Business

Global investors eye Pakistani start-ups


KARACHI:

Pakistan start-ups are high on global investors’ radar, as they raised a record $305 million in initial and advanced level financing from across the world in the first nine-months (January-September) of 2021.

“Average deal size up five times to $5.9 million in the first nine months (January-September) of 2021 compared to $1.2 million in 2020 with foreign participation growing massive,” Alpha Beta Core (ABC) said in a brief commentary.

As many as 52 start-ups have raised a total of $305 million in sectors including transport & mobility, logistics, e-commerce, fintech, heath and freight in the first nine months of 2021.

Among the prominent ones were Airlift and Bazaar which fetched $85 million and $30 million, respectively, in advanced level Series B and Series A fund raising, according to Arif Habib Limited.

Besides, QisstPay, TAG and Oraan got $15 million, $12 million and $3 million, respectively, in initial level seed financing.

As many as 17 start-ups have raised $172.6 million in the third quarter (July-September) 2021 compared to 12 new enterprises that attracted a total of $28.3 million in the same quarter last year. Accordingly, the average size of the financing has increased 4.3-times to $10.15 million per deal in July-September 2021 compared to $2.36 million in the same quarter of last year.

“The increasing global investors’ appetite suggests Pakistan is poised to attract a minimum half a billion dollar this year (January-December 2021) and another $1 billion next year,” ABC CEO Khurram Schehzad.

Start-ups received increased financing in the backdrop of Covid-19 pandemic, as they presented technology-based business models to facilitate people having reduced mobility to remain safe from the infectious disease.

“The tech-savvy youth; both start-up runners and buyers of the commodity, sharp increase in number of advanced mobile internet and available infrastructure for online business that is on expansion; all prompted global investors to invest in Pakistan,” he said.

The start-ups would continue to fetch significant financing, as there is available ample liquidity with global investors while interest rates have remained in advanced countries. “Pakistan being a highly untapped market would remain in their focus with regulatory regime becoming accommodative,” he said.

The State Bank of Pakistan (SBP) and Securities and Exchange Companies (SECP) have relaxed rules for attracting investment in technology-based business solutions like they have allowed Pakistanis to set up their holding companies abroad and attract investment through that company into the country, he said.

He said that agriculture sector has entirely remained an untapped sector in Pakistan. Technology-based solutions can help in reviving cotton production and helped increase yield per acre for wheat, sugarcane, maize, onion, tomato, mango and citrus fruits.

The government should further work to provide an enabling environment through softening rules and regulations for start-ups and global investors both, he said.

AHL added the average ticket size for Series A deals has increased from $7.7 million in 2020 to $11.3 million in the first nine-month of 2021. The number of Series A fund raising deals increased to five in 2021 from three in 2020.

Giving s breakdown of the investment numbers, it said, in e-commerce, start-ups have fetched the single largest investment of $117 million in the third quarter of 2021 alone. This was followed by fintech start-ups which received $35 million during the quarter, digital trucking platform attracted $13.6 million and martech/marketing got $2.7 million financing in 3Q2021.

It said 33 start-ups received $100.7 million in seed financing, five start-ups got $56 million in Series A financing and two start-ups raised $103 million in Series B funding in the current year to date.

Published in The Express Tribune, October 3rd, 2021.

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