Pakistan Startup Fund Phase 2 is now live with a fresh $10 million government commitment, and the IT Ministry is already in advanced talks to multiply that figure fivefold. Federal Minister for IT and Telecom Shaza Fatima Khawaja announced the $10 million fund under the second phase of the Pakistan Startup Fund (PSF) as she met senior officials of the State Bank of Pakistan (SBP) and the Sindh government to discuss ways to strengthen the country’s startup ecosystem and accelerate digitalization of the national economy.
What Is Pakistan Startup Fund Phase 2?
The Pakistan Startup Fund is a government-backed grant program run by Ignite, the National Technology Fund. It was first launched in January 2024, and Phase 1 has already started putting money into local startups. Phase 2 is a bigger, more ambitious version with stronger international backing in the pipeline.
The PSF is a government-backed grant program by Ignite that helps Pakistani startups scale, attract investors, and grow globally. The key thing that sets it apart from a loan or a government shareholding is that it gives equity-free grants. The government takes no shares and no board seat in return.
How the $10M Grant Model Works
The grant from the Pakistan Startup Fund is only released to an eligible startup as the “last cheque” in an ongoing funding round. This means the startup must first secure the full investment from a private investor or VC before receiving the fund’s grant. The grant acts as the final piece of the financial puzzle, giving startups extra support after they have already locked in private sector funding.
In practice, this is a smart risk-sharing model. PSF covers up to 30% of the investment round, ranging between $50,000 and $1 million. So if a foreign VC is putting in $700,000, PSF tops up the round with up to $300,000 as a free grant. This makes Pakistani startups look much less risky to foreign investors.
Startups that create jobs, drive exports, or attract foreign investment are given preference, with sectors like fintech, digital services, healthtech, and education technology often highlighted.
The Road to $50M: World Bank, IFC and ADB
Speaking at the Fintech Roundtable 2026 held at the Sindh Governor House, the minister said the government was working to increase funding available to startups under the PSF to $25, 50 million over the next few years by bringing global financial institutions, including the World Bank, IFC and the Asian Development Bank, on board.
This is not just a wish list. The minister said talks with the World Bank are almost finalised, IFC is pitching in, and the government is also talking to the ADB. The idea is to anchor a larger fund, make it a first-class guarantee for international investors, and hand it over to an international fund manager through an RFP (Request for Proposal) process.
What most coverage has missed is the significance of that RFP mechanism. By letting an internationally recognised fund manager run the money, the government avoids the perception of political interference. It also gives foreign LPs (limited partners) the comfort of a familiar institutional framework, which is exactly what has held back Gulf and Western capital from betting bigger on Pakistani startups in the past.
The International Finance Corporation (IFC) already has a track record of backing Pakistani startups. IFC has noted there is “tremendous potential in Pakistan for startups to develop and scale up new technologies and tech-enabled business models” addressing issues such as climate change, education, healthcare, and financial services.
Pakistan’s Startup Ecosystem in Numbers
The timing of PSF Phase 2 makes sense when you look at where Pakistan’s startup scene actually stands right now. There are a total of 22,600 startups in Pakistan, and they have raised $4.77 billion across all funding rounds.
Pakistan has seen rising fintech activity over the past two years, with funding reaching $52.5 million in the first half of 2025, and 450 fintech companies collectively raising $391 million in venture capital by late November 2025.
On the government side, the digital push is already showing results. The government has 100% digitalised government-to-government (G2G) payments among federal ministries and departments, with the minister saying there is “a large movement towards the whole economy going cashless.”
If you want to understand how Pakistan’s broader digital financial reform connects to this startup push, the SECP’s digital regulatory overhaul is a key part of the same national effort to make Pakistan a serious regional tech market.
What This Means for Pakistani Startups
For a founder sitting in Lahore, Karachi, or Islamabad right now, Phase 2 means more money is available and the bar for access is getting clearer. The PSF still requires you to have a private investor ready to back you. It will not write you a cheque just because you have a good idea. But if you are close to closing a VC round and need that final push, this is exactly the kind of bridge capital that can make a deal happen.
Startups aligned with the five Es of the Uraan Pakistan framework, especially those contributing to E-Pakistan, foreign direct investment attraction, job creation, and IT exports, will be prioritised.
To qualify, a startup must be legally incorporated in Pakistan within the last 10 years, must be innovation-driven with scalable business potential, and if part of an international group, must operate through a locally registered entity. It should also have secured or be close to securing private investment through a term sheet, funding agreement, or letter of intent.
The goal of scaling to $50M via multilateral lenders would make PSF one of the largest dedicated public startup funds in South Asia. That would be a real shift, not just in the amount of money available but in the signal it sends to global venture capital firms watching the region.
Frequently Asked Questions
What is Pakistan Startup Fund Phase 2?
Pakistan Startup Fund Phase 2 (PSF 2.0) is the second stage of the government’s equity-free grant program for local startups, launched with a $10 million pool in August 2026. The IT Ministry plans to grow this to $25, 50 million with help from the World Bank, IFC, and ADB.
Who runs the Pakistan Startup Fund?
The Pakistan Startup Fund is an initiative of the Government of Pakistan under the Ministry of IT and Telecom, executed by Ignite, the National Technology Fund.
How much grant can a startup get from PSF?
PSF offers non-equity grants covering up to 30% of the total round size, typically between $50,000 and $1 million. The grant is only released once the startup has secured the rest of its funding from private investors.
Which sectors get priority under PSF Phase 2?
Startups that create jobs, drive exports, or attract foreign investment are given preference. Sectors like fintech, digital services, healthtech, and education technology are often highlighted. Startups aligned with the Uraan Pakistan framework’s E-Pakistan goals are also prioritised.
