The Graveyard of Pakistani Startups in 2025: What Went Wrong In the Last 5 Years?

Pakistan’s startup ecosystem experienced a meteoric rise between 2020 and 2022, driven by a global venture capital frenzy. Adding fuel to the fire was a post-pandemic-accelerated digital adoption, which directly contributed to a halo effect of high-profile exits (such as Careem’s acquisition).

Experts say that startup funding surged past the $1 billion mark across 2021 and 2022, creating a wave of “unicorn-in-waiting” narratives and inspiring a generation of founders to pursue hypergrowth.

But the crash came swift and merciless: funding plummeted nearly 88% by 2024 (from $355 million in 2022 to just $43 million). It is a shame that economic turmoil including inflation, currency devaluation, and energy shortages hit hard on any new venture that begins in Pakistan. However, country-wide economic woes do not take away mismanagement and a strive for unsustainable models on entrepreneurs’ end.

Pakistani Startups: A Sorry State of Affairs

From 2020 to 2025, dozens of funded startups either shut down completely, exited markets, underwent massive layoffs (often 50–80 percent of staff), or pivoted desperately to survive. Industry estimates suggest over 55 funded companies failed or radically downsized in this period alone, with 2022 dubbed the “exodus year” and 2024 seeing another purge wave.

These startups raised eyebrows because they seemed profitable, raising tens to hundreds of millions, employing thousands, and capturing headlines. Their downfall reveals systemic issues: over-reliance on foreign VC for hypergrowth, ignoring unit economics, market saturation, regulatory hurdles, and failure to adapt to Pakistan’s low-ARPU reality.

Academic research underscores that most startups fail not because of a single issue such as “poor founders” but due to predictable patterns that compound over time. According to Harvard Business School research, more than two-thirds of startups never deliver a positive return to investors, and failure often arises from misaligned assumptions about customers, wrong partner choices, lack of early market validation, and premature scaling before real product-market fit is established.

In this light, the most public Pakistani failures reflect both contextual market challenges and these broader, well-studied failure archetypes. Let us take a look at the six of the most prominent and impactful failures, selected for funding raised, media coverage, employee numbers, and ecosystem ripple effects.

1. Airlift (Complete Shutdown: July 2022) – The Quick-Commerce Darling That Burned Bright and Out

Airlift launched in 2019 as a bus-hailing service but pivoted to quick-commerce grocery delivery in 2020 amid pandemic demand. It became Pakistan’s fastest unicorn hopeful, raising approximately $109 million total (including an $85 million Series B in 2021 at a reported $275 million valuation) from Tiger Global, First Round Capital, and others. At its peak, Airlift operated across multiple cities, employed thousands, and publicly touted order-level profitability.

However, behind this veneer was a classic case of scaling before true market validation and unit economics were robust. Airlift’s quick-commerce model masked weak economics with heavy marketing subsidies, costly warehouse networks, and fleet costs that fundamentally outpaced revenue in Pakistan’s highly price-sensitive grocery market. When a key investor withdrew from a planned $20 million bridge round in mid-2022, Airlift’s runway evaporated in weeks and the company abruptly shut down, liquidating warehouses and notifying staff with minimal notice.

The underlying causes align with patterns identified in startup failure research: premature scaling, lack of deep customer understanding, and chasing growth metrics over sustainable unit economics. Harvard Business School’s research emphasizes that failing to validate customer demand and prematurely scaling operations are two of the common patterns that doom startups, and Airlift exhibited both. The company did not simply suffer from a “global recession”; it was structurally unprepared for a capital-tightened environment because its high burn was built on assumptions of perpetual funding rather than enduring market demand. Its collapse shocked the ecosystem, eroding investor confidence and signaling an abrupt end to the “growth-at-all-costs” era in 2022.

2. VavaCars (Exited Pakistan: June 2022) – The Used-Car Platform Squeezed Out

VavaCars entered Pakistan in January 2020, backed by Dutch giant Vitol, with the ambition of formalizing the country’s fragmented used-car market. The company positioned itself as an end-to-end digital platform offering standardized inspections, transparent pricing, and centralized buying and selling. In 2021, VavaCars raised roughly $50 million globally to fuel regional expansion, including its Pakistani operations.

The core assumption underpinning the model was that inefficiency in Pakistan’s used-car market represented an opportunity for platform-led disruption. In reality, that inefficiency was structural. The market thrives on informality, personal trust, and opaque pricing, conditions that protect traditional dealers and undermine centralized platforms.

VavaCars faced entrenched competition from PakWheels, which dominated consumer trust and listings, and OLX Pakistan, which controlled buyer traffic. As inflation surged and auto financing dried up in 2021 and 2022, car sales volumes declined sharply, while VavaCars’ inspection centers and staffing costs remained high.

By June 2022, the company quietly shut down its Pakistan operations, updating its website to state that services had been permanently discontinued. Pakistan was among the first markets to be cut as Vitol refocused resources on Turkey, where transaction sizes are larger, financing penetration is deeper, and regulatory risk is lower. VavaCars did not fail due to lack of execution, but because it attempted to formalize a market that survives precisely because it resists formalization.

This failure fits broader patterns seen globally: startups that assume informal markets can be easily formalized often overlook deep behavioral and cultural market dynamics, leading to misjudgment of customer needs and willingness to adopt platform solutions. HBS research highlights that founders often skip critical customer validation steps, turning ideas into products that don’t fully address real market needs, one of the core patterns of startup failure.

3. Swvl (Exited Pakistan: November 2022) – The Mass-Transit App That Couldn’t Scale Profitably

Swvl expanded into Pakistan between 2019 and 2020 as part of a rapid global rollout that eventually led to a SPAC listing on NASDAQ in 2022. The company aimed to bring structure to urban transport through fixed-route, app-based bus services designed to replace informal vans and minibuses. The model depended on predictable commuter behavior, route discipline, and fare consistency, assumptions that clashed directly with Pakistan’s transport reality.

Pakistan’s urban transport ecosystem operates on negotiated informality, with flexible routes, cash fares, and minimal regulatory enforcement. Swvl’s cost structure could not compete with this adaptability, particularly in low-fare environments where consumers are highly price-sensitive. After its public listing, Swvl faced mounting losses and intense pressure from public markets to cut burn and retreat to core geographies. Pakistan, with its low margins and operational complexity, was deemed non-core. Services were first paused and then fully discontinued by late 2022 as part of a broader withdrawal from multiple international markets.

Swvl’s exit underscored the difficulty of imposing venture-backed mobility frameworks onto transport systems that function through informal equilibrium rather than centralized optimization. The “speed trap” pattern, pursuing aggressive growth without fully understanding local operational realities, led to overextension.

4. Cheetay (Reported Shutdown/Major Downturn: 2024) – The Delivery Pioneer That Burned Out

Cheetay began as a food delivery and logistics player and was one of Pakistan’s earliest entrants, launching in 2016 well before the pandemic-driven startup boom. During COVID-19, the company expanded into quick commerce to capture surging demand, raising an estimated $30–40 million in total funding. While this expansion initially boosted volumes, it dramatically increased burn through warehousing, rider incentives, and customer subsidies.

Unlike later entrants, Cheetay lacked the capital reserves to sustain prolonged subsidy-driven competition, particularly against a dominant incumbent such as Foodpanda Pakistan. As inflation eroded consumer purchasing power and rider utilization declined in 2022 and 2023, unit economics deteriorated further. Funding conversations stalled during the venture winter, and by early 2024, reports confirmed massive layoffs, with roughly half the workforce let go and operations effectively winding down.

Cheetay did not collapse suddenly but gradually ran out of room as costs rose faster than demand in a market that rewards scale only when paired with deep, patient capital. The academic lens finds resonance: chasing adjacent models during downturns without a secure core dilutes focus and erodes resilience.

5. Dastgyr (Major Layoffs and Survival Mode: 2024) – The B2B Marketplace That Over-Expanded

Dastgyr, a B2B e-commerce platform for retailers, raised more than $40 million, including a $37 million Series A in 2022 from Veon and Jazz, with ambitions to digitize retail procurement. Dastgyr assumed that small kiryana retailers would rapidly adopt digital ordering and absorb platform commissions in exchange for convenience and credit. In reality, retailer demand proved highly cyclical, cash-constrained, and extremely sensitive to macroeconomic shocks. The company expanded aggressively, investing in large warehouse infrastructure, rapidly growing headcount, and carrying significant inventory on its balance sheet. When inflation surged and retailers reduced order sizes, cash conversion cycles broke down, defaults increased, and burn became unsustainable.

In January 2024, Dastgyr laid off approximately 80% of its workforce, reportedly affecting 500 to 600 employees, as it cleared warehouses and cut overhead to preserve liquidity. The company’s near-collapse became emblematic of the broader B2B hype bust, alongside similar struggles at other players in the sector.

6. Careem (Ride-Hailing Suspension: July 2025) – The Mobility Pioneer That Couldn’t Sustain

Careem, acquired by Uber in 2020 for $3.1 billion, pioneered ride-hailing in Pakistan from 2015, normalizing digital payments, safer rides (especially for women), and gig work for thousands. It became a household name, operating in major cities and absorbing Uber’s local operations post-acquisition.

In June 2025, CEO Mudassir Sheikha announced suspension of ride-hailing services effective July 18, 2025, citing macroeconomic headwinds, intensifying competition from low-cost rivals like Uber (earlier, later acquired Careem), inDrive and Yango, and global capital constraints making investment unsustainable. While Careem Technologies (super app for deliveries/payments) continues with ~400 Pakistan-based employees, core mobility is no longer available.

Anyone looking for a startup plan in Pakistan needs to take key notes from Careem. High operational costs in low-margin markets, inability to compete with bargain models, and corporate prioritization amid downturns, are some of the major failure checkpoints Careem ticked over the years. Harvard research notes overextension and misjudged competition as failure drivers: Careem faced both in Pakistan’s informal, price-sensitive transport sector.

What Could They Have Done Differently?

For Pakistani startups seeking long-term survival in an ecosystem defined by funding winters, persistent inflation, currency volatility, regulatory ambiguity, and chronically low consumer purchasing power, success requires a decisive break from the hypergrowth playbook of the past. The next phase of company building in Pakistan must be grounded in discipline rather than velocity. Founders need to prioritize positive unit economics from the outset, ensuring that every transaction or customer relationship generates sustainable contribution margins before scaling. This means concentrating on core urban markets or tightly defined niches where demand is provable and pricing power exists, instead of pursuing premature, multi-city expansion that burns cash on untested assumptions.

Capital strategy must also evolve. Bootstrapping where possible, or operating with deliberately conservative burn rates, is no longer optional. Startups should plan for at least 18 to 24 months of runway even under optimistic fundraising assumptions, insulating operations from sudden capital shocks. Revenue diversification is equally critical. Integrating fintech layers such as payments, credit, or embedded insurance can stabilize cash flows, particularly in informal sectors like retail, logistics, and distribution where access to working capital is often a more pressing need than software alone.

Equally important is rigorous customer validation. Founders must invest deeply in pilot programs, direct customer engagement, and continuous iteration rooted in Pakistan’s economic realities, including extreme price sensitivity, cash-based behavior, and trust anchored in offline relationships. Imported Silicon Valley models that overlook these dynamics are more likely to fail than adapt. Hybrid online-offline execution, partnerships with entrenched local players for last-mile distribution, and ecosystem-level advocacy for regulatory clarity and cost relief, such as reduced taxes on devices and software, can further reduce structural risk.

Ultimately, endurance in Pakistan’s startup ecosystem will favor restraint over spectacle. Lean hiring, operational focus, and a culture that values profitability over vanity metrics are essential. Preparing for prolonged downturns by securing patient local capital, exploring revenue-based financing, or anchoring growth in recurring cash flows will separate durable companies from fleeting ones. The startups that survive and mature in this environment demonstrate a hard-earned truth: in Pakistan, entrepreneurship is not a sprint powered by foreign capital, but a long-distance test of adaptation, capital efficiency, and resolve.