The Pakistan Startup Fund Phase 2 became official on August 28, when Federal IT Minister Shaza Fatima Khawaja announced a fresh $10 million allocation, with a plan to grow it to $25-50 million by bringing in the World Bank, IFC and Asian Development Bank as partners. It’s a direct response to the access-to-capital problem that’s been strangling early-stage founders since the 2021 global funding slowdown, and it lands in the same month as two other government moves we’ve already covered, the SECP’s draft venture capital law and new startup tax reforms. Together they suggest Islamabad is finally treating startup funding as infrastructure, not a favour.
What Is the Pakistan Startup Fund Phase 2?
The original Pakistan Startup Fund launched in late 2025 alongside two sister programmes: the Prime Minister’s Cloud Enablement Program, which reimburses startups for AWS, Google Cloud, Azure and Huawei Cloud spend, and BridgeStart Pakistan, which connects local founders to international accelerators. The PSF itself offers equity-free grants worth up to 30% of a startup’s investment round, designed to bridge the gap between a founder’s own money and their first serious external cheque.
Pakistan Startup Fund Phase 2 is the next stage of that same programme, not a replacement for it. The $10 million is a starting allocation, and the government has been explicit that the real target is far larger once international partners sign on.
It’s worth being precise about what changed, because “Pakistan Startup Fund” and “Pakistan Startup Fund Phase 2” are being used somewhat interchangeably in early coverage. The name is the same; the funding mechanism and scale are what’s actually new here, and that distinction matters if you’re a founder deciding which programme to apply through.
Where the $10 Million Is Actually Going
According to the minister’s own framing, reported by Business Recorder on August 28, the structure involves anchoring a larger fund with international guarantee mechanisms, then appointing an international fund manager through a formal Request for Proposal process. That’s a meaningfully different approach from the equity-free grant model the original PSF used.
In plain terms: the first $10 million is meant to prove the model works well enough that the World Bank, IFC and ADB are comfortable putting real money behind it. If that happens, the fund could eventually manage capital the way a professional venture fund does, rather than issuing one-off grants.
Why the Government Is Bringing in the World Bank, IFC and ADB
Pakistan’s own fiscal room for startup subsidies is limited, so pairing a government-anchored fund with development finance institutions is a way to multiply a small initial cheque into something with real staying power. It also adds a layer of due diligence and reporting discipline that a purely domestic fund often lacks.
The minister tied this directly to a bigger number: formalising just 25% of Pakistan’s estimated $400 billion informal economy could add roughly $100 billion to GDP. Startups, especially in fintech and e-commerce, are one of the main tools the government is using to pull informal activity into the formal, taxable economy, and Pakistan Startup Fund Phase 2 is being pitched as the financing layer that makes that shift possible.
None of this happens overnight. Multilateral institutions like the World Bank and IFC typically spend six to twelve months on due diligence before committing to a new vehicle, so the $25-50 million target attached to Pakistan Startup Fund Phase 2 should be read as a medium-term goal, not a number that’s already in the bank.
- Fintech and e-commerce startups are explicitly named as priority sectors, since they touch payments data that helps formalise informal transactions.
- AI, HealthTech and cloud-native startups are also eligible, in line with Pakistan’s 2025 National AI Policy.
- International fund managers will eventually run day-to-day allocation decisions once the RFP process concludes.
Pakistan Startup Fund Phase 2 vs the Original PSF Programme
| Feature | Original PSF (2025 launch) | Pakistan Startup Fund Phase 2 |
|---|---|---|
| Structure | Equity-free grants, up to 30% of a round | Anchored fund with international guarantees |
| Fund size | Not publicly disclosed at launch | $10 million now, targeting $25-50 million |
| Partners | Domestic, government-run | World Bank, IFC, Asian Development Bank |
| Management | Government-administered | International fund manager, via RFP |
| Status as of August 2026 | Operational, taking applications | Newly announced, partners not yet finalised |
Best Investment in Pakistani Startups: What Angel Investors Should Watch
For angel investors and family offices, the government building out Pakistan Startup Fund Phase 2 is a signal, not a substitute for your own diligence. A government grant reduces a founder’s need for early dilution, which can actually make angel rounds more attractive, since founders keep more equity to offer serious backers later.
The best investment in Pakistani startups right now is still concentrated in sectors the government itself is prioritising: fintech, e-commerce infrastructure, and AI tooling, the same categories named in the PSF’s own criteria. That overlap isn’t a coincidence, it reflects where the addressable market and the policy tailwinds both point.
Angel investors should also watch the SECP’s parallel work, detailed in our coverage of the SECP Venture Capital Bill 2026, since regulatory clarity on how VC funds are taxed and structured matters as much as any single grant programme.
What This Means for Pakistani Investors
If you’re an early-stage investor, the practical takeaway is timing. International partners like the World Bank typically require months of due diligence before committing capital, so Pakistan Startup Fund Phase 2’s larger $25-50 million target is unlikely to be fully funded before 2027. Founders raising now should treat the $10 million as available today, and the rest as a pipeline to plan around, not to count on immediately.
It’s also worth reading this alongside our guide on how to raise startup capital in 2026 and the recent record global startup funding numbers from H1 2026, both of which point to the same trend: capital is coming back into early-stage startups worldwide, and Pakistan is trying to make sure local founders don’t miss the window.
Before assuming any single grant or fund is automatically the best investment in Pakistani startups, check whether it actually reduces your dilution or funding gap, or whether it’s simply a headline the government needed this quarter.
Frequently Asked Questions
What is the Pakistan Startup Fund?
It’s a government programme, launched in 2025, that gives eligible startups equity-free grants worth up to 30% of an investment round, aimed at bridging Pakistan’s early-stage funding gap. Eligibility has favoured registered Pakistani startups in fintech, e-commerce, HealthTech and AI, the sectors named in the government’s National AI Policy.
How much money did Phase 2 add?
An initial $10 million, announced on August 28, 2026, with a stated plan to grow that to $25-50 million by bringing in the World Bank, IFC and Asian Development Bank as partners.
Are Pakistan Startup Fund grants equity-free?
The original PSF grants are equity-free. Phase 2’s larger anchored fund, once international partners are onboarded, may include different terms depending on how the fund manager structures individual deals.
How is Pakistan Startup Fund Phase 2 different from the SECP Venture Capital Bill?
They’re complementary, not the same thing. The SECP bill is a regulatory framework for how VC funds operate and are taxed, while Pakistan Startup Fund Phase 2 is an actual pool of capital the government is trying to build with international partners. A founder could reasonably benefit from both at once.
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