2021: A Banner Year For Pakistani Tech Startup Investments

[Riaz Haq]

The year 2021 is turning out to be a banner year for Pakistani tech startups. At the end of the third quarter of the current year, technology startups have already raised $278 million, twice the funding raised in the previous 5 years combined. In per capita terms, this is still just over $1 per person, a lot less compared to neighboring India where startups attracted $20 per person. 

Venture Capital Investment in Pakistan. Source: Kalsoom Lakhani, i2...

The third quarter (July-Sept 2021) alone has seen startup companies raise $172.6 in 17 deals closed in the three-month period, according to data compiled by Kalsoom Lakhani of i2i ventures. The top deals closed in the third quarter were: 1. Airlift $85 million series B 2. Bazaar $30 million in series A and 3. QisstPay $15 million seed round. 

Source: Kalsoom Lakhani, i2i Ventures

The lion's share of the ,money ($117 million) went to E-commerce startups followed by Fintech ($35 million) and trucking platforms ($13.6 million). Male-founded startups got 46.5% while female-founded companies received 1.7% with the rest of the money going to startups whose founding teams include both male and female founders. 

Venture Funding in Pakistan Lowest Among Most Populous Nations. Sou...

In per capita terms, startup investment in Pakistan is still just over $1 per person, a lot less compared to neighboring India where startups attracted $20 per person. As expected, the startups in the United States dwarfed all other countries in both per capita terms ($808) and in total size ($269 billion) of venture capital investments. 

 

Largest Global Market For Venture Funding. Source: Crunchbase

Pakistan's technology sector is in the midst of an unprecedented boom. It is being fueled by the country's growing human capital and rising investments in technology startups. A recent tweet by Swedish fund manager Mattias Martinsson captured it well when he wrote, "Have followed Pakistan for 15 years. Can't recall any time time when VC activity was anywhere near we've seen in the last few months. Impact of reforms kicking in?".  New laws have made it easier to create startups and offered greater protection to investors.  Digital infrastructure has expanded with over 100 million smartphones and an equal number of broadband subscriptions. 

With expanding Internet infrastructure and rapidly growing user base, Pakistan is now seeing robust growth in venture money pouring into technology startups. Pakistani startups have already attracted more than $278 million in funding in 2021, more funds than all the money raised by Pakistani startups in their entire history. A recent example is Kleiner Perkins, a top Silicon Valley venture capital investment firm, that led a series A round of $17 million investment into Pakistani start-up Tajir. The startup operates an online marketplace for small store merchants in Pakistan. The announcement came via a tweet by Mamoon Hamid, a Pakistani-American Managing Partner at Kleiner Perkins who led the investment. Last year, Tajir raised a $1.8 million seed round.  The company's revenue has increased by 10x since its seed round. 

Pakistan Technology Exports Trend 2007-2021. Source: Arif Habib

Pakistan's technology exports are experiencing rapid growth in double digits over the last decade. Total technology exports jumped 47% to $2.1 billion in fiscal year 2020-21. 

Pakistan University Enrollment Growth. Source: Encyclopedia of High...

The foundation for Pakistan's digital transformation was laid with the higher education reform and telecommunications deregulation and investments starting in the year 2001 on President Musharraf's watch. With a huge increase in higher education funding, Higher Education Commission Chairman Dr. Ata ur Rehman succeeded in establishing 51 new universities during 2002-2008. As a result, university enrollment (which had reached only 275,000  from 1947 to 2003) soared to about 800,000 in 2008. This helped build a significant human capital that drove the IT revolution in Pakistan.      

Please watch the following video presentation for more details on Pakistan's technology startup ecosystem:

https://youtu.be/ePApXOM3vkQ

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[Riaz Haq]

Chinese firm to fund Pakistani startups - Newspaper - DAWN.COM

https://www.dawn.com/news/1878597

LAHORE: Gobi Partners, a leading pan-Asian venture capital firm, has officially announced the $50m Techxila Fund II alongside the signing of a memorandum of understanding (MoU) with the Bank of Punjab (BoP).

This strategic partnership aims to foster entrepreneurship and strengthen economic cooperation in Pakistan. The announcement has been made during the Pakistan Investment Conference in Shanghai, part of Punjab Chief Minister Maryam Nawaz’s visit to China.

The Techxila Fund II aims to empower startups in Pakistan, with a focus on high potential sectors such as fintech, e-commerce, logistics and supply chain, health tech, and SaaS. This initiative supports under-served entrepreneurs, encourages innovation, and drives sustainable growth in emerging markets.

The plan to launch $50m Techxila Fund II builds on the success of Gobi’s first Pakistan-focused venture capital fund (Techxila Fund I), which has invested in 22 startups to date. These portfolio companies have collectively impacted 3.2 million low-income households, generated a total revenue of $245m in 2023, and issued loans worth $54m during the same year.

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Shark Tank Pakistan sets world record with largest deal in history - Pakistan - Aaj English TV

https://english.aaj.tv/news/330389926/shark-tank-pakistan-sets-worl...

Shark Tank Pakistan has made history by facilitating a record-breaking investment deal worth Rs150 crore. The recipient of this substantial funding is SARAAF, a global trading company that has captured the attention of investors with its innovative business model and ambitious goals.

SARAAF secured Rs80 crore for a 20% equity stake, along with Rs70 crore in exchange for a 3% royalty.

This unprecedented deal not only reflects the confidence investors have in SARAAF’s potential but also highlights Pakistan’s growing prominence in the global entrepreneurial landscape.

With over 25 years of experience, SARAAF specializes in connecting Central Asian suppliers with international markets, particularly in exporting premium Onyx, Cotton, and minerals.

The company’s vision of becoming Asia’s largest B2B sourcing platform has received a significant boost from this investment.

The panel of investors, known as “sharks,” includes notable figures such as Faisal Aftab, Rabeel Warraich, Romanna Dada, Junaid Iqbal, and Usman Bashir, all of whom bring diverse expertise to support entrepreneurs in scaling their ventures.

This historic deal marks a pivotal moment for Pakistani startups, demonstrating the potential for innovation and growth within the country’s entrepreneurial ecosystem.

As Shark Tank Pakistan continues to spotlight transformative ideas and businesses, it paves the way for future success stories in the region.

[Riaz Haq]

Opinion | How tech innovation can bolster Pakistan’s relationship with China | South China Morning Post

By Thomas G. Tsao is co-founder and chairman of Gobi Partners, an Asia-focused venture capital firm

https://www.scmp.com/opinion/asia-opinion/article/3304588/how-tech-...

Pakistan has the potential to become a land of opportunity for start-ups, powered by its young, tech-savvy population of 240 million. But its founders are facing a series of challenges, including political instability and a funding downturn, which has hit Pakistan hard. One way to overcome those obstacles is by deepening its connection with China. And encouraging Pakistan’s innovation can benefit both countries.
China and Pakistan’s diplomatic partnership dates back nearly 75 years. The China-Pakistan Economic Corridor (CPEC) is a critical part of Beijing’s Belt and Road Initiative, and, under the CPEC, China has invested billions of dollars into Pakistan’s physical infrastructure.
This partnership is expanding to digital infrastructure, too, with the CPEC covering initiatives such as joint research and technology transfer centres. When President Xi Jinping and Pakistan President Asif Ali Zardari met in Beijing in February, science and technology were among the areas on which they signed bilateral cooperation documents.

The collaboration also extends to the provincial level. In January, Punjab Chief Minister Maryam Nawaz told Chinese investors that the province, which is Pakistan’s largest by population, aspires to build the biggest AI centre in the country with China’s cooperation.

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Pakistan faces serious challenges...In spite of these issues, the groundwork is being laid for Pakistan to become a meaningful tech collaborator with China. Pakistanis are embracing technology in large numbers. Broadband users nearly doubled between 2019 and 2024 from 69 million to 135 million, according to the Pakistan Telecommunication Authority, and that number continues to climb.

This mass adoption enables digital innovations to reach a significant audience and generate revenue. For example, e-commerce spending in Pakistan increased from US$2.2 billion to US$5 billion during the same five-year period, based on Datareportal figures.

The political landscape is also now more promising for start-ups, thanks to the formation of a six-party coalition government last year, with the Pakistan Muslim League leading the country for the next five years. This stability enabled Pakistan to negotiate a US$7 billion loan with the International Monetary Fund, boosting government initiatives to stabilise the economy and lower interest rates. This will help revive investor interest.
Government tech policies also have a better chance of bearing fruit. While innovation crosses sectors, fintech is emerging as a fast-growing area, driven by a young population seeking convenience in how they transact and the State Bank of Pakistan’s proactive policies. Licences for digital banks are being issued steadily, signalling long-term support for the sector.

As Pakistan and China continue their focus on technology and innovation, the ecosystem is set to flourish. Knowledge-sharing between the two can go both ways. Sectors where Pakistan can collaborate with China include agritech and fintech.

For example, Pakistan’s agricultural industry, which accounts for 24 per cent of its gross domestic product according to the government, can benefit from tech transfer with China’s smart farms. A new AI app called Kisan360, a joint project between Chinese and Pakistani researchers, recently launched to help farmers monitor their fields with the aid of drones and computer vision.
The Pakistani government also recently rolled out the Green Pakistan Initiative to find tech-enabled ways to strengthen development of the agricultural industry. The initiative has strong potential to complement China’s five-year action plan to digitise its agricultural industry.