CDC Group (CDC), the UK’s development finance institution and impact investor, has made an undisclosed anchor investment in Techxila Fund I, a fund managed by venture capital (VC) firm Fatima Gobi Ventures (FGV).
CDC’s commitment will help to boost Techxila Fund I’s investments in Pakistan-focused early-stage startups, helping to drive transformational impact and spurring economic and social development in the country, CDC and FGV said in a joint statement on Thursday.
CDC’s fund injection into Techxila will enable FGV to expand its investment portfolio across a myriad of verticals including FinTech, Logistics, EdTech, and HealthTech sectors.
Such tech-enabled business models can contribute to job creation at scale and enhance consumer access to essential goods and services. By partnering with local VC firms such as FGV, CDC aims to catalyze domestic VC markets and channel funding to early-stage entrepreneurs.
The partnership will support FGV in putting Environmental, Social, and Governance (ESG) practices at the forefront of its investments.
“Pakistan is a key VC market for CDC, due to the depth of entrepreneurial talent in a large and growing domestic market, with numerous opportunities for delivering impact through tech-enabled business models. We are excited to be building an enduring partnership with Fatima Gobi, which is well-positioned to support local entrepreneurs and help stimulate innovation and transformational impact that will drive sustainable economic development,” CDC Group Country Director, Pakistan, Habib Yousuf said.
Increasing interest from international investors such as global VC firms bodes well for Pakistani startups, the companies said. In the first half of 2021 alone, Pakistani startups raised more funding from VCs than the previous five years combined.
Despite a global pandemic, foreign funds accounted for over 70 percent of Pakistan’s total VC funding in 2020 and 2021. This rise in VC funding has helped fuel the country’s economic growth – the country has seen an increase in its middle-class over the last two decades, with an estimated 84 million Pakistanis (42 percent of the population) considered middle-class in 2017.
In the first half of the year, 101 million broadband users and 98 million 3G/4G subscribers were recorded in the country – indicating the significant market penetration and showing there is still much room for growth.
FGV is a joint venture between Pakistan conglomerate Fatima Ventures and pan-Asian VC Gobi Partners. Now the most active investor in Pakistan, FGV’s investees were involved in more than 40 percent of the country’s announced funding deals as of September 2021, the companies said.
CDC Group is the UK’s impact investor with over 70 years of experience in supporting the sustainable, long-term growth of businesses in South Asia and Africa. The company has investments in over 1000 businesses in emerging economies and total assets of $9.3 billion.
In 2020, CDC committed over $1.5 billion to businesses in Africa and Asia and aims to invest up to $1.75 billion in 2021 – with a focus on driving inclusive growth, job creation, and supporting economic recovery from COVID-19. CDC is funded by the UK government and is a champion of the UN’s Sustainable Development Goals.