Why a Deal Flow Tracker? Why Now?
At Invest2Innovate, our research arm Insights is dedicated to closing the information gap when it comes to the Pakistan startup landscape. In November 2019, our team released the Pakistan Startup Ecosystem Report, in partnership with the World Bank (with the support of the Women’s Entrepreneurial Finance Initiative, We-Fi). That comprehensive study included a detailed aggregated analysis of the investments made in Pakistani startups over five years. The response to that analysis was overwhelming — and we realized there was genuine demand for this kind of deal flow information, which is either not readily available or is silo’ed and onerous to track.
i2i’s Deal Flow tracker includes most (if not all) of the disclosed deals that occurred in the Pakistan Startup ecosystem from 2015-2020 (July). It is open-source and dynamic – if there are deals missing or as more deals occur, it will be updated. All the investment data was vetted by our team via startup founders, investors, or secondary resources. As much as we could, we went straight to the source.
Our aim with this resource is simple: we hope to make it easier for everyone – investors, entrepreneurs, entrepreneur support organizations, Pakistan watchers – to make better decisions in this market. We believe that evidence-based decisions will lead to ultimately success stories from Pakistan.
In this month’s newsletter, we will cover some key findings from the deal flow data that we think have major implications for the future of investments in Pakistani startup ecosystem.
In the first quarter of 2020, many had speculated that the COVID-19 pandemic would lead to a decline in startup investments globally, including in Pakistan. While this is true to a certain extent, with Pakistani startups reporting delays in investments that were already in the pipeline, activity did not halt completely. As of July 2020, 22 investments were reported in 2020 with a few reportedly in process. Compared to 30 deals in 2019, the current numbers seem relatively promising, especially considering that we are still dealing with a pandemic. In fact, we might actually surpass 30 deals by the end of the year if this activity does not decline. Altogether, 122 deals worth $178 million were made from 2015-2020 in Pakistani startups, including another 19 deals with amounts that were undisclosed. This brings the total deals (2015-2020) ) count up to 141. However, it is important to point out that out of the 122 deals (that accounted for $178 millions), 3 deals added up to $7 million but the distribution of this amount across these 3 deals remains undisclosed. Due to this, any amount related analysis discounts this $7 million and uses $171 million as the total amount raised.
Out of the $171 million raised, 75% is attributed to male-founded startups and 15% to mixed-gender founded startups. While the number of deals made by female-founded businesses amounted to 9% of the total, it made up only 2% of the total investment amount raised from 2015-2020.
While most deals over the past five years were seed-stage investments (58%, or $31.3 Million), a total of $57.85 Million was raised in Series A funding (13/141 deals). The biggest contribution in terms of amount to series A funding in Pakistan was by International VCs ($20.1 million) followed by local VCs that accounted for $19.95 million of the total amount raised in the past 6 years. This speaks to the significance of not only international VCs but also international angels ($16.3 million) who have contributed significantly by backing a total of 4 Series A investments in Pakistan.
Gender Disparity in Investment
The gender disparity in fundraising has been a roadblock in nascent ecosystems such as Pakistan for a long time. Although various support players (like i2i) are working to close this gap by offering investment readiness trainings for women-owned businesses, there is much work to be done. According to the deal flow data our team collected, none of the series A investments from 2015-2020 were raised by women-founded businesses. Mixed-gender founding teams, however, have shown a steady increase in terms of their participation in investment rounds. Such a persistent gender financing gap is not easily attributable to a difference in quality of women-founded versus male founded startups, which might be indicative of other issues such as unconscious bias, or a funnel issue (I.e., there needs to be a higher volume of women-led businesses ready to raise capital).
Data also showed that female-founded startups often raise investment from local angels, local VCs, & accelerators/incubators. Raising from International angels & VCs is not very common among female-founded startups, whereas male-founded startups historically seem to raise from a variety of investors, including international angels and international VCs that constituted 65% of the total investment from 2015-2020.
Based on the number of deals, e-commerce (30), healthtech (18), edtech (11), on-demand (11), mobility (11), and fintech (10) accounted for the highest number of deals, respectively. In terms of amount raised, e-commerce ($76.6 million) and mobility ($31.5 million) accounted for the largest total amount raised in investment. This suggests that a sector such as healthtech that had more deals wound up raising less money, i.e. the sizes of investments raised in 18 deals was smaller than those raised in 11 deals in the mobility sector. Additionally, e-commerce, mobility, edtech, fintech, healthtech & gaming have made more deals through local VCs than any other sector. In comparison, international VCs were more inclined towards investing in fintech, healthtech, energy, e-commerce, and web-based apps.
E-commerce & healthtech accounted for 33% of seed investments. The only sectors where startups raised Series A investments from 2015-2020 were in e-commerce, mobility, fintech, edtech, and energy.
To access more information and infographics (like above), click here to access our Deal Flow Analysis slide deck. Due to the major information asymmetry in the startup ecosystem in Pakistan, it is difficult to find accurate information through reliable sources. Although our team has made a significant effort in checking our current data, we know this tracker might be missing deals or may have inaccuracies. We will continue to adapt it as we receive additional information. Click here if you have any missing deals, new deals, or inaccuracies to report. To access the Deal Flow Tracker, click here.
Thanks and please share this far & wide – let’s make the Pakistan Startup Ecosystem much easier to understand & access for everyone’s benefit!