Can Bangladeshi Startups Swerve Through the Funding Winter?

LightCastle Analytics Wing
July 28, 2022
Can Bangladeshi Startups Swerve Through the Funding Winter?

Fueled by (i) the worst (two-long years dragged) pandemic in a century, (ii) Russia’s disastrous attack on Ukraine, (iii) US Fed tightening reducing global liquidity — all in all, it has imbalanced global geo-political relations, causing economic slowdown risks and supply chain disruptions for food, fertilizer, and energy. How will this impact global startup investments in Bangladesh?

Want to learn more about Market Assessment?

See Our Service

The Macroeconomic Uncertainty

Bangladesh’s macroeconomic drivers have been growing steadily over a decade. However now the country has entered an uncomfortable territory with inflation increasing rapidly, foreign reserves depleting fast, and the balance of payment under stress from the widening trade deficit. 

The global economic scenario is causing a fall in Bangladesh’s remittance, with BDT losing its value to the US dollar. The country’s total exports rose to $52Bn in 2021, but so has the cost of raw materials, diminishing the margin for the export businesses. Despite reaching a 100% electricity per population coverage milestone, high prices of fuel and supply shortages have led to substantial cuts in electricity generation, prompting planned outages across the country and dampening business activities for the foreseeable future.

State of Major Macro indicators of Bangladesh

Our Startup Ecosystem In Comparison

This global crisis is bound to impact the Bangladesh startup ecosystem on the consumer and investor front. 

Currently, Bangladesh boasts hundreds of active startups creating positive impacts in the day-to-day lives of the citizens. The startup sector is estimated to have created 1.5 million+ direct and indirect employment opportunities and has raised over $800Mn, from local and global investors, including some big names like Softbank, Ant Financials, Tiger Global, and Sequoia, in the last decade. 

In comparison, our close neighbor, India, just only in 2021, raised over $20Bn, which is significantly larger than our market. In Q2′ 2022, they raised ~$7Bn, a decline of 33%, compared with ~$10Bn in the former quarter due to a significant ‘funding winter’ amid a drop in investor confidence, and forcing belittling startup valuations, market corrections in the public market, a massive number of layoffs, and shutdown of startups with unrealistic business models and thin profit margins. 

Asian startups, which have raised ~$13Bn, will see the most significant drop, with funding set to plunge 31% this quarter, indicating a funding winter. All these situations beg us to ask, Are the Bangladeshi Startups ready to swerve through the funding winter?

If you are interested to learn more about the Startup Ecosystem of Bangladesh Document download full report

The Impact on Global Startup Investments

Marking the biggest quarterly percentage drop in deals and the second-largest drop in funding in a decade, global venture funding saw ~$110Bn raised across ~7,650 deals in Q2’2022 (but remains above levels last seen in 2020).

Global Startup Investments and Deals

Europe saw a 13% decrease in funding compared to Q1’22, the smallest dip among major regions. M&A deals trended down for the first time in 8 quarters, dropping to ~2,500 — a 6-quarter low. IPOs and SPACs dropped by 15% and 26% QoQ, respectively. ​For the first time since Q4’20, fintech startups accounted for less than a fifth of all funding.

Tiger Global Management was the top investor for the third straight quarter in Q2’22, investing in 86 startups. However, that number marked a decline from 120 in Q1’22. Global unicorn births slowed to 85, bringing the total unicorn count to 1,170 — a modest 6.8% QoQ increase. 

Startup Investments Trends in Bangladesh

In the first half of 2022, Bangladeshi startups have raised nearly $90Mn in investments, led by the largest B2B SAAS, ShopUp‘s $63Mn (70%) followed by the logistics service, Paperfly‘s $13Mn (15%). 

In 2021, 53 startups attracted a total investment of $415Mn, with 99% of investments coming from global investors. Overall, startup investment in Bangladesh grew almost 10 times despite low Investments to GDP Ratio, unlocked by three fundamental forces: (a) increasing digitization with a tech-savvy population backed by affordable technology and devices, (b) increasing demand for Bangladesh’s growing middle and affluent class, (c) active policy initiatives to support startups and tech companies.

Key Stats of Bangladesh Startup Ecosystem (2021-2022)

As the majority of investments are raised from global investors, it is eminent that the funding winter will hit the local startups as well, especially growth stage startups raising Series-A and beyond.

This will lead to a decrease in discounts and promotions by startups, effectively increasing consumer expenses. The number of hiring and open positions may also fall. Appraisals and quality control measures will increase to reduce operational costs. In the worst case, layoffs can happen. There can also be M&As to optimize operations and business development. All to temper the significance of unit economics and profitability.

Case Study: Airlift and Pakistan Ecosystem

  • Pakistan experienced a surge in venture capital (VC) funding, which peaked in 2021 with over $350Mn in investments across 81 deals.
  • In August 2021, Airlift raised $85Mn in the country’s most considerable Series B funding round, valued at $275Mn, the highest for any Pakistani venture led by Harry Stebbings of 20VC and Josh Buckley of Buckley Ventures.
  • In March 2022, Airlift started halting its operations and pulling out of several regions, including its significant expansion in MENA.
  • In July 2022, Airlift decided to shut down for good despite raising $110Mn due to macroeconomic instability, unstructured unit economics, low business margin, and drying up of VC funding.

Sentiments From Our Ecosystem

Bangladeshi Domiciled Venture Capital Fund Perspective

Given the uncertainty in the global economy, VCs will be cautious in a market like Bangladesh, where access to capital is extremely limited to startup founders. The ticket size and valuation have already been reduced, and advice is given to portfolio companies to manage costs to extend their runway and grow sustainably as the funding crunch will exist for the next 8-12 months. 

With that said, investors are also on the lookout for potential startups, navigating smartly during this peril and potentially investing in the near term.

Mustafizur R Khan, Partner of IDLC VC Fund 1

US Domiciled Bangladesh Focused Venture Capital Fund Perspective

Qualified founders solving real problems for a country of 170 million people should not have issues raising capital. The dollar amounts are still relatively small, and international investors are keen on exposure to Bangladesh’s strong macroeconomic story — and it’s possible that a high-quality Bangladeshi startup can outperform shiny tech stocks like Tesla and Snowflake in the next few years, which is not something we could have said easily a year or two ago. 

That being said, it’s prudent for founders to raise early, have a long runway and be extra cautious even if they have capital visibility. Founders must also raise more effectively and clinically with greater urgency while specifically learning to raise when they don’t need the money to have greater leverage in negotiations.

Rahat Ahmed, Founding Partner & CEO of Anchorless Bangladesh

Leading Angel Investor Perspective

The global financial situation is currently unpredictable, so it’s natural for international investors to be more reserved. Nevertheless, if we talk about local angel investments in early-stage companies – Bangladesh, in a short time, would not see much of a slow down. In fact, we may probably see a swamp of new angel investors in the market, filling up the gap of global investors. 

Asif Rahman, Angel Investor; Founder and CEO of WeDevs

Leading Startup Founder Perspective

Bangladeshi startups should be well accustomed to “funding winters” — as geographically, Bangladeshi founders have always had to fight hard for global VC attention.

In a 3-4 year time frame, this should bode well for us as VCs will focus more on fundamentals and be cautious of “hot” ecosystems. However, the startups must be on high alert for the next few years. Hopefully, more Bangladeshi investors will come forward to support early-stage enterprises, as local investors’ participation will give global investors optimism for later-stage funding rounds.

Meanwhile, Bangladesh Government should double down on the ecosystem and recognize the dangers that the current environment poses.

Waseem Alim, Co-Founder & CEO of Chaldal

What Should Startups Expect Next?

  • Valuation reduction for Series A and beyond startups: There will be an expected decline for Series A and beyond funding rounds. Negotiations will be tighter, increasing the cost of capital for startups. Startups with short runways may even have to opt for down rounds.
  • Tighter due diligence and focus on compliance from investors: Investors will take time to understand the business and the risks they are underwriting before making decisions. Financial and legal compliance will be a crucial priority and investors will want to ensure they truly understand the company they are investing in.
  • Availability of seed/ pre-seed investments: Smaller investors will follow the paths of leading influential VC firms (like Sequoia Capital, and Tiger Global), commencing a chain reaction in the investment community. Firms will significantly scale down their investments on big-ticket rounds for new Series A and beyond startups to reserve capital for their portfolio. Investments in early-stage startups will continue for the ones with good unit economics and efficient business models. 
  • Rise of new entrepreneurs, startups, and business models: When the times are tough, startups are likely to innovate business ideas and models that can survive in the current market. Existing startups may pivot and optimize their revenue models for a stable cash flow and better product market fit.
  • Possibility of mergers and acquisitions: With a shortage of funding, smaller startups may reach out to more prominent startups to explore strategic partnerships, mergers, or acquisitions, hoping to keep the business alive or increase the runway.

In theory, a downturn market typically lasts for 12-18 months. As a startup founder, if you plan and adopt the right strategies to improve your runway, your company stands a much better chance of surviving the economic downturn. Some of the most prominent global startups were born during times of recession. So if your startup can swerve through this funding winter, chances are, you might become the next outstanding Bangladeshi Unicorn in the coming decade! 


Mehad ul Haque serves as a Project Manager @ LightCastle Partners as well as the Country Coordinator @ Biniyog Briddhi. He looks upon business development, projects, and research related to startups, entrepreneurship, and investment advisory. During leisure, he enjoys occasional traveling and unraveling startup financials and business models.


  1. Bangladesh Startup Ecosystem Report 2021-22- LightCastle Partners
  2. How startups should handle the downturn – TechCrunch
  3. BL Explainer: All about the funding winter for startups – TheHindiBusinessLine
  4. The economy is stressed. What can we do? – The Business Standard
  5. State of Venture Q2’22 Report – CBInsights

WRITTEN BY: LightCastle Analytics Wing

At LightCastle, we take a data-driven approach to create opportunities for growth and impact. We consult and collaborate with development partners, the public sector, and private organizations to promote inclusive economic growth that positively changes the lives of people at scale. Being a data-driven and transparent organization, we believe in democratizing knowledge and information among the stakeholders of the economy to drive inclusive growth.

For further clarifications, contact here: [email protected]

Want to collaborate with us?

Our experts can help you solve your unique challenges

Join Our Newsletter

Stay up-to-date with our Thought Leadership and Insights