closed by a female co-founded startup amounting to $1.3 million. No funds were raised by only female founded startups.
Global economic and political uncertainties have made investors cautious. Rising interest rates and market volatility are influencing portfolio re-evaluations, favoring lower-risk ventures. There's a pronounced shift towards startups showing traction and consistent revenues. Indus Valley was the leading investor this quarter with investment in 2 deals out of 8.
👉Mergers and acquisitions
Opay, an international fintech startup, acquired Finja’s Electronic Money Institution (EMI) license, marking the quarter’s only notable acquisition.
👋See you in Q4!
As we step into the last quarter of 2023, we're holding onto a cautious yet optimistic perspective. It's noteworthy that despite the volatile political and economic backdrop, deal flow experienced a significant upswing in September 2023, which is indeed a positive development. Moreover, Q3 2023 witnessed the highest number of fundraising deals this year. We have high hopes that stakeholders and investors will continue to see the opportunities in Pakistan’s startup ecosystem, and we anticipate increased activity in the coming quarter.
We hope you enjoyed this update and look forward to seeing you next time!
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