Fatima Gobi Ventures, a joint venture between Pakistani venture capital (VC) firm Fatima Ventures and Shanghai-headquartered VC Gobi Partners, expects to close its $20-million first fund by November-end.
The Pakistan-focused joint venture was first announced at the Pakistan-Malaysia Business and Investment Roundtable in March this year.
Fatima Gobi Ventures CEO Ali Mukhtar said the firm has seen healthy fundraising despite its Pakistan-only focus, due to the combined expertise of Fatima’s on-ground Pakistan expertise and Gobi’s experience in Southeast Asia and China.
Its limited partners (LPs) include development finance institutions and corporates from Pakistan and the Middle East. Fatima Group, a Pakistani conglomerate with businesses in fertilizer, textile, sugar, trading, mining and energy, has also agreed to invest in the fund.
Mukhtar added that the fund will likely seek more capital from Southeast Asia and China in future.
Fatima Gobi Ventures will typically deploy $100k-$200k for its first cheque, with room to deploy up to $2 million. It aims to invest in about 15 to 20 startups across e-commerce, fintech and mobility sectors.
Prior to its tie-up with Gobi, Fatima Ventures had already made investments in six startups including Airlift, a bus-hailing startup; PriceOye, a price comparison site; and Clicky.pk, a fashion portal which was backed by Souq.com. In 2017, Souq.com was acquired by Amazon for $580 million to penetrate the Middle East market.
Pakistan’s startup scene small but scaling quickly
Pakistan’s VC market and startup ecosystem is still at an extremely nascent stage. According to the i2i Pakistan Startup Ecosystem Report 2019, Pakistani startups raised just $18.8 million in venture funding this year, with most capital raised at the pre-seed and seed stages.
The South Asian market has seen an increase in the number of local VCs in the last year, including the likes of Sarmayacar, i2i Ventures and Fatima Gobi Ventures. Deal sizes in the market have also grown, with transportation startups such as Airlift and Bykea crossing the Series A stage.
Pakistan is also drawing increased interest from foreign investors. Last week, Airlift closed a $12 million Series A round led by US-based VC firm First Round Capital. In October, Karachi-based online pharmacy Dawaai was reported to be raising capital from Silicon Valley seed investor 500 Startups.
Mukhtar told DealStreetAsia that he anticipates more follow-on capital to come from overseas due to the nascency of the Pakistani market. However with ticket sizes in the domestic market likely to be too small for foreign investors, the country’s startups may need to rely more heavily on local corporates and angel networks to fill in funding gaps, he added.
The Pakistani diaspora community can play a larger role in supporting the country’s fledgling startups, he pointed out.
According to the Ministry of Overseas Pakistanis & Human Resource Development under the Pakistan government, there are close to 9 million Pakistanis living outside the country, many of whom reside in the Middle East, the US and Europe.
Many of these diaspora Pakistanis send significant sums of capital back to Pakistan. According to World Bank data, close to $22 billion has been remitted home in 2019 so far, making it one of the highest inflows of remittances in the world.