By Laiba Ahmad
Copyright brecorder
From VC Boom to Balanced Growth
In 2021 and 2022, Pakistan’s startup ecosystem was riding a wave of optimism. Venture capital deals dominated headlines with funding reaching an all-time high in 2022 at $355 million through 58 deals (Pakistan Startup Ecosystem Report 2024).
That “gold rush” was short-lived. By 2023, total fundraising had shrunk to $74 million. So far in 2025, startups have raised $70 million (approx.) across 13 deals . The majority of this comes from Haball’s $52 million round. Excluding that, the remaining eleven deals total only $18 million (approx.).
This downturn has left many asking: is Pakistan’s startup dream over?
Resetting Startup Finance
The slowdown is not unique to Pakistan, but the local impact has been sharp. Our conversations with the top five local and regional VCs indicate limited deployments planned in 2025, focused mainly on existing portfolios. Investment priorities are shifting from local to regional opportunities, particularly in the GCC.
Where new investments are happening, they align with global theses such as AI, climate, blockchain, and deeptech. Even then, check sizes have shrunk to an average range of $100,000–$2.5 million.
The truth is, venture capital was never meant to be the only path. It works for a narrow set of high-growth startups, but most founders need to be honest about whether their business fits that model. For many, betting everything on the next wave of VC liquidity is not a strategy.
What is needed is a shift on both sides: founders educating themselves on the full spectrum of financing and choosing what truly fits their business, and the ecosystem building more local growth capital – from institutions, banks, and angel networks – to offer alternatives.
Where the Money Is Moving
The distribution of fundraising by investor types is already changing.
● In 2024, VCs as an investor type made up around 79% of startup funding, with debt financiers making up 14% and angels at 7%.
● In 2025, VC participation has dropped to 31%, while debt and angels have each grown to 25% and 31% respectively, and strategic financing from banks now accounts for 25%.
*Note: These percentages reflect the share of investors by type (VC, debt, angel, bank) out of the total number of investors active in this period. They indicate participation, not the amount of capital deployed by each type.
Debt financing is emerging as a credible alternative. Institutions like Accelerate Prosperity are scaling growth capital models without equity dilution. Others, such as Oraan and Akhuwat, have the potential to pilot and scale in this space. Some VCs are even considering debt arms, reflecting global critique of the VC model.
Banks are beginning to test the waters. Examples include:
● Meezan Bank’s $47M credit line to Haball, 2025 (Profit)
● Alfalah Bank’s $196K investment in Qist Bazaar, 2025 (Business Recorder)
● HBL’s $1.15M investment in Finja, 2021 (Finja Press Release)
Angel investors are stepping up, with both local and diaspora angels backing bold ideas, and ESOs prioritizing angel education to give them confidence. Yet the real potential lies in building structured networks that pool risk and reward, and in regulatory incentives that make such investments more attractive. Other emerging markets show how these factors can accelerate angel activity; Pakistan has some momentum, but far more can be done.
Together, these shifts show that funding streams are diversifying, even if the numbers are still small.
The Roadblocks Ahead
Despite progress, roadblocks remain:
● Debt requires consistent revenues, repayment capacity, and disciplined cash flow management. Many early-stage startups are not yet ready, and there is also resistance to debt as it is often seen as a burden or liability rather than a form of growth capital.
● Banks lack clear mandates or structured processes to engage with startups, and access often depends on personal networks. Their requirements are also extensive, typically including collateral and a track record of operational history, which most early-stage startups lack.
● Angels remain a small, fragmented pool, and many still hesitate due to limited experience with due diligence. There is also a lack of incentives, as well as limited awareness and understanding of this asset class, which further constrains participation.
The ecosystem needs structure, facilitation, and support to make these channels reliable. Debt pilots must scale, banks must open clearer pathways, and angel networks must consolidate.
How i2i is Experimenting with New Pathways
At Invest2Innovate, we recognize these shifts and are beginning to experiment with new approaches through our i2iScale accelerator. Change will take time, but we are committed to adapting alongside the ecosystem.
● Testing debt financing pathways, matchmaking startups with players like Accelerate Prosperity, and engaging other institutions.
● Targeting banks for outreach and conversations, to better understand the role they can play, what criteria they are using, and how startups can engage with them.
● Strengthening angel facilitation, building and mobilising networks, curating deal flow, and equipping investors with tools to invest confidently, including resources like our Starter Guide to Angel Investing.
As funding trends reshape, all of us, founders, investors, and ESOs, must adapt. The contraction in VC funding is not the end, it is an opportunity to reset.
A New Funding Playbook
Pakistan’s entrepreneurs have never lacked ambition. What they need now is a funding playbook that reflects reality. Venture capital will continue to play a role, but it cannot be the only game in town.
At i2i, we are rethinking alongside founders. The journey will take time, but the direction is clear: diverse, resilient, and locally relevant capital pathways must be the future.
👉 Find your funding fit, get investor-ready, and connect with the right people. Apply to i2iScale by September 28, 2025.
The article does not necessarily reflect the opinion of Business Recorder or its owners
