After signs of recovery in 2024, supported by improving macroeconomic condition and a revival in investor sentiment, Pakistan’s investment ecosystem entered 2025 with cautious momentum. The venture funding activity remained limited, with three deals recorded in Q1, showing more life compared to funding freeze seen during the first quarter of 2024.
The slowdown mirrors a broader global trend. According to S&P Global Market Intelligence, global private equity and venture capital funding dropped to $15.9 billion in February 2025, marking a 26% month-on-month decline. Political transitions and trade uncertainties have added to investor caution globally, and Pakistan is no exception. Domestically, investors remain watchful as the country implements structural reforms and progresses toward the second tranche of the IMF’s Extended Fund Facility (EFF).
In Q1 2025, notable local deals included Chrio, Buscaro, and Qist Bazaar, representing the AI, mobility, and e-commerce sectors respectively. While deal volume remained low, the sector distribution stayed in line with historical trends. Chrio, an AI-powered sports engagement platform, which raised funding via a SAFE round, reflecting investor interest in AI-driven solutions, in line with global capital allocation trends.
Startup Funding – QoQ
Top Deals
Funding Snapshot Q1 2025
IPOs Continue to Lead Capital Formation
While investment in venture funding remained muted, the public markets offered more active channel for capital formation. After a rebound in 2024 with seven IPOs raising around $30 million, the momentum carried into Q1 2025. Two IPOs raised a total of $8 million, up 11% QoQ. IPOs accounted for 27% of the total capital raised in 2024—up from 24% QoQ—highlighting a growing tilt toward mature, public-market-backed funding avenues.
M&A Activity Reflects Strategic Consolidation
Mergers and acquisitions also reflected a more strategic approach in Q1 2025. Deal volume was lower, four completed transactions with disclosed value of $8.6 million, down sharply from $100.8 million across seven deals in Q4 2024. Despite the decline, activity in financial services remained notable. A standout deal involved ABHI and TPL Corp’s acquisition of FINCA Microfinance Bank, followed by the launch of ABHI Microfinance Bank. With a fresh capital injection of PKR 2.6 billion, the new entity aims to expand financial inclusion by leveraging ABHI’s fintech capabilities and FINCA’s existing network. Last year, M&A activity gained strong momentum as both large conglomerates and startups pursued consolidation. Major players like Saudi Aramco, Gunvor, and Wafi Energy led landmark acquisitions, while startups such as Sadapay and Trikl were acquired by international fintechs.
M&A Deal Value – QoQ
Catalysts for Recovery: Policies and Initiatives
In response to the decline in foreign funding, the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has launched the ‘LaunchPad Pakistan 2025’ initiative. The program aims to bridge the gap between investors and startups, offering financial backing to young entrepreneurs and fostering a culture of innovation and self-sustained growth. On the corporate VC front, Dubai-headquartered Yango Group announced a $20 million venture fund to support early-stage startups across MENAP, Sub-Saharan Africa, and Latin America including Pakistan, positioning the country within a broader frontier markets investment strategy.
Meanwhile, on the policy front, the Digital Nation Pakistan (DNP) Act and the upcoming National AI Policy aim to enhance digital infrastructure, foster startups, and attract tech-focused investment. As the first country to implement the Digital Foreign Direct Investment (DFDI) Initiative, Pakistan is positioning Islamabad as a global hub for digital investment.
Global Trends
Artificial intelligence continues to dominate global VC funding. AI startups secured $5.7 billion in February 2025 alone, accounting for 30% of total venture capital funding. AI was the leading sector in 2024, capturing 35.7% of total VC investments. The shift highlights the growing importance of AI-driven solutions in securing investment capital.
Pakistan’s positioning as the Tech Destination of the Year at Gitex 2024, participation in AI Everything Global 2025, and recorded 26% growth in IT exports reaching $2.48 billion during the first eight months FY25, further highlights Pakistan’s ambition to embed AI in its economic and innovation agenda.
Macroeconomic Tailwinds Support Cautious Optimism
Recent macroeconomic developments are contributing to a more stable backdrop for investment. Inflation eased to 0.7% in March 2025, below market expectations, while the central bank has reduced the policy rate by 1,000 basis points from its peak of 22% in June 2024, improving credit conditions and easing pressure on businesses. The USD-PKR exchange rate has remained broadly stable, supporting predictability for both investors and importers. The upcoming IMF economic review under the $7 billion Extended Fund Facility further adds to the sense of macroeconomic continuity and policy alignment.
Funding Outlook: Navigating 2025
Pakistan’s funding landscape remains in a phase of cautious growth and will likely be shaped by a combination of domestic reforms and global market dynamics through the remainder of 2025. Spillovers from U.S. trade policy shifts and rising geopolitical tensions may weigh on investor sentiment and impact capital inflows into emerging markets. Despite these headwinds, Pakistan offers emerging opportunities in sectors demonstrating consistent demand and innovation. The continued momentum in IPOs provides exposure to growth-stage companies, while strategic M&A is expected to persist as businesses consolidate to scale or reposition in a tight funding environment, creating attractive entry points for investors seeking long-term value.
Nerizel is a finance enthusiast with a Bachelor’s degree in Business Administration, specializing in Finance. She is committed to leveraging her analytical skills and financial acumen to excel as a financial analyst.