Pakistan VC 2021: How the ecosystem got on the map
Public initiatives, Local investment, and burgeoning international interest- here's why 2021 marked the year of Pakistan as the South Asian Market that's Ripe for Tech disruption. We breakdown our highlights from the Pakistan 2022 Venture Investment Report
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VC investment in Pakistan has been on a gradual growth for the past few years, yet 2021 marked a pivot point for the ecosystem. It was in the first half of the year that early signs of a radical shift started showing in Pakistan, wherein in H1’21 the Pakistan VC ecosystem had already invested north of $10M more and closed 1 extra deal than full year 2020. This was a critical moment for the ecosystem not only because it was the most it had raised in one half of a year historically, but also because it showed the phenomenal progress it had made- where the ecosystem was shy of $50M in full-year 2019, it had raised almost double that amount in one half. Yet, no one was ready for H2’2021- and here is the real reason why Pakistan is the South Asian market everyone is on the lookout for.
As of 2020, the world bank ranked Pakistan as the fifth most populous country in the world with a population of more than 200M people, of which approximately 120M use the internet. Pakistan has one of the fastest-growing economies in Asia, with a GDP per Capita nearing $2,000 by 2020. Investors and startups alike understood the value of these numbers in creating an innovation-conducive environment and a market ripe for Tech disruption. Quickly digital and E-commerce startups started emerging and gaining traction: around 2019, we observed the early-stage funding of some heavy hitters in 2021 including consultation-booking platform Oladoc (formerly known as doctor.pk) raising $1.6M in its Pre-Series A, on-demand courier service Bykea raising $5.7M in its Series A, and of course T&L startup Airlift raising a mere $2.2M in its SEED round.
Fast forward two years and the Pakistani VC ecosystem recorded its take-off, observing a 350% YoY increase in VC investment over 2021. To put this into perspective, Pakistan-based startups closed 30 more deals than the year before but raised more capital than the past 4 years combined. Surely, the overarching trend of larger ticket sizes observed across Emerging Venture Markets took shape in Pakistan, where the average Early-Stage round (Pre-SEED- Pre-Series A) doubled in 2021 compared to the year before. But remarkably, global and local investors in Pakistan funneled their funds to build a strong deal foundation, where the lion’s share of total transactions was closed at the SEED stage. While Pakistan added another series B round to its VC landscape in the past year, almost 50% of all transactions closed in 2021 were SEED rounds, ensuring a healthy pipeline for the future.
With a burgeoning market need for digital solutions and strong capital backing, local private and public sectors acknowledged the value of the Pakistani VC ecosystem. On the local front, the Pakistani government shared its definition of startup ventures, and in an unprecedented move issued a 3-year tax exemption for all ventures in that category dating back to 2012. Local VCs including Fatima Gobi Ventures, Sarmayacar, and Indus Valley Capital championed the VC ecosystem by backing some of the most anticipated startups in Pakistan, accounting for 34% of all transactions in 2021 collectively. Remarkably, the growing interest from the international community culminated in exciting investment debuts by the likes of Kleiner Perkins and Tiger Global, while global investors backing Pakistan-based startups accounted for almost 80% of all investors. This gave way to unprecedented investments giving rise to the digital champions of Pakistan the likes of E-commerce pioneers Bazaar, Tajir Pakistan, and Tazah- FinTech infrastructure shapers TAG, CreditBook, and Finja- and surely T&L local champions like Airlift, BirdgeLinx, and Bykea.
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