Bangladesh – the Story of an Emerging Startup Hub in Asia

When the Bangladeshi startup ecosystem took its first notable step in 2014,  the global startup world was much smaller and nearly synonymous with Silicon Valley. Ten years have passed since. The world has lived through major technological revolutions and a global pandemic, both of which have catalyzed startups to push the limits of innovation. At the same time, hot spots for startup growth have sprouted all over the globe, with Asia and Africa, in particular, crawling into the spotlight. With these shifts, Bangladesh has become a thriving ecosystem for startups in the past decade.

Bangladesh’s Status as an Up-and-Coming Startup Hub in Asia

Today, the country boasts more than 1,200 active startups, including one unicorn, and has increasingly gained the attention of international investors and a surge of investors at home. Startup investments have grown nearly ten times between 2020 and 2021, making up 0.10% of the total GDP in 2021.

Startup investment trends in Asia

Drivers of the Rising Startup Ecosystem in Bangladesh

Digitization, changing population demographics, and supportive policies have been critical drivers of the rising startup ecosystem of Bangladesh:

• Increasing digitization empowers communities to harness the potential offered by startups. Bangladesh’s Information and Communication Technology (ICT) industry has grown 40% annually in the last 12 years, compared to the 9% annual growth in the neighboring country of India. Two-thirds of the population in Bangladesh has a Mobile Financial Services (MFS) account, resulting in USD 10 Mn transactions daily. Moreover, e-commerce has gained increasing traction across the country, expected to grow to USD 3 Bn by next year. These trends demonstrate an increasing inclination towards inclusive digitization across the country, equipping the growing population with greater potential to harness the potential of startups.
• A growing MAC population and a younger, digitally-savvy demographic drive consumption, proving an enormous opportunity for startups. The Middle and Affluent Consumers (MAC) population is expected to double to 34 Mn people by 2026, equal to the population of Malaysia. With a comparably young population that has a median age of 28 years, the country has an increasingly digitally-savvy demographic. As such, one-half of all unique mobile subscribers use mobile internet, and a third of the total population has access to the internet. This gives homegrown startups a significant reach for their products and services.
• Policies and public and private initiatives to support startups make up an encouraging environment. Over the past decade, the government has led multiple initiatives to incentivize foreign investments in the country. As a part of maturing the ecosystem in Bangladesh, the ICT division of Bangladesh set up Startup Bangladesh Limited in 2020 as its flagship venture capital. The fund has recently signed investment agreements with over 20  startups, with an allocated capital of BDT 500 crores (USD 65 million). Moreover, private accelerator programs such as Biniyog Briddhi, Grameenphone Accelerator, Banglalink IT Incubator, and BRAC Urban Innovation Challenge have also played a crucial role in promoting startup growth over the years.

Timeline of Key Activities in the Startup Ecosystem in Bangladesh

The Result: More Than USD 800 Mn Investments Raised Since 2013

Over the last decade, the Bangladesh startup ecosystem witnessed investments worth USD 804 Mn through 232 deals. In 2021 alone, nearly USD 415 Mn was raised in investments, including SoftBank’s capital injection of USD 250 Mn in bKash, a fintech company enabling mobile money across 57 Mn customers. As the ecosystem has matured, investors at home have also grown increasingly active in the ecosystem. As a result, 25% of all investments raised in 2022 came from local sources, with Startup Bangladesh Limited leading the way with nine deals in Quarter 3.

Startup Investments in Bangladesh Since 2013

The Future of Homegrown Startups Relies on Resilience

While the last decade has been favorable for startups amidst a bull run and record highs, the current crippling implications of the pandemic and market dynamic might slow down the race. Amidst the looming threat of an economic slump, startups globally face a reset in capital flows and valuations.

Global attention to Bangladeshi startups is decelerating as uncertainty rises around the post-pandemic world. The Bangladeshi startup ecosystem relies heavily on global sources of investment, making up around 94% of all investments on average in the past decade. As investments decrease globally, homegrown startups are predicted to experience the following:

• Smaller ticket sizes and valuation,
• Increased early-stage funding replacing larger late-stage valuations, 
• Local angel investors fill in the gap of global investors.

Despite these trends, investors and founders remain cautiously optimistic about the future. Through the challenges, homegrown startups already see the light at the end of the tunnel, with several local investors supporting the ecosystem heavily.

“It’s an exhilarating time for the startup ecosystem in Bangladesh as we see a lot of innovations coming to us for funding. We’re working to implement the government’s vision of Smart Bangladesh by supporting the ecosystem to develop at least five unicorns in Bangladesh by 2025,” opines Sami Ahmed, Managing Director at Startup Bangladesh Limited.

Author

Raidah Morshed, Business Analyst at LightCastle Partners, authored this article. For further clarifications, contact here: [email protected]

Featured Photo: Laura Elizabeth Pohl/Bread for the World

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