Via Rest of World, a look at how Pakistani startups are having a dazzling run, and the country might get its first billion-dollar venture soon:

The Pakistani tech startup industry witnessed many highs in the last couple of years — record-breaking funding rounds, debuts by marquee global investors, and the emergence of founder “mafias,” among others. If all goes well, the world’s fifth-most populous country might bag another win soon: its first home-grown tech unicorn.

As neighboring India produced its 100th startup unicorn this month, many in the Pakistani tech startup community are waiting with bated breath for a local company to touch the aspirational $1 billion valuation. Local investors say that having a unicorn will validate Pakistan’s potential and cement its place as a startup destination.

“Right now, there’s no proof that the market is a destination; there are the inklings of it and it’s really exciting… But unicorn valuations, whether or not they actually matter, are important for signaling,” Kalsoom Lakhani, co-founder and general partner at Pakistan-focused early-stage fund i2i Ventures, told Rest of World earlier this year.

A unicorn could go a long way in convincing global investors who might be sitting on the fence, given the country’s uncertain political environment, Faisal Aftab, co-founder and managing partner of Pakistani venture capital fund Zayn Capital, told Rest of World. “It will solidify that Pakistan is here on the map to stay.” 

Lakhani, who is hopeful that Pakistan could produce two unicorns this year, believes the first billion-dollar company in the country will be in the business-to-business (B2B) retail space. These businesses need huge amounts of money, which will compel them to raise more rounds. Just this year, Pakistani startups have raised over $163 million, $130 million of which has gone to e-commerce companies.

“Having two startups cross the unicorn threshold in such a short period of time will draw in a lot of later-stage investors to the market and also attract a lot more founders to start something in Pakistan,” said Aatif Awan, founder of Pakistan-focused early-stage VC fund Indus Valley Capital, which is an investor in two companies that are touted to be the frontrunners in the race to reach unicorn valuation: Bazaar Technologies and Airlift.

Bazaar Technologies, a marketplace that connects retailers directly with wholesalers and manufacturers, raised $70 million in a series B round led by Tiger Global and Dragoneer at a valuation of over $100 million in March. Tiger Global also participated in the first pre-seed investment round of Zaraye, a B2B supplies platform for the construction industry, in April. Retailo Technologies, a B2B app digitizing retail supply chains, raised $36 million in a series A led by Graphene. There are rumors afloat about B2B marketplace Dastgyr Technologies raising $45 million in its series A round at a valuation of over $100 million.

“There is an appetite from outside investors to keep investing in this [B2B retail] model,” Lakhani said. “As long as there is appetite, these businesses will keep on raising, and this is a sector that will probably have about two category leaders.”

Local VCs also believe there could be a Pakistani fintech unicorn this year. In 2021, Pakistan’s central bank and the Securities and Exchange Commission introduced regulatory changes, including a licensing and regulatory framework for digital banks that allows for digitization of banking services. And earlier this year, the central bank rolled out free person-to-person (P2P) payments services. Thanks to the legislation, fintech startups have taken off. 

In April, salary advance startup Abhi, launched in 2021, raised $17 million at a $90 million valuation in a series A round led by Speedinvest. The same month, fintech firm SadaPay raised $10.7 million in an extended seed round, just as it received a commercial license to deliver financial services.

Only one business-to-consumer (B2C) company, Airlift Technologies, is in the running to become a unicorn this year. Launched as a mass transit startup in 2019, Airlift pivoted to B2C e-commerce in the middle of Covid-19 lockdowns in 2020.

In August 2021, Airlift raised $85 million in a series B funding round, an unheard of amount in the Pakistani startup ecosystem until then. The company’s investors include former Y Combinator president Sam Altman, Twitter co-founder Biz Stone, and Bain Capital’s co-chairman Steve Pagliuca, among others. The company was valued at only $275 million in its last round, but its growth trajectory has been steep. At least one VC, who does not back Airlift, told Rest of World that Airlift needs to fix its unit economics if it aspires for a $1-billion valuation. The company is currently bleeding money, which might worry investors, the VC said, requesting anonymity.

Despite the exuberance of the last two years, experts also warn that Pakistan might have to wait for its first unicorn sighting for some time, given signs of “cooling off” in funding later in the year. This month, the U.S. Federal Reserve raised interest rates – the largest interest rate hike in over two decades – which will impact the liquidity coming to emerging markets like Pakistan. “Lots of Pakistani founders are young and haven’t seen liquidity cycles as yet,” Aftab of Zayn Capital said. “It takes multiple liquidity cycles before you are able to stay and survive to get that unicorn status. Young founders who haven’t gone through a liquidity squeeze like 2008 are also going to see that money won’t be readily available.” Aftab believes that “the likelihood of a couple of busts here and there is higher over the next 18 months, than a bunch of unicorns popping up.”