Bangladesh is witnessing a brand new generation of startups, making their presence felt not just in the domestic sphere but also globally. Bangladesh is developing very fast and there is no surprise about the fact that it is becoming home to several startup success stories in the past couple of years. There has been a lift in the number of new businesses surfacing in Bangladesh and ascribed to the technological and infrastructure advancement in the nation. Bangladeshi startups are just starting to attract investors from all around the world as business opportunities are rising. Any startup that is trying to break their way into their chosen industry wants to do everything they can to stand out and keep business coming in. That is why when they have a specific idea, they need to do the relevant research to support their venture as they branch out, from checking out top marijuana niches if they are in the cannabis business, to speaking to industry professionals about targeted marketing angles, the list goes on.
Increasing dependence on technology
Technological progress is the key to a country’s long-term increase in terms of standards of living. The pandemic has brought many disruptions in our lives. Thanks to the technological contribution Bangladesh is capitalizing on the opportunities that the current crisis has presented.
Bangladesh has seen substantial improvement in the country’s internet infrastructure in the past decade. Over 95% of the population have 4G coverage but many Bangladeshi internet users are just dipping their toes into the world of video streaming, social networking, and e-commerce. Opportunities in online business are particularly attractive as e-commerce accounts for only $2b in retail transactions as of 2020.
There are some startups that are presenting themselves as a viable alternative to capture a larger pie of traditional businesses in Bangladesh through technological adaptation contrary to the customary and inefficient way.
Technological progress appears to have shifted globally from 2001 when the median emerging economy’s growth rate accelerated and surpassed that of advanced economies. Although Bangladesh lagged behind substantially compared to some of the rival countries India, Pakistan, Vietnam.
Record funding
Bangladeshi entrepreneurs have been quietly building startups for a couple of years now, and finally, their presence is noticeable in both the domestic and foreign spheres. ShopUp, a startup that is digitizing the retail stores in Bangladesh, has raised $75m in the latest funding. This is a watershed moment for any startup, and a record bout of fundraising shifted attention to the startup culture in Bangladesh. It is important for startups to begin on a solid footing, that is why accounting for startups is seen as essential in helping them manage their money so they are able to put it into areas that will be beneficial and lucrative.
Bangladeshi startups have attracted $120m in investment, mostly from venture capital investors so far this year, which is three times higher compared to the entire 2020 funding. Most of the funding is by foreign investors and it demonstrates the strength and potential to solve broader social and economic problems through scaling up businesses.
Some Bangladeshi startups are turning out to be success stories for some venture-capital investors. The startups are now better positioned than ever in the eyes of international investors. From health to retail startups Bangladesh is attracting more tech talent, public tech infrastructure, and market size.
Chaldal is one of the first grocery delivery services in the world to use the “dark” store model and has secured $10m in fresh funding and soon hopes to expand to 15 new cities. Medicare startup Praava Health has raised $10.6m from international investors last month to provide quality healthcare. Tech-based delivery service Paperfly raised over $11.8m last January.
Truck lagbe a startup that intends to eliminate the middleman in hiring transport, gained momentum and attracted investors from International Finance Corporation (IFC) and US firm Millville Opportunities Management with $4m this year.
Some other prominent startups that attracted attention are Data Bird, Maya, Sikho, Jatri. These startups are expanding their offerings and deepening their footprints within Bangladesh. The record investment marks entry into Bangladesh – among the fastest growing economies in the past decade. The funding will enable these startups to participate in the country’s economic growth and attract the spotlight in South Asia.
Global trend
Bangladesh is starting to see some light in fundraising this year with the global trend. Bangladesh has attracted more funding in 2021 than 2020. Neighbouring India, Pakistan, and Vietnam too observed some massive changes to startup investment figures in the first half of 2021 that widely crossed that of the entire year of 2020.
As the pandemic ravaged the world, technology-based startups came into the investment spotlight as technology adaptation got a boost and is supposed to grow further. The venture capital investors have more cash in hand to invest in.
South and Southeast Asia is home to the largest population base and rapid technology adoption trends in the world. It is the real growth market and global investment attention is eyeing there now and over the 2019-20 period over $50b was raised by technology startups. Bangladesh only received only a small pie from there. According to the global compilation reports which track the funding reports that in 2020 the funding was $300b up from $281b in 2019. In the first half of 2021 alone global fundraising was 2-3 times higher than before.
India has overtaken in attracting venture capital-based investments in 2021. Global VC and private equity investors are allocating more funds to India than China just as investors were becoming spooked by a crackdown on internet companies in China. Investors are re-evaluating their China strategy and looking to invest elsewhere and Bangladesh could benefit from any capital flows shifting away from China.
Is Bangladesh a natural destination for startups?
Is Bangladesh setting itself as one of the greatest startup centers in the world? Success may be a farfetched word for Bangladesh. This is a journey and Bangladesh is embarking on it.
There are not too many fundable startups because their quality is not up to par with competition from other countries. Local corporations need to invest in startups to make the topic more riveting. All capital flows don’t come in the same colors and Bangladeshi startups need a boost in investments.
One of the surprising facts is that most big fundraisers that happen in Bangladesh are virtually forced to receive investments through their foreign holding companies as global investors are comfortable dealing within the jurisdictions of regional financial hubs, such as Singapore. This is depriving Bangladesh from appearing stronger in the global deal fact sheets, even though the investors know that their money will be utilized in Bangladesh.
Bangladesh is still to be benefited by the country’s tech talent, infrastructure, and market allocation. Alongside communicating the potential of the local market and startup talents, the government also needs to ensure that the legal and regulatory system supports international venture capital investors’ way of dealing.
Startup investment requires complex clauses in deals unlike simple acquisitions in Bangladesh. Local regulations and the majority of professionals are in need to catch up with the international standard to attract more foreign venture capital firms. Investors also care about their exit strategies and Bangladesh needs to smartly treat those investors. The previous record shows that the central bank had disputes regarding the valuation of non-listed companies during foreign investors’ exit.
Bangladeshi startups are emerging and so far things are going in the right direction as talents are emerging and the investors are paying closer attention to Bangladeshi startups. The most exciting part is that it is just the beginning and Bangladesh may not have even scratched the surface in terms of the potential, given the abundance of rising tech talent and growing startup ecosystem in the country.
The internet and smartphones have allowed tech entrepreneurs to create new viable business models that can reach the country’s furthest corner. The new ventures also have competitive advantages over traditional businesses which are often costly and suffer from broken distribution chains and complicated structures. To accelerate growth startups need to be more resilient and offer better experiences to the customers.
It doesn’t stop here. Fundraising from international investors is just the beginning. Add to this the prospect of the huge earnings momentum that is set to play out in the coming years may disrupt the culture within Bangladesh.
Wrapping up
Bangladesh has a big market and higher growth potential. If the startup culture is to survive then people need to be emotionally attached to their business and achieve success through disruption. Capital flow to tech-enabled businesses is a global phenomenon and to be a part of that, startups need to provide attractive returns generated from investments by venture capital investors. Interesting times are ahead of the local startups to watch out for a brand new generation of startups.
By Maksudur Rahman
