From Tradition to Innovation: Local Conglomerate’s Evolution Through Strategic Equity Investment in Startups

The Opportunity

Bangladesh over the last 10 years has grown at an average rate of 6% and the moment is almost a half a trillion dollar economy. Given the current trajectory, the country is expected to hit the trillion-dollar mark by 2041. The startup ecosystem aligns with global trends, targeting five unicorns by 2025. With a projected USD 2.5 billion in annual startup funds by 2030 and a GDP per capita surpassing the South Asian average, Bangladesh emerges as a potential global investment hub, offering a promising landscape for investors in the dynamic startup and fintech domain.

The Approach

Leading corporate, divested in construction and real estate, is exploring investment opportunities in the tech space. LightCastle supported its due diligence process.

The due diligence had two parts – business and technology. The business due diligence was conducted by LightCastle Partners and the technology due diligence was conducted by Brain Station 23 – a leading IT Services firm. 

The buy-side investment due diligence was based on the below framework:

Following an initial macroeconomic assessment of fintech, DFS, embedded finance, e-commerce, and the SME industry, the due diligence focused on the target company. This involved a detailed analysis of its products, funding history, competitive position, and key advantages. Subsequently, a thorough examination of each service, emphasizing economic scales and efficiency, was conducted. Engaging with 40-50 clients and users provided practical insights, complemented by evaluations from platforms like the Play Store.

The final due diligence phase involved evaluating internal dynamics, including management experiences, organizational structure, market traction, growth strategy, and financials. Accurate valuations were derived, and a post-investment exit plan was formulated, contributing to a well-informed investment decision and laying the groundwork for a strategic and mutually beneficial partnership in the dynamic fintech startup landscape.

The Way Forward

Corporations are increasingly looking to create synergy with fast-growing technologies. Strategic investments are one of the ways to do so. Based on the due diligence, the final decision to make the investment decision was positive.