Deosai Ventures launches public document for startup funding.

What are the future milestones that you see happening in the ecosystem?

So far, the fundraising numbers for 2022 were not as bad as expected despite the slowdown. We’ll see a lot smaller deals at more realistic valuations as compared to the $30-50 million mega-rounds of last year. Those will be few and far between and it’ll be healthier for our ecosystem for those funds to be divided among more startups.

After this new normal in terms of smaller rounds and valuations, we’ll see companies focused on sustainable business models and unit economics rise up as the most investable startups over the next 1-2 years. The smart teams will focus on building their product and cementing their product market fit during this downturn and they will find it much easier to raise larger rounds for their growth in 2023-24.

We will also see a lot more angel syndicates and family offices investing in a more structured way, taking advantage of this vacuum left by the retreating foreign funds. This is a great by-product of the current market conditions as this will fill a much-needed gap in early-stage investing in Pakistan.

We’ve seen a wave of interest in qCommerce, eCommerce, mobility, and fintech and are now seeing secondary level investments in the same verticals as well e.g. mobility startups in carpooling and EVs have renewed interest now due to the soaring fuel prices. The ignored sectors which were hard to crack so far were Edtech and health tech, but they are also seeing more activity now.

Everyone wants to be the Byju’s of Pakistan but that’s easier said than done. Healthtech will now see some prominent regional players getting interested in our platforms. Agritech is a strategic sector in terms of food security and we’re seeing a lot of interest building up there as well. Other overlooked verticals include media and local content, as well as some of the new waves of web3, AR/VR, and crypto.

We use a simple framework for our investment decisions and that looks at the following factors:

Advice for founders who are looking to raise?

This is the toughest time to raise but round sizes in Pakistan can easily be constructed as a mix of angels and small VCs. Founders cannot be picky right now, so they need to be more flexible in terms of who they raise from and the terms on which they close a round.

You may not have planned on having 20 angels on your cap table without a well-known VC lead but if that’s what it takes to get you to the next milestone and raise a larger round down the round, that’s what you need to do to survive and grow. Generally, suppose you have a solid business model and revenue that can be scaled. In that case, you’re already in a thin minority that will be more noticeable and investable than the flock of “growth at all costs” startups we saw over the last 2 years.

Founders also need to look at multiple revenue sources that may not match their long-term strategy but will be invaluable in getting them through this tough market. Long-term survival is the name of the game right now.

Are you satisfied with the quality of startup ideas and teams in the ecosystem?

The quality of teams and startups has improved tremendously over the last three years and one of the reasons is that we’re seeing more mature mid-career founders who are leaving their corporate jobs or previous career trajectories and taking a stab at building solid startups.

They are not experimenting in this new “startup game” but have deep domain knowledge and are trying to solve genuine problems, as compared to some of the other younger founders who were just making products for issues that did not exist.