Pakistan Startup Ecosystem Report 2024: A Comprehensive Overview

The latest edition of the Pakistan Startup Ecosystem Report 2024 (PSER 2024), launched by Invest2Innovate (i2i), arrives at a pivotal moment for the country’s entrepreneurial landscape. This fourth edition of i2i’s flagship research not only reflects on the remarkable investment boom of 2021-2022 but also addresses the sharp decline in startup funding that has followed.

Pakistan Startup Ecosystem 2024

The report reveals a staggering 89.58% drop in startup investments, plummeting from $355 million in 2022 to a mere $37 million in 2024 (as of November 2024). This decline follows a record year in 2021, when startups raised an impressive $365 million. The subsequent years have seen a recalibration within the ecosystem, shifting the focus from rapid growth to building sustainable and profitable businesses.

Kalsoom Lakhani, founder of i2i, emphasizes the importance of this report: “Since 2014, i2i has been benchmarking the Pakistan startup ecosystem, tracking both historic highs and more challenging periods. This year’s report not only examines the data behind this challenging time but also the reasons for it and how founders are adapting. Pakistani founders are among the most resilient in the world, and 2024 proves this once again.”

Authored by i2i’s Head of Insights, Amna Masood, and guided by CEO Sarah O Munir, the report synthesizes data from interviews with over 60 industry stakeholders and three targeted surveys involving investors, entrepreneurial support organizations, and founders. This comprehensive approach is bolstered by extensive secondary research.

Key Findings

Resilience Amidst Challenges

Despite the funding dip, the report highlights the resilience of Pakistani founders. They continue to adapt to shifting market conditions, showcasing a remarkable ability to pivot and innovate in the face of adversity.

Comprehensive Insights

The report’s data-driven approach, drawn from interviews and surveys, provides valuable insights into the ecosystem’s potential and challenges. This depth of research aims to fill the gap in credible, data-driven analysis that has historically hindered Pakistan’s entrepreneurial landscape.

Demographic Dividend

Pakistan boasts a youthful population of 241.5 million, with 65% under the age of 30. The country’s IT export market is projected to reach $3.2 billion in FY24, indicating significant opportunities for innovation. Rising digital adoption further enhances this potential, suggesting a fertile ground for startups.

Emerging Sectors

Key sectors such as fintech, e-commerce, and cleantech continue to attract investor interest. Notably, fintech secured $30.5 million of the total $37 million raised in 2024, underscoring its dominance in the current landscape.

Fintech, E-commerce, and Cleantech Lead

Despite the overall funding decline, certain sectors remain robust. Fintech, e-commerce, and cleantech are leading the charge, with fintech alone accounting for a significant portion of the funding. Noteworthy developments include the $2 billion acquisition of SadaPay by Turkey’s Papara and PostEx’s $7.3 million pre-Series A funding, highlighting the sector’s potential for growth despite broader challenges.

Challenges: Connectivity, Gender Disparity, and Research Gaps

While opportunities abound, the report identifies several persistent hurdles that need addressing:

Gender Disparity

Women constitute 39% of the startup workforce but have received only 18.75% of the funding since 2015. This disparity highlights the need for targeted initiatives to support women entrepreneurs and address funding imbalances.

Connectivity Issues

A staggering 47% of Pakistan’s population lacks reliable internet access, leading to an estimated $238 million in losses in 2023. Improving internet connectivity is crucial for fostering a thriving digital economy.

Brain Drain

An increasing number of skilled individuals are leaving Pakistan for better opportunities abroad, further straining the talent pool. This brain drain poses a significant challenge to the growth of the startup ecosystem.

Low R&D Investment

Pakistan invests only 0.16% of its GDP in research and development, far below the global average of 2.62%. Regulatory complexities also stifle growth, making it imperative to streamline policies to support startups.

Path Forward: Opportunities and Necessary Reforms

The report outlines several key recommendations for unlocking Pakistan’s potential:

• Improving Regulatory Frameworks: Streamlining policies to support startups is essential for fostering a conducive environment for innovation.

• Targeted Support for Women Entrepreneurs: Addressing gender imbalances in funding and providing targeted support for women-led startups can enhance diversity and drive growth.

• Investing in Infrastructure: Enhancing internet connectivity and overall infrastructure is vital for bridging the digital divide and enabling startups to thrive.

• Enhancing Academia-Industry Linkages: Strengthening connections between academia and industry can help address the skill gap and reduce brain drain, ensuring a robust talent pipeline.

Despite the challenges, the entrepreneurial spirit in Pakistan remains strong. With the right policy and investment support, the country can unlock its immense potential. Recent venture capital rounds, such as Gobi Partners’ $50 million Techxila Fund II and Sarmayacar’s $40 million Climaventures Fund, signal renewed investor confidence. The digital economy is projected to contribute Rs 9.7 trillion by 2030, positioning it as a cornerstone for future growth.