In the first quarter of 2025, Pakistani startups experienced a significant slowdown, with startups raising just $196,000 in total funding. Invest2Innovate (i2i) reported only one publicly disclosed investment deal during this period. Despite three funding deals being finalized involving startups like Chrio, BusCaro, and Qist Bazaar, only the investment in Qist Bazaar was made public.
Pakistani Startups Raised Just $196K in Q1 2025 — What’s Behind the Slowdown?
Bank Alfalah Limited, which invested in Qist Bazaar, revealed it had invested Rs. 55 million (approximately $196,000). This investment is part of a larger Series A round for the startup. The low funding figures reflect the cautious mood among investors during Q1 2025. A key reason for this hesitation was the uncertainty surrounding Pakistan’s negotiations with the International Monetary Fund (IMF) over the release of the second tranche of $1 billion under the ongoing $7 billion Extended Fund Facility (EFF).
However, some positive developments have recently emerged. Pakistan successfully signed a Staff Level Agreement (SLA) with the IMF and secured another SLA for $1.3 billion under a new climate resilience loan program. These breakthroughs could play a critical role in improving investor sentiment and may help attract more funding in the upcoming quarters.
Signs of Progress in the Ecosystem
Despite the overall downturn in startup investments, there are some encouraging signs for the ecosystem. Dubai-based Yango Group, which operates in Pakistan’s ride-hailing market, has announced a $20 million corporate venture fund. This fund will support early-stage startups in Pakistan and across regions, including the Middle East, North Africa, Sub-Saharan Africa, and Latin America. This move reflects the growing interest in emerging markets and could provide much-needed support to Pakistani startups in the early stages.
Another significant milestone for Pakistan’s financial sector is the launch of ABHI Microfinance Bank by Abhi (a Y Combinator-backed startup) and TPL Corp. The bank aims to improve financial access for underbanked communities and promote digital financial services. This initiative could empower micro-entrepreneurs and contribute to financial inclusion across the country.
Challenges Remain, but Optimism Grows
Despite some positive developments, Pakistan’s startup ecosystem still faces several major challenges. These include regulatory roadblocks, a lack of local capital, and broader macroeconomic instability. The underdevelopment of local venture capital and private equity markets continues to discourage international investors from entering the space.
Looking ahead, there is cautious optimism for a potential recovery in the latter half of 2025. If Pakistan’s economic conditions stabilize further—with potential reductions in interest rates and improved investor confidence—more capital could flow into the startup sector.
To foster growth, it is crucial to introduce regulatory reforms, offer incentives for local investors, and build strategic partnerships between the public and private sectors. With resilience and the right support, Pakistani startups can overcome current hurdles and play a key role in the country’s economic transformation.
