In the startup world, attention spans are typically short, just like the apps they build. One day, you’d be a star, garnering media attention left and center, speaking at conferences, and being named to Forbes 30 under 30. Next month, he could face legal proceedings on fraud charges.
However, one company managed to keep everyone hooked for nearly two years; maybe this is actually OpenAI’s biggest achievement so far and not GPT. After launching the chatbot, it became the fastest startup to hit a billion users, and even faster to abandon its non-profit ethos.
Last week was more of the same.
First, CTO Mira Murati, along with two other executives, left the company, continuing the leadership exodus. However, not long after, OpenAI raised $6.6 billion in fresh funding at a $157 billion valuation, making it the third most valuable venture capital-backed entity on the planet. Only SpaceX and TikTok parent ByteDance are worth more.
Pakistan’s venture capital market remains stagnant as distant foreigners and disinterested local capital leave few options for startups
However, the OpenAI round – the largest ever – is not representative of the broader venture market, where global funding fell to $70.1 billion in Q3FY24, according to Pitchbook data. This is the lowest amount since October-December 2017 and represents a decrease of 22.6% from the same period last year and 26.6% from the previous quarter.
Apart from North America, where funding grew by 11.9% year-on-year (YoY), all other regions experienced a further retreat. The decline in Asia was particularly sharp as the amount fell 51.4% to $14.9 billion in July-September, falling to levels not seen since early 2016 and just 21% from the peak from Q4FY21.
Volumes were no more immune either, as the number of deals fell to just 7,227 in Q3FY24, the worst quarter on record since at least 2015. Even adding in estimated rounds, the total rises to 9,742, barely reaching Q3’19 levels . . This slide is fairly broad-based as every region saw a decline in deals, again led by Asia at 31.6% year-on-year.
Similarly, outbound activity also remained muted at a total dollar value of $39.2 billion across 606 deals in Q3FY24 – down 55.6% and 17.8% respectively with the same period last year. Surprisingly, Asia stood out here, and not for the wrong reasons. It accounted for 45.6% of exit value, likely led by some large listings in India, where public markets have been surprisingly buoyant in recent years.
While Pakistani markets have also enjoyed good momentum over the past 12 months, rising 29.2% so far in 2024, the risk market remains flat. Between January and September, Pakistani startups raised just $16 million in grant funding, according to Data Darbar. But if it’s any consolation, four deals worth $15 million came in the last quarter alone. If you add Myco, which is technically headquartered in Dubai, the total rises by another $10 million.
Regardless, for a country of our size, these are pretty insignificant numbers. Obviously, the biggest reason behind this is that most of the funds that have invested in Pakistan are foreign and do not take a view of the local market from any long-term strategy. Local capital is virtually non-existent – a problem that, unfortunately, is not limited to venture capital.
This combination of distant foreigners and disinterested local capital leaves few options for startups. Debt has always been tight, venture capital has become increasingly difficult, and government-backed grant funding is uncertain. Amid such gloom and gloom, the upcoming launch of Shark Tank Pakistan could be a much-needed addition to the ecosystem and open up some opportunities for entrepreneurs.
As seen in other markets, including neighboring India, the show has the potential to bring much-needed attention and excitement to entrepreneurship, possibly inspiring a new generation of founders. More importantly, it can bridge the gap between investors and startups, opening up access to capital that has been severely constrained in recent times.
Additionally, it can help educate the general public about the startup world, potentially expanding the pool of angel investors and creating a more supportive environment for entrepreneurship. From a purely fundraising perspective, the scale is likely to be quite small, as seen in India, and it doesn’t match. But if it helps highlight some lesser-known success stories, that would be a good enough win because God knows we need them.
The writer is the co-founder of Data Darbar
Published in Dawn, The Business and Finance Weekly, October 7, 2024
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