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Even as things look bleak, financial platform Abhi has proven itself to be one of the bright spots in Pakistan’s startup scene – raising just $5.2 million across eight deals between April and June this year.
But the Karachi-based company, which works with companies to give employees access to capital before payday, has raised $21 million in venture capital (VC) funding from investors including Dubai-based Global Ventures and VentureSouq . It has also raised $15 million to $20 million in debt financing in various markets.
Pakistani financial platform Abhi raises Rs 2 billion sukuk, ‘first in MENA region’
A report in August said its valuation had grown to $90 million over the past two years as it became one of 16 startups to join the Hub71 family of Abu Dhabi’s global tech ecosystem. The company was also recently selected as one of the UAE’s Future 100 Companies, a program that recognizes top startups that contribute to the UAE’s future readiness and economic sector competitiveness.
Another round: Pakistan-based Abhi raises $17 million in Series A funding
Its total revenue is close to $8 million, according to CEO Omair Ansari.talking business recorder In an exclusive interview, he revealed that the company’s “profit this year has been very good.” He did not disclose actual figures.
The UAE is one of its largest markets, along with Pakistan and Bangladesh.
Ansari said the Gulf state, and Dubai in particular, “are working hard to support new businesses, whether it’s fintech, medtech or other forms of technology to really disrupt the economy and bring new industries to the economy”.
“We have had nothing but support from the Dubai International Financial Center and the Abu Dhabi Global Market. The regulators are very willing to work with you to be able to bring you to market. It has been a very pleasant experience so far,” he added road.
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The local venture capital ecosystem has also been very supportive, he said: “I think it’s something we’re very happy with and we want to further cement ourselves in the region.”
When asked to compare the startup and venture capital ecosystems in Dubai and Pakistan, Ansari said the UAE is “a more mature market because it’s been around a little longer.”
“Venture capital funds have a longer history there. There have been exits before, for example ecosystems like Careem have exited.
The UAE has another advantage: It has more second- and third-time founders than Pakistan “because it’s so new from a venture capital perspective.”
Abhi’s valuation grows to $90 million in two years
However, there are similarities: “We talk about some incidents that happened in Pakistan over the past few years and, to be honest, happened in the UAE as well. Once learning happens, people move on and the ecosystem moves on.
He also noted that one similarity between the two countries is the lack of growth equity.
“There is some growth equity capital in the UAE, but it’s not the same as Europe or the United States. That’s a big problem, and I think Pakistan is very similar as well.
“The problem we face or any large company faces is that if you want to grow the business beyond Series A, there is a lack of deep financial resources to support such a business, take it to the next level, continue to develop B, C, D.
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Help small and medium-sized enterprises solve working capital problems
Abhi works with approximately 1,000 companies through which it already serves approximately 400,000 individual customers, with more services in the pipeline.
While its clients include well-known companies such as Unilever, Alfalah Bank and Artistic Milliners, it also has a strong focus on small and medium-sized enterprises.
Ansari said Abhi’s wage access (EWA) product is performing well because “the country’s largest employers are small and medium enterprises, which often face working capital issues” meaning they often fail to pay wages on time.
The business isn’t just focused on EWA, though. Since launching during the pandemic in 2021, it has grown – now also helping companies provide invoice factoring, payroll financing and revenue-based financing for online merchants.
“We charge a flat fee for every product we launch. That’s how we generate revenue,” Ansari said.
Launching during a pandemic comes with its own set of challenges. But COVID-19 has also “accelerated acceptance of what they are building.”
He explained that before the pandemic, Pakistan was not ready to accept products like Abhi.
But COVID-19 has forced people to understand what it’s like to be only through digital channels, becoming an accelerant of digital transactions and digital acceptability.
In 2021, Ansari and co-founder Ali Ladhubhai decided, “If Pakistanis are not ready for digital now, they will never be.”
Paving the way with Islamic bonds
Fast forward to May 2023, Abhi raised a Rs 200-crore Sukuk, a first for a fintech company in the MENAP region.
Explaining the thinking behind it to Business Recorder, Ansari said Abiy wanted to demonstrate that “there is an emerging debt market in Pakistan that we can tap into to grow the business without the need for ongoing equity financing.”
It also wants to prove “that we are using real raw materials, which is cash, to be able to fund the business and still make a profit.
Going forward, Abiy plans to double down on issuance of more sukuk.
“We raised around Rs 200 crore in the last round of funding. By the first quarter of 2024, our revenue will be close to Rs 400-500 crore.
While it looks to raise debt in international markets, on the equity side it “has started having conversations, but given that we are already profitable, we are in no rush to raise capital at this time given what the market is” valuation is.
future growth plan
As for Abhi’s plans for next year, Ansari’s answer is “further growth.”
The company has just received approval from the State Bank of Pakistan to conduct due diligence on FINCA Microfinance Bank in partnership with TPL Corp as they look to acquire a majority stake in the bank.
Although Ansari would not comment, he said that while 2023 was a very difficult year, “we came out of the year bigger and more profitable, and I think hopefully 2024 looks like will be stronger, especially from a macro perspective in Pakistan.
It also wants to focus more on international expansion, giving Bangladesh and the UAE “a larger share of our overall business”.
Copyright Business Recorder, 2023
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