By Staff Reporter
ISLAMABAD: The interim government launched a Rs2 billion fund on Tuesday to support startups in the country, which saw a sharp drop in investment last year due to high interest rates.
The new fund aims to attract more foreign investment and create more value in the tech sector.
“The Pakistan Startup Fund (PSF) will provide grants of up to $300,000 to startups that have secured at least $700,000 from foreign venture capitalists,” said Dr Umar Saif, caretaker minister of IT & Telecom, and Science & Technology.
The minister said that the fund is structured as an equity-free capital to help close a venture capital round for a startup.
“We won’t take any equity/shares in your startup or a board position etc. PSF is designed to lower the risk for international investors to invest in Pakistani startups,” Saif said in a tweet.
“Once we have written you a cheque, we won’t hassle you at all .. betting on you and your VC investors to drive your success.”
Saif said the fund was designed to help startups raise their first external investment and that over $800 million had been invested in Pakistani startups in the last few years.
“Some of these startups are certainly on a journey to become unicorns,” he said, referring to privately held companies valued at more than $1 billion. “With PSF we hope to create a value of at least Rs50 billion per year in the startup ecosystem in Pakistan.”
Pakistan is the fifth most populous country in the world, with nearly 230 million people, and has a fast-growing smartphone penetration rate. “There is no reason why we won’t have them (unicorns),” Saif said.
The launch of the fund comes amid a slump in startup funding in Pakistan, which fell by 77.2 percent to $75.6 million in 2023, according to data from a startup tracker. The amount was in stark contrast to the funds attracted in 2021 and 2022 when they stood at $365.8 million – the highest ever – and $332.4 million, respectively.
Experts attributed the decline to a global trend of rising interest rates and a tight-fisted environment for startups as the world recovered from the pandemic.
Higher interest increases the opportunity cost of investing in startups. Simply put, investors tend to invest in much-less risky government and private interest-based instruments such as T-Bills and bonds, they added.
They are, however, optimistic about 2024, as Pakistan’s economic recovery and the announcement of general elections in the country had restored investor confidence.
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