Startup ecosystem faces challenges
Despite current challenges and a market reset in Pakistan's startup ecosystem, many compelling opportunities are emerging that could drive the next phase of growth and innovation. Pakistan's policy landscape for startups requires major reforms to create an enabling environment for innovation and growth. However, the regulatory framework remains fragmented across multiple agencies, causing unnecessary complexity for entrepreneurs, according to the Pakistan Startup Ecosystem Report 2024 (PSER 2024).
Invest2Innovate (i2i) released the report, the fourth edition of its flagship initiative, during an event held at a local hotel on Saturday evening. The event was attended by leaders of Pakistan's entrepreneurial ecosystem, investors, and all stakeholders.
The report comes at a pivotal time for the ecosystem, which has experienced a significant reset after the funding boom of 2021-22. With investments plummeting from $355 million in 2022 to just $37 million in 2024 (up to November), the ecosystem has shifted its focus from rapid growth to building sustainable, profitable businesses grounded in sound unit economics.
Kalsoom Lakhani, Founder of i2i and an eminent leader of the industry, said, "Since 2014, i2i has been benchmarking the Pakistan startup ecosystem, tracking historic highs but also more difficult periods. This year's report delves not only into the data behind a more hard time but also the reasons behind it, and how founders are managing and adapting. Pakistani founders are some of the most resilient in the world, and 2024 is further proof of this."
The report is based on interviews with over 60 industry stakeholders and three targeted surveys designed for investors, officials from entrepreneurial support organisations (such as incubators and accelerators), and startup founders. The findings are further reinforced by comprehensive secondary research.
"The absence of credible, data-driven research has been a persistent challenge for stakeholders in Pakistan's entrepreneurial ecosystem. This report aims to address that gap, offering actionable insights to help Pakistan realise its full potential on the path to innovation," said Sarah O Munir, CEO of i2i.
The report highlights Pakistan's immense potential, underpinned by a population of 241.5 million, 65% of whom are under 30. Growing digital adoption and rising IT exports, which reached $3.2 billion in FY24, showcase the opportunities for innovation and expansion.
Sectors such as fintech, e-commerce, and cleantech continue to attract attention, with fintech securing $30.5 million of the total startup funding in 2024. The report also celebrates major achievements, including SadaPay's acquisition by Turkey's Papara (valued at $2 billion), PostEx's $7.3 million pre-Series A funding, and COLABS raising $2 million to expand into the Middle East and North Africa (MENA).
However, PSER 2024 also highlights persistent challenges that hinder ecosystem growth. Issues such as gender disparity, with women comprising only 39% of the workforce and receiving just 18.75% of total startup funding since 2015, are compounded by brain drain and infrastructure gaps.
Connectivity remains a significant hurdle, with 47% of the population lacking internet access and frequent disruptions causing an estimated $238 million in losses in 2023.
Regulatory complexities, low Research and Development (R&D) investment (0.16% of GDP versus a global average of 2.62%), and limited access to capital further strain the ecosystem's potential.
Despite these hurdles, the report identifies emerging opportunities, such as the digital economy's potential to generate Rs9.7 trillion in value by 2030. It emphasises the need for coordinated action from all stakeholders, including harmonising regulatory frameworks, improving infrastructure, and providing targeted support for women entrepreneurs.
The report also calls for enhancing academia-industry linkages to address skill gaps and fostering local investment to counter the declining international funding landscape.
The report is a comprehensive roadmap for transforming challenges into growth opportunities and ensuring Pakistan remains a vibrant hub for innovation.
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Express Tribune
7 hours ago
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