The vast majority of startup investments never make it to Pakistan

Pakistani businesses received around $350 million in funding previous fiscal year and $189 million this fiscal year; yet, most of that money never made it to Pakistan since venture investors held their cash outside the nation because to transactional issues.

The investors have been gradually releasing money for startups to use on a “as and when needed” basis.

“It is how venture capitalists want it and it makes sense,” said a healthcare startup founder, who has also received international funding.

“It is easier for them to repatriate their funds if the investment is in countries such as Dubai, while Pakistani currency is also continuously depreciating. So, there is no incentive in bringing all the investment into Pakistan.”

Then there was a lot of monitoring, making it difficult for investors to shift their investments if they were already in the country, he explained.

It has been validated by several other IT professionals. “It has been happening, and financing in Pakistani companies is something to applaud,” industry officials said. “However, the impression that it is also supporting the country’s depleted foreign exchange reserves is incorrect.”

Fragmented investments were brought into Pakistan to satisfy the commercial expenses of the IT firm, according to the healthcare startup entrepreneur.

In a recent announcement, Finance Minister Miftah Ismail stated that his government would work to strengthen regulations that allow investors to repatriate profits/funds and make doing business in the IT sector easier in order to attract more investment.

Only operational expenses were released to Pakistani entrepreneurs, according to Adnan Sami Sheikh, AVP Pak Kuwait Investment Company.

“The central bank’s red tape keeps venture capitalists and startup investors on the tenterhooks. They fear they won’t be able to repatriate their investment and profits in case of an increase in valuation of the startup,” he said.

“Moreover, depreciating rupee has also been affecting the startups and their investors’ decision to bring bigger chunks of investments. They try to bring in as little as possible to meet startups’ needs in Pakistan,” Sheikh said.