Pakistan Startup Fund offers up to 30% co-investment to attract VCs, Angels

January 09, 2024 (MLN): To accelerate the startup ecosystem in Pakistan, the government has launched the Pakistan Startup Fund (PSF) which offers to co-invest up to 30% of the capital raised by startups from venture capitalists or angel investors.

The government will allocate Rs2 billion every year for this program, which aims to catalyze more investments in the startup ecosystem.

The fund is structured as an equity-free capital to help close a Venture Capitalist round for a startup.

PSF is designed to help a startup raise its first external investment. If a startup in Pakistan and a foreign VC is evaluating the startup for a $1 million investment, the VC would only need to invest $0.7m, the PSF will give a grant of $0.3m to help close the round.

Moreover, the government will not take any equity/shares in the startup.

PSF is designed to lower the risk for international investors, and increase the attractiveness of investing in Pakistani startups.

Speaking at the launch event, Caretaker Federal Minister for IT & Telecom Dr Umar Saif stated that this program will enable around Rs10bn of investments in the startup ecosystem per year, based on an average of 20% of the government's commitment to the fundings.

With an average estimated dilution of 20% at the start of the startup, this means that the program is expected to create a staggering Rs50bn of value creation in the startup ecosystem per year.

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