Hi Everyone! I hope you are all doing well. Welcome back to another blog. This article will delve into the intriguing and much-discussed topic of “95% Decrease in Startup Funding”. Startup funding in Pakistan experienced a severe downturn during the April-June 2023 quarter, marking its worst performance since 2020. The funding landscape for startups witnessed a substantial decline, with investments in this category plummeting to a meager $5.2 million. This staggering figure reflects a massive 95 percent year-on-year decrease. The challenging environment faced by startups in securing financial support.
Moreover, when compared to the previous quarter, the decline becomes even more pronounced. With a significant 77.5 percent quarter-on-quarter drop from $23.1 million. The magnitude of this decline underscores the struggles faced by startups in attracting capital during this particular period.
The downward trend is further underscored by the dwindling number of deals closed. The deal count in the startup sector witnessed a substantial decrease of 65.2 percent year-on-year. With only eight deals being sealed during the quarter. This sharp decline in deal activity indicates a cautious investor sentiment and a reluctance to commit funds to startup ventures.
Startups face challenges in raising funds due to economic uncertainties, shifting investor priorities, and the impact of the COVID-19 pandemic. They must adapt and explore alternative avenues to secure capital for growth and innovation.
During the second quarter of 2023, there was a significant decline in the average deal size within the investment landscape. The average deal size dropped substantially from $4.7 million in the previous year to a modest $743,000, marking its lowest point since the first quarter of 2019. Moreover, the median value experienced a downward trend as well, hitting a record low of $500,000, the lowest it has been since the period spanning January to March of 2021. As a result, the size-to-median gap has narrowed significantly, reaching an unprecedented level of $243,000.
Interestingly, the majority of movements and activities in the market were concentrated in the early-stage investment realm. This consisted of four seed rounds and three accelerator rounds, indicating a prevalent focus on nurturing and supporting nascent ventures. It is worth noting that among the various deals executed, only Abhi’s transaction with BlueEx was classified as post-IPO, implying a relatively smaller pool of mature investments.
Within the investment sectors, the fintech industry emerged as the most dominant player, capturing a substantial portion of the declared investments, amounting to approximately $4 million. The fintech sector’s continued growth and appeal to investors contributed significantly to its prominent position. However, there were also noteworthy developments in other sectors. After a relatively quiet period, the automotive industry gained traction and entered the investment radar, primarily due to the emergence of OkayKer and its activities in the market. This diversification in sector focus demonstrates the evolving investment landscape and the exploration of new opportunities.
The space industry faced a notable downturn in the first half of 2023, as the total funding in this sector dwindled to a mere $28.3 million. This amount marked a substantial 60 percent decrease when compared to the corresponding period in the previous year. The drop becomes even more staggering when juxtaposed with the impressive $276.9 million raised during the initial half of 2022, reflecting a drastic 98 percent decline.
Moreover, not only did the funding suffer, but the number of transactions also took a hit. The figures plummeted from 26 deals in the July-December timeframe and 46 deals in the January-June period of the prior year to a mere 16 transactions. This decrease signifies the lowest funding levels witnessed since the latter half of 2020. Furthermore, when considering the number of deals, it is the joint lowest count observed since the second half of 2019.
The space industry faces challenges amid cautious investors. Funding drops and transaction volume declines. Investors exercise caution in the sector in H1 2023.
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