NCRC

i2i’s New Study: Pakistan Startup Ecosystem Report 2019

The State of Pakistan’s Startup Ecosystem: i2i’s New Study

Have you felt the buzz yet? If you haven’t been under a rock, you know that Pakistan is buzzing with young, tech-savvy people in a burgeoning startup ecosystem. Our team was just at 021 Disrupt in Karachi, a major technology conference, and the announcements included a $22 million Series A round for Airlift, $1.6 million Seed round in TelloTalk, and $450,000 Seed round in PriceOye. The growth in Pakistan’s startup space spurred our team to undertake and launch the 2019 Pakistan Startup Ecosystem Report, a study that comes after editions we launched in 2014 and 2016. The study was conducted with the support of the World Bank Group and was launched at 021 Disrupt this past Sunday (please note the analysis was completed before the funding announcements by Airlift and TelloTalk, so was not included in our data).

In the last 8 years, the ecosystem has come far with increased digital entrepreneurial activity. And we’re not even talking about a small increase here. In 2012, there were only 2 major business incubators with almost no investors and funding sources in the Pakistan startup ecosystem. Now, in 2019, there are over 24 major incubators and accelerators, and approximately 20 formal investors. While it seems like we are moving in the right direction, such small steps forward also present an opportunity to reflect on what we have done so far, what worked, and what we can do better.

But before we get into the nitty gritty of this study, we’ll explain the methodology behind this work. Our analysis looked into three main pillars: finance, support, and policy. It was based on secondary research and primary information collected from four groups of stakeholders (a total of 161 different individuals): digital entrepreneurs, investors, intermediaries, and individuals advocating for policy reforms, all conducted in just a few months.

We also collected data on deal flow from 2015-2019 (with a focus on 2018-2019) in the country to identify important trends and challenges in investment activity. Our team also adopted a Gender Lens approach to understand the challenges that female-led companies face in Pakistan

Let’s begin with a quick look at what we found out under each one of our key pillars:

Diving into the Three Pillars: 

FinanceUnsurprisingly, we found out that startups in the digital landscape are still mainly raising pre-seed and seed investment. In fact, 49% of the deals that occurred between 2015 and 2019 were seed-stage investments, which highlights that the early-stage capital gap for startups continues to persist in Pakistan. What does this tell us?  To state the obvious, we need more quality angel investors and funders at this stage to plug this gap. 

SupportMost of us have noticed a growing number of tech hubs and labs, but it goes without saying that the majority of them are located in Islamabad, Lahore, and Karachi. There is a need for expansion of the innovation economy into tier 2 and tier 3 cities.  We also found out that there is a scarcity of resources for support organizations due to an over-reliance on grants, which is challenging for long-term sustainability. Our research also suggested that support organizations need to customize their services based on the needs of startups and the local context of Pakistan. Not a surprising finding entirely, but one that was voiced as a criticism of current support organizations.

PolicyMost of the entrepreneurs and investors interviewed for this study agreed that the regulatory framework is difficult to navigate when it comes to the tax regime. An inefficient taxation process means a waste of time and resources of stakeholders engaged in the process. The government has recognised some of this pain and has taken steps to improve the regulatory framework through a one-window facility for registering a business and getting a National Tax Number (NTN). Still, a lot needs to be done to make the process less cumbersome and while Pakistan recently jumped 28 points in the World Bank Doing Business Index 2020 to 108 out of 190 countries, there’s still much that needs to be done to continue improving the current policy & regulatory framework for businesses in Pakistan.


Talking Data

  • 72 – Based on a score given to the number of venture capital deals per year, in 2019 Pakistan ranked 72, which was below India at 30, and Sri Lanka at 45, but was higher than Bangladesh at 73.
  • 22 – of the  82 digital startups (from 2015-19) that raised funding fell under the e-commerce sector.
  • 17 – About 29% (17 deals) raised funding via grants or donors, which points to the important role donor funding plays in supporting early-stage companies in the Pakistan ecosystem.
  • 24 – Out of 101 deals that occurred between 2015-19, only 24 were investments into companies led by women.

Image(s) of Interest

We have some good news. Based on our deal flow analysis over the past five years, we found that 82 Pakistan-based digital startups resulted in a total of 101 deals, which constituted over USD $165 million in funding (this $165 million does reflect the Airlift and Tellotalk rounds). While this is promising, Pakistan still has a long way to go when compared to its neighbors in South Asia (refer to the Talking Data section).  If you look at the below graphs, you will notice there is seemingly a larger amount of investment raised by companies in 2015 compared to other years, despite the fact that the amount of deals were less (22  compared to 33 deals that occurred in 2018). While this is notable, it’s also because companies like Daraz.pk (USD $33 million), Zameen ($9 million) and Rozee.pk ($6.5 million) raised large investments compared to the average deal size in other years. These companies, in many ways, were outliers, given that most startups in Pakistan raise pre-seed and seed funding.

Figure 1. Year-wise distribution of amount (in USD) of investment raised through 96 early stage deals in Pakistan – 2015 to 2019

Figure 2. Year-wise Breakdown of 101 deals made by 82 companies in Pakistan – 2015 to 2019


  • How can we better equip younger technology-enabled Pakistanis to navigate Pakistan’s unique digital entrepreneurship landscape as they launch startups?
  • What are the challenges women entrepreneurs face in Pakistan? And what are some steps we can take to increase women’s participation in the ecosystem?
  • How can the government continue to improve the overall environment for doing business in Pakistan? What are the actionable steps we can advocate for?
  • How can we encourage further support and collaboration among players in the ecosystem to support startups?

You can download the report here. We will also host a webinar on Monday, Nov 18, 8AM PST. It will be an interactive session on the findings of the report about digital entrepreneurship space in Pakistan. Please sign up for the webinar here.

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