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Startup ecosystem shaken, braces to wait out the storm

Startup ecosystem shaken, braces to wait out the storm
by Insider Desk
June 19, 2023

Bangladesh’s position in the world’s startup ecosystem has fallen from 103rd to 123rd in 2022, indicating a downward trend in startup activity. In addition, total funding decreased from USD 50 million in 2021 to USD 22 million last year, along with a significant lack of local angel investment, a crucial funding source for early-stage startups. 

With a looming global economic recession perpetrated by the Russia-Ukraine war, production challenges and supply-chain disruptions, the already dire startup ecosystem is anticipated to shrink further this year. 

However, the situation is not entirely bleak. In the first half of 2022, local startups raised over USD 90 million, which included the largest-ever pre-seed funding of USD 65 million by the largest tech-based B2B e-commerce platform in the country, ShopUp. The largest B2C e-commerce platform in the country, 10 Minute School, also received USD 2 million in early funding from Sequoia Capital India’s rapid scale-up program, Surge. 

Agritech startup Agroshift managed to raise USD 1.8 million last year, the largest-ever pre-seed round in the country’s startup ecosystem. Shikho, an ed-tech startup, raised USD 4 million in new seed funding in March this year, the largest seed funding ever raised by a Bangladeshi startup.

There has also been an increase in investments from local sources, and policymakers have proposed several measures to facilitate the ease of starting and operating startups. The government has proposed reducing startup turnover tax to 0.1% and exempting startup businesses from all other types of reporting except submitting income tax returns. Additionally, startup companies are allowed to set off and carry forward losses over a period of nine years.

Startup Bangladesh, the first and only venture capital fund sponsored by the government, Bangladesh Angels, has made several investments in startups such as Bimafy, Shuttle, and Pickaboo. However, out of approximately 200 new startups born every year, only a few survive, with 80-90% failing to survive for various reasons. Industry insiders consider this normal for any growing ecosystem.

The way forward lies in partnering with seasoned advisory organizations to strengthen startups and formulate strategies to overcome obstacles. The industry-academia collaboration can also nurture the startup ecosystem by encouraging innovation and talent development at the school and university levels. A strong network must be built among Bangladeshi startups and global venture fund networks. Bangladesh’s development partners can guide, aid, educate, finance, and promote Bangladeshi startups in the global arena.

Despite the challenges, Bangladesh’s position as a maturing startup hotspot has attracted global attention, with over 1,200 active startups creating innovative products and services that have significantly impacted Bangladeshi lives. In 2021, bKash, Bangladesh’s largest mobile financial service, raised USD 250 million from Softbank, making it the country’s first unicorn.

While Bangladesh’s startup ecosystem faces challenges such as declining funding and a fall in the global ranking, there have been positive developments, small but significant. The country’s potential as a maturing startup hotspot has also attracted global attention. With the right support, Bangladesh’s startup ecosystem can continue to flourish and create innovative products and services that positively impact people’s lives.

Tags: EconomyEcosystemStartup
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