KARACHI:
Ensuring major reforms may turn Pakistan’s startup landscape towards more growth and opportunities, which can transform the country’s economic scenario because of a huge population of nearly 242 million including 65% under the age of 30 years.
Young people are quite keen to learn IT skills and earn more without any formal university degrees as talented and skilled youth are being hired by IT companies on the basis of tech skills, while mostly university graduates are looking for jobs for want of required skills.
To address challenges, the government must introduce a host of reforms to ensure incentives such as funding, co-working spaces, uninterrupted internet and electricity, training including professional courses in university’s curriculum and the like for the youth.
When it comes to opportunities, the emerging digital economy is ballooning around the world and Pakistan is no exception. Freelancers and IT firms are doing a good business by offering tech services and solutions, earning handsome profits.
Setting up software technology parks and software technology zones can play a vital role in meeting the demand of youth, while the National Incubation Centres (NICs) are already helping produce new startups and supporting the talented youth who are eager to do business and fulfil needs of society.
According to the Pakistan startup ecosystem report 2024, issued by invest2innovate recently, the startup ecosystem found itself at a pivotal crossroads in 2024, characterised by significant challenges, yet demonstrating remarkable resilience.
The ecosystem’s journey has been marked by dramatic shifts from a peak of $355 million in funding in 2022 to a stark decline of $74 million in 2023, representing a 79.2% decrease. The downturn intensified in 2024, with only about $37 million raised till November, reflecting both global venture capital constraints and local challenges. Around 200 startups have raised $1.045 billion since 2014.
IT expert and NIC Karachi Project Director Syed Azfar Hussain said Pakistan’s startup ecosystem holds immense potential, fueled by a young, tech-savvy population and increasing digital adoption.
Government-led initiatives, such as the NICs set up by Ignite National Technology Fund and through grants, have been instrumental in supporting early-stage businesses. Key sectors like fintech, e-commerce, and cleantech are rapidly growing, demonstrating the ecosystem’s vitality.
However, significant challenges persist. Funding remains limited while the limited presence of investors, complex regulations and structural issues further hinder progress. Also, many startups struggle to scale due to weak infrastructure and the lack of mentorship. In this situation, retaining the skilled talent is difficult as professionals seek opportunities abroad.
For sustainable growth, collaboration between the government and private sector is essential. Streamlining regulations, fostering local investment networks, and enhancing tech education will unlock further growth. With the right support, Pakistan’s startups can drive innovation, create jobs, and contribute to economic development.
“In 2024, Pakistan’s startup ecosystem witnessed notable growth, driven by Ignite’s establishment of four National Incubation Centres across the country. NIC Karachi, NIC Lahore, and NIC Islamabad launched dedicated startup verticals alongside focused acceleration programmes, while NIC Peshawar initiated its acceleration programme,” Syed Azfar Hussain said.
A key milestone was NIC Karachi’s partnership with Orbit Startups for its acceleration initiative, he mentioned.
“Despite these positive developments, equity deals for startups declined. Still, significant funding initiatives emerged, such as Gobi Partners’ collaboration with The Bank of Punjab and Climaventures’ partnership with the National Rural Support Programme (NRSP). These initiatives signal a growing emphasis on innovation and attracting strategic investments, paving the way for expanded entrepreneurial opportunities,” Hussain added.
By 2025, Pakistan’s startup ecosystem is expected to be poised for growth including fintech, e-commerce, climate tech, and cleantech, aligning with global trends towards sustainability and technology-driven solutions.
Startup funding will be driven by the launch of new investment funds like Climaventures and Techxilla, backed by The Bank of Punjab and Gobi Partners. The startup fund launched by Ignite will pave the way for local investments, supported by the Bridgestart programme for startup exposure to global accelerators and businesses.
The incubation ecosystem will mature, offering more specialised programmes focusing on corporate innovation and sector-specific acceleration. This evolution will encourage greater collaboration between startups and established enterprises, fostering scale and market access.
With increasing capital flow and sector diversification, the startup landscape will become more dynamic, which will position Pakistan as an emerging entrepreneurial hub. Enhanced government policies and private-sector engagement will further catalyse innovation, drive economic growth and create jobs across the country.
To strengthen Pakistan’s startup ecosystem, the government can implement several key measures like tax incentives, further tax subsidies and tax holidays for startups, similar to models like India’s exemption scheme and reduced corporate taxes during the early growth phases in line with the Singapore model.
The State Bank of Pakistan’s incentives like providing low-interest loans and promoting digital payments for startups are great steps. Also, ease of business with the simplification of FBR and SECP processes and venture capital licensing and encouragement can stimulate investment.
The government can establish a fund of funds to boost early-stage investments. These measures can unlock the ecosystem’s potential, fostering innovation and driving sustainable growth.
IT and telecom sector analyst Muhammad Yasir said promoting startups is very crucial for boosting economic activities and generating jobs for the local youth. Startups need funds and an ecosystem to flourish in any market, but a startup should fundamentally offer services and products that could create its own market by targeting the requirements of consumers.
In Pakistan, the ecosystem is not so strong, macroeconomic indicators are not supportive, and venture capitalists are really limited.
The overall macroeconomic situation has improved compared to last year. Startup funding has been improving for the last two quarters but only a few startups have emerged in this period. The situation is going towards stability and growth path will likely be the next to follow.
“The new year will bring optimism for startups with a number of new ventures emerging and more funds will be attracted by the growing startups. Venture capitalists and financial institutions should invest in the growing startups. They should also guide startups on the trends and fundamentals of local markets along with growth strategies,” Yasir said.
He said the government could boost startups through a customised financing scheme at low mark-up that could keep startup businesses afloat or help them grow further.
Besides, the government should allocate funds that could mitigate the risk of financing for venture capitalists, which will restore the confidence of investors and encourage them to invest.
