Funding Landscape
Pakistani startups raised a mere $196,000 across one publicly disclosed deal in the first quarter of 2025. The total number of deals stood at three, involving Chrio, Buscaro, and Qist Bazar.
Bank Alfalah, which invested in Qist Bazar, disclosed that it is investing Rs55 million (~$196,000) as part of a larger Series A funding round.
Reported Deals in Q1 2025
According to the i2i Deal Flow Tracker:
- Chrio operates in the sports tech space.
- Buscaro is a mobility startup.
- Qist Bazar is a fintech.
Founder Diversity: Buscaro stands out as a female-founded startup, whereas Chrio and Qist Bazar have male founders.
Q1 2025 marks the lowest funding level in the past four quarters. However, it still outperforms Q1 2024, which saw no deals recorded due to a complete funding drought.
Founder Gender Diversity
A positive takeaway from this quarter was the gender diversity among funded startups. The ratio of male- to female-founded startups securing investment stood at 2:1, an improvement compared to previous quarters.
This was largely due to Maha Shahad’s Buscaro, which increased female representation in the funding landscape.
Investor Confidence
Investor sentiment remained subdued throughout most of Q1 2025 as Pakistan grappled with securing the IMF’s approval for the second tranche of $1 billion under the Extended Fund Facility (EFF) of $7 billion.
However, a breakthrough was reached with:
- Signing of a Staff Level Agreement (SLA) with the IMF.
- Securing another SLA for $1.3 billion under a new climate resilience loan program.
These agreements may boost investor confidence and potentially lead to increased funding activity in the coming quarters as macroeconomic stability improves.
Investor Activity
Despite concerns over:
- Market volatility
- Macroeconomic instability
- Geopolitical factors
Over 69% of global investors remain optimistic about the 2025 investment landscape, particularly in Brazil, Singapore, and India.
Key factors influencing investor sentiment:
- High-interest rates & economic uncertainty: The U.S. Federal Reserve is expected to maintain elevated rates.
- Tech advancements: Investors remain interested in emerging technologies and private markets.
- Liquidity constraints: Limited rate cuts may impact available funding, but VC investors continue to seek promising opportunities.
Domestic Market Activity
- The State Bank of Pakistan cut its policy rate to 12% to revitalize economic activity.
- Interest rates remain too high to encourage substantial local investment in high-risk startups.
- Analysts expect further rate reductions to ~10% by year-end, but VC activity depends on macroeconomic stability.
Global VC Funding Trends
According to Crunchbase, global venture funding reached $112 billion in Q1 2025, showing a modest rebound despite macroeconomic hurdles.
Notable Funding Rounds
- OpenAI raised a record-breaking $40 billion round, valuing the company at $300 billion.
- This single deal accounted for over half of U.S. venture funding in Q1.
India’s Startup Funding Landscape: A Comparison
A report by INC42 highlights stark contrasts between India and Pakistan’s startup ecosystems:
- India’s total VC funding (since 2014): $161 billion.
- India’s Q1 2025 funding alone: $3.1 billion.
- Pakistan’s total VC funding (since 2015): Barely crossed $1 billion (i2i data).
Navigating the Funding Drought
With early-stage funding scarce, Pakistani startups are exploring alternative financing options:
- Impact Investment: Securing low-interest loans from impact investors aligned with SDG-focused business models.
- Corporate Partnerships: Collaborating with fintech and logistics companies to raise capital.
- Regional Expansion: Expanding to UAE and Saudi Arabia to attract investors and diversify revenue streams.
However, caution is crucial. Raising capital under unfavorable terms or solely for survival may hinder long-term growth. Some startups are opting for strategic down rounds to extend financial runway while maintaining operations.
Challenges and the Road Ahead
Pakistan’s startup ecosystem faces significant hurdles, including:
- Regulatory challenges.
- Limited domestic capital.
- Macro-financial instability.
The slow development of venture and private equity funds discourages international investors from efficiently operating in Pakistan.
Looking Forward
Despite challenges, there is cautious optimism for a potential recovery in late 2025, driven by:
- Improving economic fundamentals.
- Further interest rate reductions.
- Growing regional investor interest in Pakistan’s startup ecosystem.
See You in Q2!
The road ahead remains challenging for Pakistani startups, but resilience and adaptability continue to define the ecosystem.
To foster a more favorable funding environment, key areas of focus should be:
- Regulatory reforms.
- Incentives for domestic capital deployment.
- Strategic partnerships.
Stay tuned for our next report and subscribe to our newsletter for the latest insights on Pakistan’s startup ecosystem!