by Liu Qiyu

ISLAMABAD, Apr. 28 (China Economic Net) - As Pakistan's digital economy steadily gains traction, the South Asian country is attracting increasing interest from regional venture capital firms seeking untapped growth opportunities beyond traditional investment hubs.

With a population of over 240 million—one of the largest in the world—Pakistan presents a sizable consumer base and a young, tech-savvy demographic. Nearly two-thirds of the population is under the age of 30, a statistic often cited by investors as a key indicator of digital potential.

"Pakistan is one of the most promising but underappreciated digital markets in Asia," said Thomas G. Tsao, Co-Founder and Chairperson of Gobi Partners, during an exclusive interview with China Economic Net.

Tsao noted that Pakistan reminded him of China back in 2002, where a vast population and a surge in internet users laid the groundwork for rapid digital scaling. "When we first entered Pakistan in 2018, the ecosystem was at a very early stage. But what we saw was a country full of energy, talent, and ambition," he highlighted the country's young talent and growing connectivity as core reasons for Gobi's early move into the market.

Since then, Gobi has become one of several regional players participating in Pakistan's evolving startup ecosystem, launching landmark projects like the USD 30 million Techxila Fund I and Techxila Fund II (USD 50 million), investing in several Pakistani startups across sectors such as logistics, e-commerce, travel tech and fintech including Sastaticket.pk, DealCart, PriceOye, Abhi and so on. The fund's performance has been in the top quartile for its vintage.

In recent years, Pakistan's startup ecosystem has experienced significant drop in venture capital funding. After reaching a peak of $365.8 million in 2021 and $332.4 million in 2022, investments declined sharply to around $75.6 million in 2023—a 77.2% year-over-year drop attributed to global economic headwinds and local macroeconomic challenges.

The downward trend continued into 2024, with total startup funding falling to $42.5 million, marking a 42.5% decrease from the previous year. Despite this decline, the fourth quarter of 2024 showed signs of recovery, accounting for over 62% of the year's total funding, driven primarily by the fintech sector.

In Q4 2024, Pakistani startups secured several notable VC-led financings beyond Gobi Partners, including a $15 million debt round for ABHI led by Shorooq Partners and Amplify Growth, and a $5.5 million seed round for Laam Technologies. The climate-tech sector also landed a $15 million first-loss equity commitment from the Green Climate Fund.

While Pakistan's overall venture capital inflows remain modest compared to its neighbors or other emerging economies, the trendlines are shifting. These figures highlight the resilience of Pakistan's startup ecosystem amid challenging circumstances. While funding levels have receded, the sustained interest in sectors like fintech and e-commerce suggests underlying growth potential.

Investors like Gobi see long-term potential. "Pakistan may not yet be top of mind for many global investors," Tsao said, "but the fundamentals are too strong to ignore. The digital transformation is already underway, driven by mobile access, entrepreneurial energy, and a growing base of consumers comfortable with online services."

Indeed, the country's low mobile data costs—among the cheapest globally—and steadily increasing smartphone penetration are laying the groundwork for digital service adoption. The Government of Pakistan, terming 2025 as the "Year of 5G," has set ambitious targets, including achieving an average broadband speed of 50–100 Mbps and increasing Fiber-to-the-Site (FTTS) coverage to 60 percent. For some, Pakistan's relatively untapped consumer base and low digital infrastructure cost give it an edge as a frontier of large-scale digital markets in Asia.

Also, Pakistan's tech ecosystem is benefiting from a growing pool of local talent. Many founders are educated abroad or have worked for multinational firms before returning home to build startups. At the same time, an increasing number of software engineers and product managers are gaining experience within the local startup scene, fueling a more robust support system for innovation.

In addition, government-backed initiatives such as the Special Technology Zones Authority (STZA) and efforts to digitize public services are slowly creating a more enabling environment for startups. These steps are seen as positive signals by investors looking for long-term gains.

Looking ahead to 2025, both CB Insights and PitchBook forecast continued growth in global mid- and late-stage funding as well as AI investments, creating a favorable external environment for Pakistan's digital economy and startup ecosystem.

Challenges, however, remain. The country has bottlenecks that have complicated business operations and investor confidence. Yet some observers argue that these same challenges create opportunities for first movers. "Great talent is evenly distributed; access to opportunity is not. We're here to bridge that gap," pinpointed Tsao.

The market is still forming, Tsao said, adding that it means there's room to help shape it—for investors, entrepreneurs, and even policy advocates. For a growing number of regional VCs, the question is no longer whether Pakistan is investable—but when and how to engage most effectively. For many, the next step lies in navigating regulatory clarity, ensuring currency stability, managing security risks, and identifying scalable exit opportunities—all factors that will shape Pakistan's digital future.