What do turbulence in the global economy and the plunge in tech valuations imply for Pakistan’s emerging startup ecosystem? Let us evaluate. In short, these are some of the outcomes you can expect:
Most companies recently raised funds, right before the downturn, and will be able to ride this out
Layoffs in the tech ecosystem will increase to conserve cash
Adoption could actually increase for some efficiency-enhancing products
Startups will consolidate into more sustainable businesses.
Let’s establish the base set of facts that will work with. Two data points capture these facts. Firstly, Pakistan foreign exchange reserves fell to roughly USD 10 billion last month, down 50 percent from August 2021. Secondly, Tiger Global has allegedly seen losses of roughly 17 billion in its portfolio this year, according to estimates by the FT.
The first statistic illustrates the impact of rising commodity prices and irresponsible fiscal management on foreign exchange reserves, the inevitable pressure on the PKR exchange rate, and the painful adjustment in interest rates and fiscal management that’s already underway. The second statistic speaks to the fall in public market valuations for tech stocks and the ensuing cascade on losses for growth-stage investors. The comparison between the two puts Pakistan’s economy into perspective.
This has many implications and second-order effects for the Pakistani startup ecosystem, but here I’m going to focus on two immediate ones that I believe are...
Read Full Story: https://profit.pakistantoday.com.pk/2022/06/12/the-global-financing-crunch-is-here-how-will-it-impact-pakistan/
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